BlackRock Model Portfolios

Hi, I’m Uwe Helmes - lead strategist for the Model Portfolio Solutions business in Australia.

Financial markets have been volatile over the past few weeks as the Iran conflict and resultant oil shock reverberates across global markets.

There’s been a lot of negative headlines and sentiment, considerable uncertainty for investors and plenty of speculation regarding the impact on economic growth and inflation.

Before I give you an update on how we are positioning the portfolio in this environment, I want to summarize some of the key performance figures and put the current situation into perspective.

Year-to-date returns for the Enhanced Strategic model portfolios range from -1% for the Conservative profile to -4% for the Aggressive profile, as of close of business on Tuesday, 31st of March 2026.*

*Past performance is not a reliable indicator of future performance. Model performance returns are hypothetical and for illustrative purposes. Returns are net of underlying fund's management fees but gross of the platform's fees and any brokerage/commission costs.

Performance is holding up well despite the turmoil in markets. However, the situation remains fluid.

What began as an energy shock has evolved into a global supply chain shock, spreading across energy, trade routes and other critical commodities.

Markets are starting to price in the possibility that this is a more persistent supply shock, rather than a temporary one.

We’re seeing the impact of this conflict feeding through unevenly across regions and sectors. The heightened level of dispersion and volatility is creating both risks and opportunities.

For example, government bond yields have already increased meaningfully, credit spreads are widening selectively, and equity markets have recorded mixed performance.

We believe this environment warrants a more pro-active and targeted approach to asset allocation.

As such, the portfolio underwent an out-of-cycle tactical rebalance on the 1st of April to manage portfolio risk and update allocations.

Here are some of the key trades that were implemented during the rebalance:

First, we reduce overall portfolio volatility mainly by trimming the equity exposure in the portfolio.

With no clear signs of a resolution in the Middle East, we have dialed back on overall equity exposure to reflect a more cautious stance.

Second, we re-calibrate the equity positioning within the portfolio. We prefer regions like China and US large-cap equities in this environment, which may be more insulated to the energy shock, while selling out of Australian and US small-cap stocks.

Smaller companies are typically at greater risk of a pullback from slower economic growth and higher interest rates, and hence the preference for larger more stable companies.

Third, we add to defensive diversifiers in the portfolio. For example, we increase the exposure to listed infrastructure as a way to stay invested while lowering overall portfolio volatility.

Infrastructure typically offers inflation resilience and can help protect the real value of the portfolio in the event of a protracted inflation shock.

Fourth, we increase the exposure to Australian fixed income to hedge against a growth slowdown. Prolonged supply chain disruptions have raised the possibility of weaker economic growth, which may not yet be fully reflected in markets.

Specifically, we add to Australian government bonds to provide portfolio ballast and capitalise on a more attractive entry point following the recent rise in bond yields.

Finally, we go up-in-quality within the fixed income component of the portfolio. We prefer higher quality bonds over that of riskier debt to provide further ballast to the portfolio.

Zooming out, we remain constructive on the long-term investment outlook and believe investors will be rewarded for staying invested over time, but the current conditions justify a more dynamic investment approach that aims to manage risk in the short term.

Thanks for watching.