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Total Return Fund Monthly Insight

Investor sentiment bodes well for credit sectors

January 23, 2020

How the BlackRock Total Return Fund is positioned for today’s markets.

Renewed optimism around trade negotiations between the U.S. and China boosted investor sentiment across financial markets in December. Also, during the month, the U.S. Federal Open Market Committee kept rates steady and signaled their desire to remain on hold for the foreseeable future, barring the emergence of any developments that cause a material reassessment of their outlook.

The BlackRock Total Return Fund holds an overweight in duration (higher interest rate sensitivity) relative to its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index. We favor the front end of the U.S. yield curve as we believe short-term rate exposure provides an effective risk hedge. Longer terms, however, could be more vulnerable to an uptick in growth and inflation. Outside the U.S., we hold a small overweight in European rates, such as France and Italy, where we think the central bank policy accommodation could be supportive.

The fund's diversified sources of return across fixed income asset classes

Chart: The fund's diversified sources of return across fixed income asset classes

Source: BlackRock as of 12/31/19. Quarterly return attribution is based on gross returns of the fund’s Institutional share class. U.S. Relative Value: The fund’s U.S. relative value strategies reflect the portfolio management team’s specific views on the mortgage market. Macro: The macro strategy is how the portfolio management team implements thematic and macro-economic investment views through duration, yield curve and foreign-currency positioning. Residual: This non-attributable portion of the fund’s total return is derived from trading and allocation effects across the fund’s investment strategies. For standardized performance, click here

Performance data quoted represents past performance and is no guarantee of future results. Investment returns and principal values may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than that shown. All returns assume reinvestment of all dividend and capital gain distributions. Refer to blackrock.com/tr for current month-end performance.

The fund generated a positive return in December and outperformed its benchmark index as investor demand for riskier assets supported various credit sectors. Duration positioning and a U.S. high yield overweight were the key drivers of the fund’s outperformance for the month. There were no significant detractors in a broadly positive environment for the credit markets.

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Bob Miller
Head of U.S. Multi-Sector Fixed Income
Bob Miller, Managing Director, is head of the U.S. Multi-Sector Fixed Income team within BlackRock's Global Fixed Income group and a member of the Global Fixed Income ...
Rick Rieder
Chief Investment Officer and Co-Head of Global Fixed Income
Rick Rieder, Managing Director, is BlackRock's Global Chief Investment Officer of Fixed Income, and Co-head of BlackRock's Global Fixed Income platform, a member of ...