Rethink diversification

The big question that clients in Asia Pacific are asking me today is, “Is there a smarter way to diversify in this market?”

Hi, I'm Jeff Shen, Co-CIO and Co-Head of the Systematic Active Equity team here at BlackRock.

In recent years, we've seen equity and bond correlations rise and fail to deliver the diversification needed in a traditional 60/40 portfolio. As we face more economic and market uncertainty, we think there is a smarter way to build a more resilient portfolio by adding alternative strategies.

Alternative strategies like market neutral, absolute return strategies are made for times like these for two key reasons. First, they aim to deliver positive returns regardless of how the market is performing. Next, they often aim to have near-zero correlation to broader equity markets. 

As a result, these strategies may offer investors a differentiated source of return, which in turn could be additive to overall portfolio diversification.

Within the BlackRock Systematic team, we carefully manage our portfolios to have a low correlation to traditional asset classes such as equities, bonds and commodities.

Our unique systematic approach utilizes the combined strengths of cutting-edge technology, the power of big data, and human intellect to uncover opportunities across thousands of stocks, allowing us to effectively navigate volatility.

Hi, I'm Daniel Caderas. I'm a multi-asset investor, and I lead the Global Tactical Asset Allocation team here at BlackRock.

The big question that our clients in Asia Pacific are asking us today is how do I prepare my portfolio in a robust and resilient manner so that the portfolio is ready to maneuver and navigate today's fast changing markets?

What worked in the past potentially, where you just combine stocks and bonds in a portfolio and they're largely offset by each other, in particular, during periods of stress and volatility. Those times are gone.

We believe as an investor these days you want to be flexible, you want to be nimble.

You also want to incorporate the fact that the world is changing fast, and you want to have a more short-term view.

We are a team which invests in a more tactical manner, which means we focus on the short-term to mid-term time horizon. We do this across a large opportunity set.

And that allows us to be flexible in terms of go anywhere. So wherever we believe there's dislocations, discrepancies, wherever the market tends to overreact or underreact, that's where we can position ourselves.