Systematic investing
By combining the power of big data, data science, and deep human expertise to modernize the way we invest, systematic investing is unlocking new ways to seek consistent portfolio outcomes amidst a world of unpredictability.
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IMPORTANT:
i. BlackRock Systematic Global Equity High Income Fund seeks to generate a high level of income. The Fund invests globally, with no prescribed country or regional limits, at least 70% of its total assets in equity securities.
IMPORTANT:
i. BlackRock Systematic Global Equity High Income Fund seeks to generate a high level of income. The Fund invests globally, with no prescribed country or regional limits, at least 70% of its total assets in equity securities.
ii. The Fund’s investments in equities could incur significant losses due to higher fluctuation of equity values. 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 currency risk, emerging market risk, foreign investments restrictions risk, small-cap companies’ volatility and liquidity risks, securities lending counterparty risk and currency conversion risk including Renminbi denominated Classes.
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.
Systematic Investing
In today’s uncertain markets, we all need more predictable investment outcomes.
By combining the power of data-driven insights, investment science, and disciplined portfolio construction to modernize the way we invest, systematic investing is unlocking new ways to seek consistent outcomes amidst a world of unpredictability.
Systematic investing begins with data-driven insights.
In the digital age, we have access to vast amounts of data, from traditional sources like company financial statements and economic reports to more complex unstructured sources like company news stories, web traffic, social media sentiment, consumer geo-location data and even satellite imagery.
By harnessing highly sophisticated analytics techniques like machine learning and artificial intelligence, we transform this sea of raw data into useful investment information—providing insights faster, at greater scale, and with more granularity than traditional methods.
Next, we deploy rigorous scientific testing to learn if these investment insights actually have the potential to help forecast future returns.
This process includes a comprehensive examination of empirical evidence by seasoned investment experts—testing different combinations of variables and comparing the results to known outcomes. This ability to validate insights means portfolio decisions are firmly evidence-based and not dependent on human conviction alone.
Finally, when an insight is shown to be valuable, we employ a disciplined portfolio construction process to implement it. Our investment experts use computers to model the many complex trade-offs involved—finding a balance between expected return, risk, correlation and cost—to guide any allocation decisions.
At every step, the systematic process is designed to help deliver more targeted investment outcomes
Whether it’s seeking risk-managed growth through equities… generating income and maintaining ballast with bonds… integrating sustainability and ESG insights into portfolios… or accessing new sources of diversification and return with alternative strategies…
Systematic investing is unlocking new ways to navigate a world of uncertainty.
What is systematic investing?
Systematic investing, often called quantitative investing, is an investment approach that emphasizes data-driven insights, scientific testing of investment ideas, and advanced computer modelling techniques to construct portfolios.
Different by design
Human x machine
Innovative investment insights are validated through rigorous quantitative testing—amplifying the decision-making of our investment experts.
Engineered for scale
Technology-driven process helps scale investment insights across vast sets of securities, enabling high-breadth portfolios for equities, fixed income, and alternatives.
Robust risk management
Employing our own innovations and technology in seeking to manage risk and generate consistent results over the long term.
There is no guarantee that research capabilities will contribute to a positive investment outcome.
Systematic Investment Process Video Script
Systematic investment process
The world is more data-driven than ever before. Our systematic process leverages vast sets of data, both traditional and alternative, to provide investment insights faster, at greater scale and with more granularity. We score and rank thousands of securities daily to help make investment decisions in real time, based on company fundamentals, market sentiment and macroeconomic themes.
Our fundamental signals perform the same analysis a traditional security analyst might. Our models leverage data and technology to systematically evaluate thousands of securities. Using alternative data, such as internet search, transaction activity, and geolocation data, we score the attractiveness of investment opportunities against more traditional accounting measures.
Our sentiment signals recognize factors other than fundamental strength can influence returns over shorter time frames. Sentiment signals analyze a broad range of market views from sell side 1analysts, company management, and other investors. Electronic text forms a large part of the underlying data that drives these insights and seeks to enable our models to identify where analysts and management are more positive (or negative) on a company’s outlook.
Our macroeconomic signals seek to form a view across groups of securities rather than individual companies. For example, we analyze the impact of positive hiring trends or adverse inflationary pressures across a universe of securities. We evaluate the impact of macroeconomic data among countries, industries, and equity styles, such as value and growth.
The final score for every security is a weighted combination of all signals, blending the views across these insights.
The final “alpha” score represents our assessment of the return potential of each security relative to all the others within the investible universe.
Portfolio Construction
Our investment process2 seeks to systematically capture the drivers of future returns, to create a portfolio that seeks to maximizes exposure to our signal views. We construct portfolios starting with these final alpha scores and size positions aligned with these scores. A market neutral portfolio would hold a long position3 in securities with a positive score, and a short position4 in securities with a negative score.
However, this doesn’t tell us anything about risk and implementation frictions such as transaction costs and constraints. To account for this, we take into consideration the expected return of a position, alongside an assessment of its potential risk using a multi-factor risk model.
Whether the portfolio being generated is a market neutral hedge fund designed to deliver an uncorrelated source of alpha, or a long only portfolio seeking to outperform a broad index of market exposure, the process is identical. The final output is intended to capture the broadest possible opportunity set within the target market, as we seek to achieve the best possible tradeoff between risk and return net of transaction costs.
1Sell side: refers to a portion of the financial industry that issues, sells, or trades securities in the public market.
2Source: BlackRock, 2024. Investment process is subject to change and is provided here for illustrative purposes.
3Long position: A long position refers to the purchase of an asset with the expectation that its value will increase over time.
4Short position: A short position refers to borrowing a security, selling it, then buying it back later at a lower price to return to the broker and keep the difference.
[DISCLAIMERS]
There is no guarantee that a positive investment outcome will be achieved.
While the investment approach described herein seeks to manage risk, risk cannot be eliminated.
For investors in Italy: This document is marketing material. Before investing please read the Prospectus and the PRIIPs KID available on www.blackrock.com/it, which contain a summary of investors’ rights.
Risk Warnings
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
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.
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 and depend on personal individual circumstances.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
This material is prepared by BlackRock and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date shown above and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. This material is intended for information purposes only and does not constitute investment advice or an offer or solicitation to purchase or sell in any securities, BlackRock funds or any investment strategy nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Investment involves risks. Past performance is not an indication for the future performance.
In the UK and Non-European Economic Area (EEA) countries: this is Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.
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In South Korea, this information is issued by BlackRock Investment Management (Korea) Limited. This material and the BlackRock website (www.blackrock.com/kr) have not been reviewed by the Financial Supervisory Service in Korea.
In Australia, issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975 AFSL 230 523 (BIMAL). The material provides general information only and does not take into account your individual objectives, financial situation, needs or circumstances.
Before making any investment decision, you should assess whether the material is appropriate for you and obtain financial advice tailored to you having regard to your individual objectives, financial situation, needs and circumstances. Refer to BIMAL’s Financial Services Guide on its website for more information. This material is not a financial product recommendation or an offer or solicitation with respect to the purchase or sale of any financial product in any jurisdiction.
Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.
This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.
Prepared by BlackRock Investments, LLC. Member FINRA.
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As investment processes become more efficient at absorbing and leveraging information in real time, building systems that can scale and multiply the value of these insights will provide a significant investment advantage.
Raffaele Savi
Global Head of BlackRock Systematic
Global Head of BlackRock Systematic
Why BlackRock?
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01
Empowered by data and technology
We use vast datasets and technological innovation to find investment insights amidst market complexity.
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02
Guided by science
We vigorously test and validate ideas through a deliberate scientific method to continuously refine and redefine our approach.
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03
Enlightened by experience
We draw on 35 years of experience, augmented by intellectual curiosity and diverse thought, to inform our investment process every step of the way.
Transforming how we see the world
Just think about how much data is out there and how it escalates rapidly. In 2022, Amazon.com saw 3.16 billion visits on average per month, while Alibaba generated over US$94 billion in e-commerce sales. And every minute of every day, we have about 97 million WhatsApp messages, and 500 hours of new videos on YouTube. And it goes on.
The funny thing is, we don’t just want data or information. Instead, we want to know what it all means, why it matters to us, and to be able to use the insights we have to predict outcomes
At BlackRock, our systematic investing platform has been doing this for over 35 years with a track record of innovation, creativity and reinvention. Our diverse team of 200+ financial professionals, academics and data scientists, blends the best of humans and machines to unlock new ways to generate differentiated outcomes
They harness cutting-edge technology such as AI and machine learning to review 800-plus data signals, assessing the fundamentals, sentiment, macro, and ESG characteristics of thousands of securities, at scale, and on a daily basis. They can then analyze and combine traditional inputs along with unconventional data sources in faster and more effective ways than any human could ever do.
So, how does this work in the real world?
Since 2007, we have been using natural language processing techniques to capture local text in the form of regulatory filings, news articles, broker reports, social media updates, and other sources to gather timely, nuanced views about a company’s outlook at scale
For example, our model can identify early investment signals by using sentiment analysis, tracking the number of positive and negative words included in a document, and assigning an overall sentiment score based on word counts.
Our approach also constantly evolves. We now apply transformer-based large language models like ChatGPT. These can process long sequences of elements – such as words in a sentence – accounting for the relationship between each individual word with other words, and focusing on the most important points.
And language is not a barrier as we can read text with 7 major languages, which allows us to get local context.
Another source of AI-led alpha might come from the physical world. Here, we can use AI as a tool to compile and analyze location-specific data – such as GPS signals from cell phones, and more to track consumer traffic. Or we can track trucking routes across a country, based on a view that heightened traffic may be a proxy for increased company fundamentals like future sales.
AI and data availability also allow us to better understand corporate intentions and macro dynamics. For example, in the US we tracked millions of online job postings to gauge the health of a company or to target future growth areas based on the skill-sets in demand. The rate of hiring can also be a proxy for activity at the company, industry, or country level.
Yet despite this outlook, machines will not take over. Human input and analysis is a critical component, and fundamental and classic information still have a major role to play. We call this a human-machine-team approach to investing.
Investing evolved
The Morningstar RatingTM for funds, or "star rating," is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
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