Rainbow colored threads through needle eyelet, symbolizing diverse income sources

BlackRock Dynamic High Income Fund

Consistently seeking high income in an inconsistent world

Think Differently About Income

Faced with unprecedented market conditions, we need to think differently about how we are investing for income.
Ratio
Focus on generating higher income
Low volatility
Use volatility to your advantage
Choice
Stay nimble and be diversified

BlackRock Dynamic High Income Fund

The fund is uniquely positioned to help investors “think differently about income”.

In today’s environment, it can be challenging for investors to find sources of consistent high income. But investors willing to broaden their scope can still find opportunities.

The BlackRock Dynamic High Income Fund is a global multi-asset strategy that aims to provide investors with the potential for high income and positive total return.  The Fund achieves this outcome by investing across stocks, bonds and “complementary income asset classes”.  Complementary asset classes are often more difficult to access for retail investors and are less commonly found in existing income strategies. Their lower correlation to traditional income sources can help to complement what investors already own. 

Complementary asset classes can be complicated. Investing in them requires expertise and flexibility. Our team has the flexibility to dynamically adapt the Fund’s asset allocation, adjusting the portfolio based on current market opportunities and conditions. 

With the right amount of risk management, complementary asset classes can offer compelling opportunities to investors today. The BlackRock Dynamic High Income Fund seeks to deliver a compelling combination of high income, capital appreciation, and diversification, and is exactly what investors should be looking for today.

In today’s environment, it can be challenging for investors to find sources of consistent high income. But investors willing to broaden their scope can still find opportunities.

The BlackRock Dynamic High Income Fund is a global multi-asset strategy that aims to provide investors with the potential for high income and positive total return.  The Fund achieves this outcome by investing across stocks, bonds and “complementary income asset classes”.  Complementary asset classes are often more difficult to access for retail investors and are less commonly found in existing income strategies. Their lower correlation to traditional income sources can help to complement what investors already own. 

Complementary asset classes can be complicated. Investing in them requires expertise and flexibility. Our team has the flexibility to dynamically adapt the Fund’s asset allocation, adjusting the portfolio based on current market opportunities and conditions. 

With the right amount of risk management, complementary asset classes can offer compelling opportunities to investors today. The BlackRock Dynamic High Income Fund seeks to deliver a compelling combination of high income, capital appreciation, and diversification, and is exactly what investors should be looking for today.

Why invest in the Fund?

1. Go-anywhere high income solution 2. Potential for high income amid volatility 3. Flexibility to adapt
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1. Taps into a full range of markets to generate high income

The Fund invests dynamically across an incredibly wide opportunity set including both traditional and complementary asset classes, allowing it to go where opportunities might be. Today, that means the Fund can focus its attention on the higher yielding areas of markets.

Asset class yields (%)1

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2. The other side of volatility is higher income potential

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The Fund takes advantage of heightened market volatility to earn higher income through a covered call strategy. 

Market volatility has also led to much higher yields and capital appreciation potential in many other income asset classes. The Fund’s active approach can tap into these opportunities to generate higher income and upside.

3. Adapt to thrive in the new market regime

Diversification logo

The Fund invests flexibly in over 10 income asset classes globally and over 1,000 individual stocks and bonds.2 This diversification and flexibility can help investors prepare for the inevitable ups and downs in markets, and capture new opportunities as they emerge.

In addition to top-down tactical asset allocation, the Fund taps into the expertise of over 10 flagship investment teams across BlackRock for individual security selection in equities and bonds, aiming to identify the names best positioned for tomorrow’s market environment.

Explore complementary income asset classes

Complementary income asset classes have the potential to deliver higher yields, as well as capital appreciation, and their low correlation3 to more traditional asset classes can provide meaningful diversification to your portfolio.

A covered call strategy is commonly used to generate additional income in a portfolio. It is achieved by holding a stock position and selling or “writing” a call option on that same stock.

A call option is a contract that gives the buyer the right to buy a stock at a pre-arranged price, or the strike price, on or before the option expiration date, depending on the terms of the contract. On the other side of the contract, the seller of a call option is required to sell the stock at the strike price if the buyer wishes to exercise the option.  In return, the seller receives a payment or a premium upfront from the buyer of the call option. 

Let’s look at an example. Say we bought shares of XYZ Company at $100. While we like its long-term prospects, we feel the stock won’t appreciate sharply in the near term. How can we still generate a return in the meantime? This is where a covered call strategy may add value. By selling a call option worth $2 at a strike price of $105, we earn the $2 premium from selling the call option today, but one of these scenarios is going to play out before the option expiration date::

a) XYZ stock trades above $105. The buyer of our call option will exercise it, meaning we need to sell our stock to the buyer at $105. In this case, we still get to keep the $2 option premium but we lose out on any capital appreciation beyond $105.

b) XYZ stock trades between $100 to $105. The call option expires worthless. Because the stock did not trade above the strike price of $105, the buyer did not exercise the option, we get to retain ownership of the stock, earn the $2 in option premium and capture the full upside of the stock.

c) XYZ stock trades below $100 at maturity. The call option expires worthless. Because we own the stock, we would incur a loss that equals the stock price decline less the income earned from the premium. In other words, the option premium can provide some protection against modest stock price declines.

While it is important to be aware of the risks involved,  a covered call strategy can help investors achieve additional income in a portfolio and provide some downside protection from stock price movement.

A covered call strategy is commonly used to generate additional income in a portfolio. It is achieved by holding a stock position and selling or “writing” a call option on that same stock.

A call option is a contract that gives the buyer the right to buy a stock at a pre-arranged price, or the strike price, on or before the option expiration date, depending on the terms of the contract. On the other side of the contract, the seller of a call option is required to sell the stock at the strike price if the buyer wishes to exercise the option.  In return, the seller receives a payment or a premium upfront from the buyer of the call option. 

Let’s look at an example. Say we bought shares of XYZ Company at $100. While we like its long-term prospects, we feel the stock won’t appreciate sharply in the near term. How can we still generate a return in the meantime? This is where a covered call strategy may add value. By selling a call option worth $2 at a strike price of $105, we earn the $2 premium from selling the call option today, but one of these scenarios is going to play out before the option expiration date::

a) XYZ stock trades above $105. The buyer of our call option will exercise it, meaning we need to sell our stock to the buyer at $105. In this case, we still get to keep the $2 option premium but we lose out on any capital appreciation beyond $105.

b) XYZ stock trades between $100 to $105. The call option expires worthless. Because the stock did not trade above the strike price of $105, the buyer did not exercise the option, we get to retain ownership of the stock, earn the $2 in option premium and capture the full upside of the stock.

c) XYZ stock trades below $100 at maturity. The call option expires worthless. Because we own the stock, we would incur a loss that equals the stock price decline less the income earned from the premium. In other words, the option premium can provide some protection against modest stock price declines.

While it is important to be aware of the risks involved,  a covered call strategy can help investors achieve additional income in a portfolio and provide some downside protection from stock price movement.

To find out more, speak to your financial advisers below

 
•CIMB Bank •Citibank •DollarDEX
•FSMOne •Maybank •OCBC Bank
•PhilipCapital •RHB Bank •SAXO Capital Markets
•Standard Chartered Bank  •UOB Kay Hian