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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.
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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.
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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.
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For illustrative purposes only.

Source: BlackRock, as at March, 2020.