As an investor, my client's approach is conservative
and my client uses fixed income to preserve capital

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The hidden risk: Interest rate risk

Unbalanced bond allocation creating instability

Average portfolio allocation1

Portfolio allocation: Conservative preserve capital

As rates rise, bond prices fall. With over 75% of fixed income risk coming from interest rates, this example could suffer notable losses if rates rise.2

Based on the portfolios we’ve analyzed, a portfolio like this is typically comprised of 19% equities and 81% bonds, allocated as shown above.3

For illustrative purposes only.

Understanding this risk

  • Not all bonds are the same. “Traditional” bonds are heavily influenced by interest rate moves.
  • Corporate and high yield bonds are more sensitive to economic dynamics, much like equities. These portfolios may have accrued too much rate risk to preserve capital in a rising rate environment.

Help manage your hidden risks

Consider adding flexible bond funds that actively adapt to interest rate changes and funds that specifically seek to balance credit risk and interest rate risk.

Let us help you build a better fixed income portfolio for your client.

Contact us



or use the Target Allocation 20/80 portfolio strategy to help manage your risk with an all-in-one strategy.

20/80 Target Allocation ETF Portfolio Strategy

This investment strategy seeks total return through exposure to a diversified portfolio of primarily fixed income, and to a lesser extent, equity asset classes with a target allocation of 20% equities and 80% fixed income. Target allocations can vary +/-5%. It invests exclusively in iShares Exchange Traded Funds which may pay fees and expenses to BlackRock that are in addition to the fees payable to BlackRock for managing the account. Selection of this strategy indicates a willingness to assume some risk of principal loss. More detailed information on this strategy is available upon request.

Allocations %
U.S. fixed income 65.0%
U.S. equity 21.0%
International fixed income 10.0%
International equity 4.0%

How is technology helping BlackRock manage risk?

Hear from Rick Rieder, BlackRock's Global Chief Investment Officer of Fixed Income, on how the team uses technology to better understand risks in the fixed income markets.

  • View transcript

    Q: How is technology helping BlackRock manage risk?

    The investment world has evolved to where markets have become more efficient in many ways. Social and other media more broadly creates an incredible flow of information. To regularly out-pick the market based on one specific piece of information is impossible. So what should you do? Research, research, research. And analyze. And then allocate your portfolio in a way that ensures you’ve got relative value decisions all around the world, all around the capital stack, and around different asset classes. Then do it over and over again.

    It’s a way of tilting the odds in your favor. By repeating that process a million times over, you’re creating a dynamic where you’re not just diversifying to reduce risk, but you’re diversifying in a way that you’ve got a lot of relative value calls that make sense. When you do it over and over, the odds are working for you on a regular basis.

Well positioned to identify risk

BlackRock is powered by Aladdin®, our powerful risk-analysis and portfolio management technology. Our Aladdin® risk technology platform oversees $17+ trillion in assets under management and is relied upon by 100+ institutions.

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