BUILDING A DEFENSIVE PORTFOLIO

THE CHALLENGE

How can I build a more defensive portfolio without too much cash?

Recent geopolitical uncertainty and market volatility have caused many wealth managers to decide to de-risk their clients’ portfolios by increasing their cash allocation, resulting in a cash drag.

THE ACTION

BlackRock could help build customised solutions to manage portfolio risk while achieving a positive yield and avoiding cash drag.

Cash and equivalents allocations:

Cash and equivalents allocations

ORIGINAL OPTION 1 OPTION 2 OPTION 3
YIELD -0.48% -0.21% 0.03% 0.09%
CREDIT QUALITY A+ A+ A- A-
SPREAD DURATION 0.1 0.3 0.9 1.3

Source: BlackRock, as at May 2020.
For illustrative purpose only. Currency = GBP. Spread duration in 0.1, 0.3, 0.9 and 1.3 years.

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.

THE OUTCOME

Blending across product types helped demonstrate that, by taking on slightly more credit and/or duration risk, different yield requirements can be met whilst still providing a degree of portfolio protection.

WHY INDEXING?

Understanding that not all liquidity was needed on a T+0 basis, the client was able to invest some money in short-duration fixed income ETFs, which increased yield without significantly changing the liquidity profile.

WAYS WE CAN HELP YOU

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

EXPLORE PORTFOLIO SOLUTIONS