HIGH YIELD TO HIGH INCOME

THE CHALLENGE

How can I obtain additional income in my portfolio?

A change in market fundamentals, or economic regime, can often results in schemes needing to make substantial asset allocation changes to meet required income, risk or return targets.

Exploring dividend focused indexed products and diversifying sources of risk and income is one way that can help to achieve such objectives.

THE ACTION

Restructuring a strategic asset allocation requires a multi-dimensional approach, that moves beyond optimising for risk and return, but also considers other metrics such as ESG and income considerations.

BlackRock's approach to portfolio design, leveraging our risk management platform Aladdin, provides clients with the tools and support needed to ensure that portfolios meet investment objectives in the most efficient manner.

In this case, BlackRock was able to find an alternative equity solution, which enabled the client to transition out of high yield exposures and better manage their overall portfolio risk.

Dividend Yield

Dividend Yield

Source: BlackRock, Aladdin as at May 2020.
For illustrative purposes only.

Case studies are for illustrative purposes only; they are not meant as a guarantee of any future results or experience, and should not be interpreted as advice or a recommendation.

Up Market and Down Market Capture Ratio

Up Market and Down Market Capture Ratio

Source: BlackRock, Aladdin as at May 2020.
For illustrative purposes only. Time Period is May 2015 - May 2020. Calculated using FTSE All World Index as Benchmark.

THE OUTCOME

The solutions showed how the client could obtain up to a 77% increase in dividend yield with a 14% decrease in the 2-year historical standard deviation of the portfolio.

WHY INDEXING?

The expansion of index building blocks, beyond their use to access broad market exposures, has acted as an additional toolkit for investors to make more granular investment decisions. In this case, a quality dividend ETF strategy provided a useful solution to help simultaneously manage risk and income needs.

WAYS WE CAN HELP YOU

From case studies to full outsourcing, explore how our portfolio solutions can help you rethink your portfolio.

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