Systematic investing, different by design

Systematic investment process

The world is more data-driven than ever before. Our systematic process leverages vast sets of data, both traditional and alternative, to provide investment insights faster, at greater scale and with more granularity. We score and rank thousands of securities daily to help make investment decisions in real time, based on company fundamentals, market sentiment and macroeconomic themes.

Our fundamental signals perform the same analysis a traditional security analyst might. Our models leverage data and technology to systematically evaluate thousands of securities. Using alternative data, such as internet search, transaction activity, and geolocation data, we score the attractiveness of investment opportunities against more traditional accounting measures.

Our sentiment signals recognize factors other than fundamental strength can influence returns over shorter time frames. Sentiment signals analyze a broad range of market views from sell side ¹analysts, company management, and other investors. Electronic text forms a large part of the underlying data that drives these insights and seeks to enable our models to identify where analysts and management are more positive (or negative) on a company’s outlook.

Our macroeconomic signals seek to form a view across groups of securities rather than individual companies. For example, we analyze the impact of positive hiring trends or adverse inflationary pressures across a universe of securities. We evaluate the impact of macroeconomic data among countries, industries, and equity styles, such as value and growth.

The final score for every security is a weighted combination of all signals, blending the views across these insights.

The final “alpha” score represents our assessment of the return potential of each security relative to all the others within the investible universe.

Portfolio Construction

Our investment process² seeks to systematically capture the drivers of future returns, to create a portfolio that seeks to maximizes exposure to our signal views. We construct portfolios starting with these final alpha scores and size positions aligned with these scores. A market neutral portfolio would hold a long position³ in securities with a positive score, and a short position⁴ in securities with a negative score.

However, this doesn’t tell us anything about risk and implementation frictions such as transaction costs and constraints. To account for this, we take into consideration the expected return of a position, alongside an assessment of its potential risk using a multi-factor risk model.

Whether the portfolio being generated is a market neutral hedge fund designed to deliver an uncorrelated source of alpha, or a long only portfolio seeking to outperform a broad index of market exposure, the process is identical. The final output is intended to capture the broadest possible opportunity set within the target market, as we seek to achieve the best possible tradeoff between risk and return net of transaction costs.

DISCLAIMERS

There is no guarantee that a positive investment outcome will be achieved.

While the investment approach described herein seeks to manage risk, risk cannot be eliminated.

For investors in Italy: This document is marketing material. Before investing please read the Prospectus and the PRIIPs KID available on www.blackrock.com/it, which contain a summary of investors’ rights.

Risk 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 and depend on personal individual circumstances.

The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.

This material is prepared by BlackRock and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date shown above and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. This material is intended for information purposes only and does not constitute investment advice or an offer or solicitation to purchase or sell in any securities, BlackRock funds or any investment strategy nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Investment involves risks. Past performance is not an indication for the future performance.

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Before making any investment decision, you should assess whether the material is appropriate for you and obtain financial advice tailored to you having regard to your individual objectives, financial situation, needs and circumstances. Refer to BIMAL’s Financial Services Guide on its website for more information. This material is not a financial product recommendation or an offer or solicitation with respect to the purchase or sale of any financial product in any jurisdiction.

Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.

This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.

Prepared by BlackRock Investments, LLC. Member FINRA.

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¹ Sell side: refers to a portion of the financial industry that issues, sells, or trades securities in the public market.

² Source: BlackRock, 2024. Investment process is subject to change and is provided here for illustrative purposes

³ Long position: A long position refers to the purchase of an asset with the expectation that its value will increase over time.

⁴ Short position: A short position refers to borrowing a security, selling it, then buying it back later at a lower price to return to the broker and keep the difference.