As a new year begins, BlackRock's commitment to securing better financial futures for all of our clients is more steadfast than ever. In the case of official institutions this means staying faithful to the time honored objectives of safety, liquidity and return, all the while recognizing the New World of InvestingTM has turned old ways of thinking on their head.
Perpetually low rates in the major government bond markets have left reserve managers and sovereign wealth funds with few high quality/ reasonable return fixed income options. Most high quality debt products with spread - including corporates, mortgages and other forms of securitized assets - have muted excess return prospects. To achieve one’s investment objectives with tolerable risk, multi-asset strategies will prove essential. Beta results must be maximized, and scientific techniques must be deployed to implement systematically consistent, sensible solutions.
BlackRock expects three themes in particular will dominate the advice we give to our official institution clients:
1. Asymmetry in Fixed Income Markets: The next major move for global interest rates is higher. Indeed, rates cannot move much lower and the normalization of rate term structures will become desirable policy in many countries. How should portfolios be positioned for this move, recognizing sustainable economic growth will be its precondition?
2. Currencies: Is the worst now over for the Euro? Have we only seen the beginning of a major weakening of the Yen? Can the dollar breakout if US policy-making remains phlegmatic and beneath its fiscal challenge? How will emerging market currencies perform while advanced economies continue to de-lever out of necessity? If one’s balance sheet and/or return target is in local currency, what role should the US dollar, Euro and Yen play in its formulation?
3. Emerging markets: Relating to currency concerns, how should reserve managers and sovereign wealth funds - many of whom are in developing economies - invest in the EM world responsibly? With global growth secularly tilted towards the developing world, proper diversification suggests corresponding exposure.
Helping those entrusted with public assets achieve optimal returns within carefully calibrated risk budgets is the primary focus of BlackRock’s Official Institutions Group. Solutions customized to your unique circumstances will remain a hallmark of our approach. May this website serve as a window to our uncontested goal: to be your most valued and trusted advisor.