BlackRock Global Unconstrained Equity Fund (UK)

Believe in long-term investing?
Now own it.

In these days of short-termism and day trading, it’s easy to lose sight of what you’re investing in and for. Some might feel this focus on immediate results has been at the expense of good old-fashioned analysis – and patience.

If you’re one of them, BlackRock’s Global Unconstrained Equity Fund (UK) could be for you.

Our investment strategy is built on a truly long-term outlook and a deeper understanding of fundamentals, helping us get more from our investments.

The BlackRock Global Unconstrained Equity Fund (UK) is a diverse, but concentrated portfolio of only the world’s leading businesses with proven track records of generating high returns on capital, being able to re-invest their cash flows back into their business and compounding growth over time. Such businesses are rare and we believe in-depth fundamental research is required to find them.

So if you believe in long-term investing, now’s your chance to own it.

Investing in the BlackRock Global Unconstrained Equity Fund (UK) gives you:

  • A compelling investment opportunity: an equity portfolio focused on long-term alpha generation.
  • A distinctive approach: an investment approach designed to maximise returns from extraordinary businesses based on fundamental insights.
  • A leading investment team: a highly experienced and successful portfolio management team.

A compelling investment opportunity

Investor aims have not changed but the investment landscape has, with the rise of factor constructs and an ever increasing array of passive options, leaving the long-term alpha opportunity intact. Indices need not dictate the investment opportunity set, especially in a world where low economic growth and technological disruption are contributing to a divergence between ‘winners’ and ‘losers’. Removing the constraints of benchmarks in portfolio construction can be advantageous in this context.

Risk: Diversification and asset allocation may not fully protect you from market risk.

Dispersion between businesses increasing (MSCI World Index)

Dispersion between businesses increasing (MSCI World Index) chart

Source: Datastream, I/B/E/S, Goldman Sachs Global Investment Research, December 2019, revenue growth relates to FY3 sales growth estimates. There is no guarantee that any forecasts made will come to pass.

A distinctive approach

Unconstrained investing is designed to maximise returns from extraordinary businesses based on fundamental insights. The investment process is uniquely centred on franchise strength and reinvestment opportunity with a real-world approach to portfolio construction and risk.

The Fund’s portfolio will be long-only, concentrated (~25 stocks) with low turnover (<20%) meaning more capital is backing our high conviction ideas. The portfolio also employs systematic exclusion and integration of environmental, social and governance (ESG) criteria in the process.

What do we mean by Unconstrained?

Long-term approach

Many investors focus on valuation levels relative to history, but forward-looking growth can be far more relevant over the long run. We see indications to suggest that the current valuation of a company, as expressed by its price-earnings ratio, does not necessarily have predictive power over the long run. What may matter more is a company’s ability to grow earnings fairly consistently over the longer term, with compounding being an exceptionally powerful but frequently overlooked opportunity. In our view, businesses that can maintain higher rates of growth for longer can present an outstanding opportunity set. The below shows the hypothetical “warranted valuations multiples” of various businesses i.e. the reverse engineered P/E ratio which a stock should have traded at 20 years ago, if it had been fairly valued so as to perform in line with the market.

Warranted valuations multiples

Source: BlackRock, Bloomberg, December 2019. For illustrative purposes only. Reference to the names of each company mentioned in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

A leading investment team

Alister Hibbert
Founder and co-portfolio manager
Michael Constantis
Founder and co-portfolio manager

Our experienced portfolio management team follow a robust investment process underpinned by in-depth engagement with the companies in which they consider investing and supported by BlackRock’s global market presence and network of investment intelligence. Alister Hibbert and Michael Constantis combine over 40 years’ experience with extensive company-wide resources to seek to deliver compelling long-term alpha generation by identifying stock specific investment opportunities.

Case studies

Brand Heritage
Brand Heritage
Unique, hard to replicate, global brand franchises.
Benefit from structural growth driven by global wealth creation.
Innovative Technology
Innovative Technology
Companies whose technology has helped pioneer a new structural growth channel and placed their products at the core of it.
Infrastructure 2.0
Infrastructure 2.0
Businesses forming the very foundation of the modern world.
Typically, defensive with high barriers to entry.
Paragraph-3
Paragraph-4
Paragraph-5

Exceptional brand heritage and limited price elasticity

Strong market position
Brand equity built up from 1939 foundation; iconic racing tradition; artificially cap volumes to ensure desirability.

Structural tailwinds
Growth in demand from High Net Worth; potential for SUV model to expand emerging market penetration.

High returns
Strong balance sheet enables re-investment in next generation products and supercars; no M&A; special models provide optionality.

Exceptional management teams
Focused on engineering excellence; monetising business after years under Fiat ownership.

Subject to change. Case studies are for illustrative purposes only and this case study has been selected based on positions in the Fund that are reflective of the “Brand Heritage” portfolio theme. They are not meant as a guarantee of any future results or experience, and should not be interpreted as advice or a recommendation.

Positioned to drive future computing power with room for margin expansion

Strong market position
Largest supplier of photolithography systems for the semiconductor industry and sole company producing extreme ultraviolet lithography (EUV) machines.

Structural tailwinds
Growth of memory in day-to-day life; fuels “Moore’s law” (i.e. the number of transistors on a microchip increases but costs fall).

High returns
Net cash balance sheet; history of re-investing at high returns; bolt-on acquisitions.

Exceptional management teams
Long-serving management team; invested c. USD$10bn in R&D over last 10 years; excess cash returned to shareholders via buybacks and dividends.

Subject to change. Case studies are for illustrative purposes only and this case study has been selected based on positions in the Fund that are reflective of the “Innovative Technology” portfolio theme. They are not meant as a guarantee of any future results or experience, and should not be interpreted as advice or a recommendation.

Under-appreciated business ripe for multi-year growth

Strong market position
The global leader and owner of the world’s largest domain name registry (.com and .net) which generate c.97% of revenues.

Structural tailwinds
Expansion of internet: Verisign receive c.140bn IP look-up requests per day.

High returns
Margin >65%; limited incremental costs for further growth; regulatory visibility on pricing; limited M&A activity.

Exceptional management teams
CEO founded business in 1995; aligned to shareholder returns; lobbying for greater price liberalisation; share buybacks with excess cash flow.

Subject to change. Case studies are for illustrative purposes only and this case study has been selected based on positions in the Fund that are reflective of the “Infrastructure 2.0” portfolio theme. They are not meant as a guarantee of any future results or experience, and should not be interpreted as advice or a recommendation.

How can this fit in a client’s portfolio?

We do not consider any index in day-to-day portfolio construction. However, over a longer time horizon (3-5 years), we believe the MSCI World Index is an appropriate proxy to use to evaluate the success of the Fund

Risk/Return analysis chart

BlackRock, December 2019. For illustrative purposes only. This information demonstrates, in part, the firm’s Risk/Return analysis. This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. Tracking error is defined as the divergence between the returns of a portfolio and the returns of a benchmark, and is a measure of the risk in an investment portfolio that is due to active management decisions.

We aim to

Allocate capital like a business owner
Buy businesses, not share prices and look straight through the shortterm
Divest based on structural considerations only
Ignore factors, indices and other artificial constructs
Build a resilient portfolio

DOWNLOAD NOW >

 

For more info, contact the UK Advisory Sales team:

UKAdviserSales@blackrock.com
+44 (20) 7743 5710

 

Risks warnings

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed.

Investors may not get back the amount originally invested.

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase.

Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

Fund specific risks for the BlackRock Global Unconstrained Equity Fund (UK)

Unconstrained Investment Risk
Funds may have an unconstrained investment style (i.e. the Investment Manager will not take into consideration the specific constituents of any benchmark index when selecting investments for such Funds). Accordingly, the active risk (i.e. the degree of deviation between the returns of any such Fund and the returns of any benchmark indices which are broadly representative of the universe of securities in which such Funds invest) taken on by such Funds is expected to be significant. As a result, such Funds will be particularly reliant on the ability of the Investment Manager to identify securities that perform well, and the failure of the Investment Manager to do so may result in such Funds underperforming market performance (as represented by benchmark indices) and/or suffering capital losses, which may be significant. There can be no guarantee that such Funds will outperform, or indeed match the performance of, any benchmark index.

Concentration risk
Investment risk is concentrated in specific sectors, countries, currencies or companies or because the Fund has only a small number of investments. This means the Fund is more sensitive to any localised economic, market, political or regulatory events. Concentrated investment exposure by the Fund could magnify the other risks to which the Fund is exposed.

Emerging markets risk
Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore, the value of these investments may be unpredictable and subject to greater variation.

ESG Policy risk
The Fund seeks to exclude companies engaging in certain activities inconsistent with ESG criteria. Investors should therefore make a personal ethical assessment of the Fund’s ESG screening prior to investment. Such ESG screening may adversely affect the value of the Fund’s investments compared to a fund without such screening.

Counterparty risk
The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.

MKTGM0120E-1067327-2/6