For qualified investors

BlackRock Style Advantage Fund

Factor investing provides a framework for navigating the current challenging market environments, and the BSF Style Advantage Fund (a sub-fund of BlackRock Strategic Funds) represents BlackRock’s best thinking in applying style factors to target those diversifying returns.

Price and performance

Factor Phenomena

The opportunities driving factor investing

Rewarded risks

Rewarded risks

By taking on more risk, investors have the potential to gain more reward.

Structural impediments

Structural impediments

Market rules or restrictions have made some investments off-limits to certain investors, but created opportunities for others.

Behavioural biases

Behavioural biases

Investors are not consistently rational, generating opportunities for those who take a contrarian view.

There can be no assurance that performance will be enhanced or risk will be reduced for funds that seek to provide exposure to certain quantitative investment characteristics (‘factors’). Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. In such circumstances, a fund may seek to maintain exposure to the targeted investment factors and not adjust to target different factors, which could result in losses.

Style Factor Investing

The Fund invests in a diverse set of long/short strategies, each of which represents pure exposure to a specific style factor. Our approach to style investing focuses on factors that make intuitive economic sense.

We target five investment styles that our research shows can have strong potential to deliver long-term returns and diversification across multiple asset classes.

 

Value buying relatively cheap assets and selling expensive ones
Carry buying higher-yielding assets and selling lower-yielding ones
Momentum buying recent outperformers and selling underperformers
Quality buying high-quality assets against poor-quality ones
Low Volatility buying low-risk assets against high-risk ones

Quality and Low Volatility used to be combined to form the Defensive part of our factors, but have been split for clarity. This does not effect the management of the Fund.

What are the risks associated with this type of investment?

Diversification: Diversification and asset allocation may not fully protect you from market risk.

Long/Short: Investors considering this Fund should understand that the Fund is not guaranteed to produce a positive return and as an absolute return product, performance may not move in line with general market trends or fully benefit from a positive market environment. The Manager employs a risk management process to oversee and manage derivative exposure within the Fund.

Derivatives: The strategies utilised by the Fund involve the use of derivatives to facilitate certain investment management techniques including the establishment of both ‘long’ and ‘synthetic short’ positions and creation of market leverage for the purposes of increasing the economic exposure of a Fund beyond the value of its net assets. The use of derivatives in this manner may have the effect of increasing the overall risk profile of the Fund.

Our Investment Process

Each set of factors is constructed to maximise exposure to desirable security attributes, while aiming to neutralise unwanted exposure to the broad market, sectors and regions.

These factors are then combined to maximise diversification, while incorporating some important long-run preferences of our portfolio management team. Specifically, we emphasise those with the greatest breadth and those we would expect to deliver better performance in adverse market environments.

Identify and measure rewarded factors
Construct factor sleeves
Combine and implement portfolio

There can be no guarantee that the investment strategy can be successful and the value of investments may go down as well as up.

Fund essentials

Overview of the BSF Style Advantage Fund’s approach to Factors, philosophy and team

Price and performance

Risks

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Capital at risk. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.

Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

Capital at risk. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

Fund specific risks

The Fund invests a large portion of assets which are denominated in other currencies; hence changes in the relevant exchange rate will affect the value of the investment.

The Fund(s) may invest in structured credit products such as asset-backed securities (‘ABS’) which pool together mortgages and other debts into single or multiple series credit products which are then passed on to investors, normally in return for interest payments based on the cash flows from the underlying assets. These securities have similar characteristics to corporate bonds but carry greater risk as the details of the underlying loans is unknown, although loans with similar terms are typically packaged together. The stability of returns from ABS are not only dependent on changes in interest rates but also changes in the repayments of the underlying loans as a result of changes in economic conditions or the circumstances of the holder of the loan. These securities can therefore be more sensitive to economic events, may be subject to severe price movements and can be more difficult and/or more expensive to sell in difficult markets.

Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore the value of these investments may be unpredictable and subject to greater variation.

The Fund may invest in a variety of investment strategies and instruments while aiming to be highly  diversified in terms of risk and returns. The Fund is therefore directly and indirectly, through its investments, subject to the risks each of these investment strategies and instruments are subject to. The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.

The Fund may invest in exchange-traded funds which have exposure to property securities and commodities (through an index). Property investments are subject to adverse changes in economic conditions, adverse local market conditions and risks associated with the acquisition, financing and ownership and operation and disposal of real property. The underlying commodities index may concentrate investment on selected commodity futures of multinational markets. This makes the exchange traded fund extremely dependent on the performance of the commodity markets concerned.

The Fund invests in fixed interest securities issued by companies which, compared to bonds issued or guaranteed by governments, are exposed to greater risk of default in the repayment of the capital provided to the company or interest payments due to the Fund.

The strategies utilised by the Fund involve the use of derivatives to facilitate certain investment management techniques including the establishment of both ‘long’ and ‘synthetic short’ positions and creation of market leverage for the purposes of increasing the economic exposure of a Fund beyond the value of its net assets. The use of derivatives in this manner may have the effect of increasing the overall risk profile of the Funds.

Investors in this Fund should understand that the Fund is not guaranteed to produce a positive return and as an absolute return product, performance may not move in line with general stock market trends as both positive and negative share movements affect the overall value of the Fund. The Manager employs a risk management process to oversee and manage derivative exposure within the Fund. The Fund may be exposed to finance sector companies, as a service provider or as counterparty for financial contracts. Liquidity in the financial markets has been severely restricted, causing a number of firms to withdraw from the market, or in some extreme cases, becoming insolvent. This may have an adverse affect on the activities.

Important Information

BlackRock Strategic Funds (BSF) is an open-ended investment company established and domiciled in Luxembourg which is available for sale in certain jurisdictions only. BSF is not available for sale in the US or to US persons. Product information concerning BSF should not be published in the US. It is recognised under Section 264 of the Financial Services and Markets Act 2000. BlackRock Investment Management (UK) Limited is the UK distributor of BSF. Most of the protections provided by the UK regulatory system, and the compensation under the Financial Services Compensation Scheme, will not be available. A limited range of BSF sub-funds have a reporting fund status A sterling share class that seeks to comply with UK Reporting Fund Status requirements. Subscriptions in BSF are valid only if made on the basis of the current Prospectus, the most recent financial reports and the Key Investor Information Document, which are available on our website. Prospectuses, Key Investor Information Documents and application forms may not be available to investors in certain jurisdictions where the Fund in question has not been authorised.