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Alternatives: helping build better portfolios

We believe a complex and rapidly changing world demands a new approach to portfolio construction. One that delivers portfolios which are built to be resilient and withstand uncertainty. Portfolios with outcomes at their heart.

Alternatives can play a key role in building such portfolios. Here’s how:

Portfolios designed with outcomes at their heart

Alternatives can play an important role in building more resilient portfolios, as they can help meet a range of specific goals. They can increase diversification, helping to reduce overall sensitivity to market factors. They can enhance returns, provide opportunities to increase income, or offer protection against inflation.

A key approach when building resilient portfolios is to focus on managing risk and fees, such as using cost-effective index strategies where appropriate. This means more resources can be put towards alternative strategies to enhance overall portfolio outcomes.

We believe there are several longer-term shifts taking place between the roles of public markets and private ones that make the options available to investors in alternatives even greater:

  • A long-term decline in public ownership and increase in private*
  • A continued need for investment in infrastructure globally*
  • A decreasing role by banks in the credit market being filled by private entities*

These all help to increase the range of alternatives open to investors, offering more flexibility.

* Source: BlackRock, 30 March 2020.

Explore our alternatives hub here

Steps to consider in building effective investment portfolios:

Take an outcome-orientated approach

Choose investments to match to specific goals. In multi-asset portfolios, alternatives can offer diversification, return enhancement, income opportunities or inflation protection.

Focus on unique return drivers and low market correlation

Approach managing alternatives dynamically across various strategies, e.g. commodities, hedge funds & private markets, rather than focusing on one strategy exclusively.

Use our tools to select the right alternative investment

Building dynamic, alternative strategies can be challenging. Multi-asset risk management platforms, like Aladdin® and eFront, can help navigate this.

For illustrative purposes only.

Source: BlackRock, as at March, 2020.