* Observations from BlackRock’s Portfolio Solutions Team. BlackRock’s Portfolio Solutions team has engaged with close to 1,000 advisors to analyze their portfolios. The team’s observations add up to a striking conclusion: We see imbalanced portfolios with excess risk across all portfolio types relative to their respective benchmarks.
1Source: Morningstar as of 12/31/16. Bond returns represented by IA SBBI IT Govt Index from 1926 to 1975 and the Bloomberg Barclays U.S. Aggregate Bond Index from 1976 to 2016. Stock returns are represented by IA SBBI Large Stock Index from 1929 to 1970 and the S&P 500 Index from 1971 to 2016.
2Source: Morningstar. Based on Institutional shares of the fund. Data is from 3/31/10 (when Rick Rieder was named PM of the fund and the investment strategy changed) through 12/31/16. Rate Periods: Sorts through daily 10-year treasury rates from 12/31/2010. Rising Rate Periods (10): Counts period if <= 60 day period with at least a 40 bp increase in 10-year treasury from start date to end date. Overlapping periods are eliminated by choosing the period with the highest rate increase. Flat Rate Periods (14): Ending date rate must be within +/- 2 bps of start date rate. Period must be at least 30 days and no more than 90 days (business days). Variance of rate in the periods must be +/- 15 bps from start date rate on each date over the period (ensures minimal volatility over the period as a whole). Overlapping periods are eliminated by choosing the period with the longest date range. Declining Rate Periods (12): Counts period if <=60 day period with at least a 40 bp decline in 10-year treasury rate from start date to end date. Overlapping periods are eliminated by choosing the period with the largest rate decrease.