Explore new sources of return
Alternative Investments

Explore new sources of return with alternatives

With bond yields near record lows and the stock market near record highs amid heightened volatility, traditional 60/40 portfolios are under pressure. Find new sources of return with alternative investments

It's time to think beyond the traditional 60/40 portfolio. With low yields and muted expected returns, many advisors have come to BlackRock looking for a better way meet their client's goals.  Alternatives can help but many advisors we talk to don't know where to begin. That's why we built the “HDMA framework.”  to identify the four outcomes that most alternative investments look to accomplish

Not all alternatives behave the same way so it's important to match your intended outcome to the right type of alternatives for your client portfolios.

What is the HDMA framework? It stands for hedge, diversify, modify and amplify. Let's talk about what that means further.

Hedges look to reduce the risk of a drawdown on your core holdings. They are designed to increase in value when stocks fall.  But this can be a drag on your portfolio since stocks typically grind higher over time. So, you can either accept the drag or try and time the market—which is hard to do!

Alternatives that diversify have a low or moderate correlation to core holdings. These strategies invest in differentiated sources of return.

Modifiers seek to provide growth with less volatility than stocks. We believe it's possible to replicate this outcome with a mix of low-cost index investments and cash – a better value for money

Amplifiers seek higher returns or income over stocks and bonds by investing in private markets.   Recent innovations have made amplifiers more accessible to traditional investors through interval or closed-end funds.

Within this framework, two stand out. Advisors should focus on (1) diversifiers to reduce risk and add differentiated portfolio exposures and (2) amplifiers for their potential to boost returns or income.

Now let's put this framework into action. I invite you to visit our tools on Advisor Center to  see how well your portfolio is delivering.

For institutional or financial professional use only. Not to be shown or distributed to the general public.

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. Investments named within this material may not necessarily be held in any accounts managed by BlackRock. Reliance upon information in this material is at the sole discretion of the reader. Statements concerning financial market trends are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will perform well under all market conditions. Outlook and strategies are subject to change without notice.

Investing involves risks, including possible loss of principal.

Alternative investments may engage in speculative investment practices which increase investment risk, can be highly illiquid, often are not required to provide periodic prices or valuation, may not be subject to the same regulatory requirements as mutual funds and often employ complex tax structures. Also, some alternative investments have experienced periods of extreme volatility.

Focus on outcomes

When you’re looking at alternatives, there is a broad universe to consider. BlackRock suggests you focus on strategies that seek to diversify or amplify.

Seek to diversify
Seek to diversify
Core bonds diversify stocks but deliver low yields. Low correlation alternative strategies can offer another way to diversify equities and seek attractive returns.
Seek to amplify
Seek to amplify
Tap into private markets to seek higher returns over traditional stocks and bonds.
See how alternatives can help your clients reach their goals
Run an analysis on Expected Return Analyzer to see how alternative strategies can help your clients generate income, increase return, or reduce risk in portfolios.
Bridge above the river

Private markets unleashed

With stocks at all time highs and bond yields at sustained lows, we expect long-term public market gains to be more muted. Look to potentially amplify returns through private markets, which are now easier to access than ever before, through non-listed closed-end funds.

More opportunity for private markets

ERA PM Opportunity

US Census Bureau – Statistics of US Businesses; Droidge, Karolyi and Stulz (1988-2017) . Represents the latest data available as of February 5, 2021.

Private companies are a larger part of the economy, creating more opportunity for private equity investors.

America’s wealth creator

ERA PM Wealth Creator

For illustrative purposes only. Selected companies are used to represent prominent and recognizable examples of the IPO market. Does not reflect the IPO market as a whole and is not meant to imply or represent underlying holdings in BlackRock Private Investments Fund or that the Fund will only invest in these types of investments. Past performance is no guarantee of future performance. Left display: Source - National Venture Capital Association. Data as of December 31, 2019. Middle display: Source: Journal of Applied Corporate Finance. Private Equity and Public Companies. “The Growing Blessing of Unicorns: The Changing Nature of the Market for Privately Funded Companies.” Comparative Summary Statistics for the Unicorn Sample: 2015 vs. 2020. See appendix for methodology on how sample was determined. Unicorns are start-ups valued at $1Bn or more. Right display: Source – Stripe; “Stripe has raised a new round of funding to accelerate momentum in Europe and reinforce enterprise leadership”. Stripe data as of 3/14/21. Amazon source: “TechCrunch, A look back in IPO: Amazon’s 1997 move.”

There’s been a shift of wealth creation toward private equity. As IPOs come to market today at increasingly rich valuations, there’s “less juice left in the squeeze” for the public markets.

To obtain more information on the funds, including the Morningstar time period ratings and standardized average annual total returns as of the most recent calendar quarter and current month-end, please visit:
Systematic Multi-Strategy Fund
Global Long/Short Equity Fund
BlackRock Credit Strategies Fund

The Morningstar RatingTM for funds, or "star rating," is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

Our expertise at your fingertips

Our platform seeks to deliver outperformance with true partnership across a range of investment solutions. We provide you:
Access to quality opportunities
Access to quality opportunities
Our 330-plus alternative investment professionals supplement their networks and know-how with insights from BlackRock’s other 2,000-plus investors around the world.
Greater transparency
Greater transparency
We use some of the industry’s most advanced technology. We monitor 3,000 risk factors daily on Aladdin® and track 45,000 private portfolio companies on eFront.
An integrated view
An integrated view
We provide you with a whole portfolio view, so you have a deeper understanding of how alternatives impact the rest of your clients’ portfolios.
A new standard of alignment
A new standard of alignment
We share our best insights and deliver BlackRock’s skill, scale and technology to help you tailor investment strategies to your clients’ needs and challenges.