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

Change responses

The hidden risk: Interest rate risk

Bonds are overweight rate risk

Average portfolio allocation1

Portfolio allocation: Moderate preserve capital

As rates rise, bond prices fall. With over 70% of fixed income risk coming from interest rates, the portfolio could suffer losses if rates rise.2

Based on the portfolios we’ve analyzed, a portfolio like this is typically comprised of 55% equities and 45% bonds, allocated as shown above.3

For illustrative purposes only.


Understanding this risk

  • Not all bonds are the same. Core bonds are heavily influenced by interest rate moves.
  • Corporate and high yield bonds are more sensitive to economic dynamics, much like equities. In this example, the portfolio may have too much rate risk to protect 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 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 50/50 portfolio strategy to help manage your risk with an all-in-one strategy.

50/50 Target Allocation ETF Portfolio Strategy

This investment strategy seeks total return through exposure to a diversified portfolio of fixed income and equity asset classes with a target allocation of 50% equities and 50% 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. equity 40.0%
U.S. fixed income 39.0%
International equity 15.0%
International fixed income 6.0%

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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