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Capture high income and growth with BlackRock Dynamic High Income Fund

  • IMPORTANT:

    i. The BlackRock Dynamic High Income Fund follows a flexible asset allocation policy that seeks to provide a high level of income. In order to generate high levels of income the Fund will seek diversified income sources across a variety of asset classes

    i. The BlackRock Dynamic High Income Fund follows a flexible asset allocation policy that seeks to provide a high level of income. In order to generate high levels of income the Fund will seek diversified income sources across a variety of asset classes, investing significantly in income producing assets such as fixed income transferable securities, including corporate and government issues which may be fixed and floating and may be investment grade, sub-investment grade or unrated, covered call options and preference shares. The Fund will use a variety of investment strategies and may invest globally in the full spectrum of permitted investments including equities, equity-related securities, fixed income transferable securities, units of undertakings for collective investment, cash, deposits and money market instruments. Currency exposure is flexibly managed.

    ii. The Fund follows a dynamic asset allocation strategy and may incur greater transaction costs when rebalanced periodically. The Fund may invest in debt securities that are subject to actual or perceived ratings downgrade. An increase in interest rates may adversely affect the value of the bonds held by the Fund. The Fund may invest in non-investment grade and unrated bonds that may be subject to higher default, volatility and liquidity risks. The Fund invests in bonds issued or guaranteed by governments or authorities, which may involve political, economic, default or other risks. The Fund's investments in equities could incur significant losses due to higher fluctuation of equity values. The Fund invests in asset/ mortgage backed securities that may be subject to greater credit, liquidity, and interest rate risks and are often exposed to extension and prepayment risks. The Fund's income-generating investment strategy may reduce the potential for capital growth and future income of the Fund.

    iii. The Fund is subject to risks associated with preference shares , currency risk, emerging market risk, securities lending counterparty risk, currency conversion risk including Renminbi denominated Classes, foreign investments restrictions risk and contingent convertible bonds risk.

    iv. Class 5(G) Shares pay dividends gross of expenses. Class 6 Shares pay dividends gross of expenses and/or from capital at the Directors’ discretion. Class 8 Shares pay dividends gross of expenses and/or from capital at the Directors’ discretion and include interest rate differentials arising from share class currency hedging. Negative interest rate differentials may decrease the dividends paid. Paying dividends gross of expenses may result in more income being available for distribution; however these shares may effectively pay dividends from capital – may amount to a partial return or withdrawal of an investor’s original investment or capital gains. All declared dividends result in an immediate reduction in the NAV price of the share class on the ex-dividend date.

    v. The Fund may use derivatives for hedging and for investment purposes. However, usage for investment purposes will not be extensive. The Fund may suffer losses from its derivatives usage.

    vi. The value of the Fund can be volatile and can go down substantially within a short period of time. It is possible that a certain amount of your investment could be lost.

    vii. Investors should not make investment decisions based on this document alone. Investors should refer to the Prospectus and Key Facts Statement for details including risk factors.

BlackRock Dynamic High Income Fund -
Help achieve the yield you need with a fund that goes beyond the conventional

Today's income challenge

With ongoing low interest rates and below average yields, finding attractive income is no longer as easy as it once was before the financial crisis.

Investors need to find new income sources to complement what they already own. BlackRock Dynamic High Income Fund allocates across asset classes that are complementary to and less commonly held in existing income strategies, and has the potential to provide higher yields and add meaningful diversification to your portfolio.

 

Why invest in BlackRock Dynamic High Income Fund

In today’s environment, it can be challenging for investors to find sources of consistent high income. But investors willing to broaden their scope can still find opportunities.

The BlackRock Dynamic High Income Fund is a global multi-asset strategy that aims to provide investors with the potential for high income and positive total return.  The Fund achieves this outcome by investing across stocks, bonds and “complementary income asset classes”.  Complementary asset classes are often more difficult to access for retail investors and are less commonly found in existing income strategies. Their lower correlation to traditional income sources can help to complement what investors already own. 

Complementary asset classes can be complicated. Investing in them requires expertise and flexibility. Our team has the flexibility to dynamically adapt the Fund’s asset allocation, adjusting the portfolio based on current market opportunities and conditions. 

With the right amount of risk management, complementary asset classes can offer compelling opportunities to investors today. The BlackRock Dynamic High Income Fund seeks to deliver a compelling combination of high income, capital appreciation, and diversification, and is exactly what investors should be looking for today.

6.2% p.a. (A6 USD share class as of 31 March 2022)
(A6 share class aims to pay a dividend on a monthly basis. Dividend Payment is not guaranteed. The Fund may effectively pay dividend from capital. See important information iv)1
5.7% p.a. (A6 USD share class as of 6/30/2021)

Latest 6 months dividend table – A6 USD share class1

Month Annualized yield
3/31/2022 6.23%
2/28/2022 6.29%
1/31/2022 6.11%
12/31/2021 5.80%
11/30/2021 5.91%
10/29/2021 5.82%

 

High Income
 
Potential for high income and total return across different market environments
Diversify
 
Diversify into complementary income asset classes with low correlation to traditional income sources2
Flexibility
 
Flexibility to adjust the Fund’s asset allocation based on changing market opportunities and conditions
Protect Pie
 
A complement to your core income portfolio

Explore complementary income asset classes

Complementary income asset classes have the potential to deliver higher yields, as well as capital appreciation, and their low correlation2 to more traditional asset classes can provide meaningful diversification to your portfolio.

A covered call strategy is commonly used to generate additional income in a portfolio. It is achieved by holding a stock position and selling or “writing” a call option on that same stock.

A call option is a contract that gives the buyer the right to buy a stock at a pre-arranged price, or the strike price, on or before the option expiration date, depending on the terms of the contract. On the other side of the contract, the seller of a call option is required to sell the stock at the strike price if the buyer wishes to exercise the option.  In return, the seller receives a payment or a premium upfront from the buyer of the call option. 

Let’s look at an example. Say we bought shares of XYZ Company at $100. While we like its long-term prospects, we feel the stock won’t appreciate sharply in the near term. How can we still generate a return in the meantime? This is where a covered call strategy may add value. By selling a call option worth $2 at a strike price of $105, we earn the $2 premium from selling the call option today, but one of these scenarios is going to play out before the option expiration date::

a) XYZ stock trades above $105. The buyer of our call option will exercise it, meaning we need to sell our stock to the buyer at $105. In this case, we still get to keep the $2 option premium but we lose out on any capital appreciation beyond $105.

b) XYZ stock trades between $100 to $105. The call option expires worthless. Because the stock did not trade above the strike price of $105, the buyer did not exercise the option, we get to retain ownership of the stock, earn the $2 in option premium and capture the full upside of the stock.

c) XYZ stock trades below $100 at maturity. The call option expires worthless. Because we own the stock, we would incur a loss that equals the stock price decline less the income earned from the premium. In other words, the option premium can provide some protection against modest stock price declines.

While it is important to be aware of the risks involved,  a covered call strategy can help investors achieve additional income in a portfolio and provide some downside protection from stock price movement.

Covered call writing

Exposure to stocks where an investor earns a premium today for selling away some amount of that stock’s future upside.

A floating rate loan is a corporate loan where the coupon rate adjusts, or floats, at regular intervals to reflect changes in short-term interest rates. Unlike traditional bonds where the coupon is fixed, floating rate loans can generate higher or lower income as interest rates rise or fall; therefore, they are considered a popular way to protect against interest rate movements.

Investing in floating rate loans is often done via collateralized loan obligations, or CLOs. A CLO is a security that is backed by a pool of floating rate loans that are packaged together and actively managed. Like bonds, CLOs have credit ratings and make regular income payments to their holders. While CLO holders are at risk should the underlying loans default or get downgraded, investors can select the credit quality that best fits their income and risk objectives.

The typical buyer of higher-quality CLOs includes pensions funds, insurance companies, and asset management firms. High yield CLOs are often owned by investors that can tolerate higher risks like hedge funds. CLOs provide an efficient way for investors to reduce interest rate risk and achieve compelling income. 

Floating rate loans

Exposure to corporate loans through securities which have lower exposure to interest rate changes due to floating rate structure.

Global real assets refer to stocks of publicly traded companies involved in real estate and infrastructure businesses globally. Some examples include industrial and office real estate investment trusts (REITs) as well as renewable energy and utility companies. Because these companies trade on public stock exchanges, they can serve as a liquid proxy for investing in physical real assets.

Real assets provide a number of benefits to investors: they have lower correlation to traditional stocks and bonds, they offer competitive yield, and can be used as an inflation hedge. Investors can also easily diversify across property and infrastructure types as well as across geography.

Historically, the variety and complexity of these global real assets have given active investors ample opportunities for outperformance. What's more, there are several underlying megatrends that are likely to support the real asset space for years to come. For income investors, real assets offer a compelling combination of income and diversification relative to traditional asset classes.

Global real assets

Exposure to physical real assets through investing in stocks of publicly traded companies involved in real estate and infrastructure businesses globally.

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Preferred stock
Hybrid securities which offer features of debt (fixed payout) and equity (potential to appreciate in price)
Urbanization
Mortgage-backed securities (MBS)
Mortgage-backed securities are a pool of mortgages on commercial properties or home loans.

To find out more, speak to your financial advisors