blackrock consensus funds simple, transparent investments

Transcription

1 blackrock consensus funds simple, transparent investments

2 Tony Stenning Head of BlackRock UK Retail Business With BlackRock Consensus Funds, investors can tap into the full depth and breadth of our investment and risk management capabilities, delivered in a simple, cost effective way. blackrock consensus funds

3 Contents Investing for a new world 2 What are BlackRock Consensus Funds? 4 Why choose BlackRock Consensus Funds? 10 More about the Fund range 12 Information to consider when investing 14 The BlackRock investment advantage 16 How to invest 17 blackrock consensus funds [1]

4 investment options Investing for a new world We believe today s investors need simple, transparent yet diversified portfolios that reflect their individual needs. The global economic and financial landscape continues to be reshaped. It s not the world it was a decade ago, or even five years ago. And that means investing has to change too: Stock markets are up and down, and traditional sources of stable, low-risk return such as government bonds or savings accounts may no longer seem such viable investment options. With interest rates held at record lows, returns available from these sources have been pushed to the lowest levels ever seen in some cases approaching zero. Even though inflation has remained steady in most developed countries, interest rates are so low that real interest rates official interest rates minus inflation are now negative. Many cash savers and bond investors are receiving a return below inflation, meaning that their capital is being eroded in real terms, and their long term purchasing power is at threat. This does not mean a complete change of strategy. Holding some cash is undoubtedly the right approach but if you are prepared to take on more risk, it could be time to think about making your money work harder for you by stepping out of cash in search of higher returns, consulting a financial adviser and revisiting your financial goals. Moving out of cash in search of higher returns will involve accepting a greater risk of capital loss. You may get back less than you originally invested. Past performance is not a guide to future performance. In this new era of investing, we believe portfolios need to be more flexible and diversified than ever before to achieve the desired outcomes for investors. We believe this means diversifying portfolios across different asset classes, industry sectors and geographies. This can also mean considering different styles of investing; in particular, indexing otherwise known as passive investing, which can enable investors to build diversified portfolios with exposure to various asset classes and markets at lower cost than more traditional styles of investing. [2] blackrock consensus funds

5 Introducing BlackRock Consensus Funds To help investors access a broad range of markets, in a straightforward and cost-effective way, we ve developed BlackRock Consensus Funds: a range of five multi-asset portfolios which invest in a combination of equities (shares), bonds and other asset types. Each of the five Funds has a different investment exposure to these assets, and an independent risk-rating. The risk ratings help financial advisers to work with investors to select the Fund that most closely meets their investment objectives and attitude to risk. The value of advice This brochure is designed to provide investors with an understanding of the main features of the Funds. However, before investing it s important to give sufficient consideration to your time frame for investing, attitude towards risk and your investment goals. Prior to investing in the Funds, we strongly recommend you speak to a financial adviser. You can locate your nearest registered independent financial adviser (IFA) by visiting unbiased.co.uk. Please note, BlackRock does not have any control over the information that may be available on this site. Additionally, you can check the authorised status of an adviser and any professional associations they might have through the Financial Conduct Authority (FCA) register (fca.gov.uk). Finding an adviser blackrock consensus funds [3]

6 What are BlackRock Consensus Funds? BlackRock Consensus Funds are a range of five multiasset funds. Each Fund invests in index funds managed by BlackRock. In other words, BlackRock Consensus Funds are funds of index funds. NURS Funds. BlackRock Consensus Funds are authorised investment funds, regulated by the Financial Conduct Authority (FCA). They are structured as Non- UCITS Retail Schemes ( NURS ) meaning they can be marketed to retail investors but have less restrictive borrowing and investment powers than UCITS* schemes. For more information refer to the Simplified or Full Prospectus. Diversified portfolios The multi-asset approach of BlackRock Consensus Funds means the Funds are able to invest across a broad investment landscape including equities, bonds and cash. Where appropriate, the Funds may also have exposure to alternative assets such as property. This provides a greater degree of diversification than investing in a single asset class. BlackRock Consensus Funds have been designed according to one of our core beliefs that diversification is the key to achieving a more consistent investment experience over time. When a fund invests in different sectors or asset classes, it s considered to be diversified. The key benefits of diversification are: ``Investments are spread over a broad range of strategies, styles, sectors and geographic regions ``Diversification can help cushion the impact of market moves which can be more severe when investing in a single asset class, and ``Enhance the potential for investing in the best-performing asset class, while reducing the impact of the worst-performing asset class. These outcomes are of course dependent both on the precision and skill of the portfolio manager and the general market environment. Investors should note that a diversified portfolio is still exposed to the risk of capital loss. *UCITS (Undertakings for Collective Investment in Transferable Securities) is a European Union Directive that provides a standard regulatory regime across the EU for funds sold to the public. [4] blackrock consensus funds

7 Core assets: Shares and bonds equities (or shares) are shares issued by a company and may be listed and/or traded on a stockmarket. When investors buy a share in a company s ownership they become shareholders. Shares have the potential to make money in two ways: investors can achieve capital growth from their investment reflected through an increase in the share price, and/or receive income in the form of dividends. Neither of these is guaranteed and there is the risk that the share price will fall below the level at which it was purchased leading to loss of capital. I.O.U. fixed income securities (such as bonds) are issued by companies and governments as a way of raising money to finance projects and other initiatives and are effectively an I.O.U for the repayment of these amounts at a specified date in the future. Bonds issued by companies are known as corporate bonds. Bonds typically provide a regular stream of income (which is normally a fixed amount over a specified period of time) in return for the investment in cash. Once bonds have been issued, they are usually bought and sold between investors without the involvement of the issuer. Bonds are generally considered to offer stable returns, and to be lower risk than shares and therefore typically deliver lower returns. However, bonds carry the risk of default which results in the failure of the issuer to return all or part of the investment and/or the interest due. In addition, bonds are exposed to the risk of movements in interest rates which will impact the value of the bond. Under extreme market conditions, liquidity in bond markets may fall significantly without warning and it may not be possible for you to realise your investment. blackrock consensus funds [5]

8 continued Invested in index funds To achieve the desired combination of asset types, BlackRock Consensus Funds invest in BlackRock s range of index funds within the BlackRock Collective Investment Funds (BCIF) range. This indexing (or passive ) investment approach ensures BlackRock Consensus Funds can access the desired market exposures in an efficient and cost-effective way. More about index funds Index funds seek to replicate the performance of a specified market index (also known as the benchmark), less fees and expenses, as opposed to actively managed funds that aim to beat the returns of the index. For example, an index fund may invest in all companies in the FTSE 100 index. This is a share index comprised of the 100 largest (by share capital) companies listed on the London Stock Exchange. The Fund would invest in all the stocks in the FTSE 100 in the same proportion they are represented in the index. So if Vodafone accounts for 6% of the FTSE 100 Index by value and a smaller company such as Tate & Lyle accounts for 1%, the Fund will aim to replicate this by investing 6% of its portfolio by value in Vodafone shares and 1% by value in Tate & Lyle. If these weightings change, then the portfolio manager will attempt to mirror this in the Fund by buying and/or selling the relevant shares. The upshot of this indexing approach is that if shares in the FTSE 100 rise in value, so will the value of the Fund. Although conversely, if the value of the FTSE 100 falls in value, so will the Fund value. Risk-rated Each of the BlackRock Consensus Funds has been assigned an independent risk-rating out of ten one being the lowest risk and ten the highest. These simple ratings are designed to assist financial advisers in understanding and assessing their client s attitude to risk, and then based on this, recommending the appropriate Fund. To learn more about risk ratings, please consult your financial adviser. Expertly managed Although they invest in index funds, BlackRock Consensus Funds are not entirely passive. The Funds are managed by the Index Asset Allocation team within the Beta Strategies Group. The team monitors the Funds on a daily basis, ensuring their exposure to the different assets through the BCIF funds is managed in response to changes in the market environment. Management by the team means BlackRock Consensus Funds benefit from dedicated and expert focus on asset allocation and risk management. Working closely with the team are the expert managers of BlackRock index funds within the BCIF range. The BlackRock Consensus Funds are also subject to rigorous independent oversight and the analysis of a dedicated risk team within BlackRock. A focus on investor needs runs through each element of the BlackRock Consensus Funds, from portfolio design, through to implementation. [6] blackrock consensus funds

9 Asset allocation: the engine of portfolio returns Over the past 20 years, several academic studies * have demonstrated the importance of asset allocation, showing that in many cases, the allocation of capital across asset classes is often more important than the individual shares or other assets held in the portfolio. In other words, it s not just about selecting individual investments that are likely to perform well, but also how and where the assets across the whole portfolio are invested. This makes asset allocation among the most valuable services provided by an asset manager and/or financial adviser. Determining where to invest assets is a complicated process, and one that demands significant time, knowledge and resources. BlackRock s Beta Strategies team consists of 25 investment professionals, including asset allocation, market and fund specialists with the expertise and resources to deliver strong, consistent and risk-controlled investment performance. For more information on the BCIF funds Please refer to the Prospectus, the Key Investor Information Document (KIID) and the latest annual and interim Report & Accounts. These are available at blackrock.co.uk. BCIF is authorised by the Financial Conduct Authority (FCA) in the UK and classified as a UCITS retail scheme under the FCA regulations. * source: Determinants of Portfolio Performance, Brinson, Hood & Beebower, 1986; Asset Allocation Dynamics and Pension Fund Performance, Blake et al, blackrock consensus funds [7]

10 five core asset allocation funds Each with a different asset allocation and a different risk profile CONSENSUS CONSENSUS 60 CONSENSUS 70 CONSENSUS % % % % % Maximum exposure to equity securities (shares) The name of the Fund refers to its maximum exposure to equities. For example the BlackRock Consensus 35 Fund may invest up to 35% in shares at any one time. This is the Fund s independent risk rating out of ten. These ratings are produced by an independent company and are designed to help your financial adviser match the risk profile of the different funds to your individual preferences. The risk ratings are only one of a number of factors to consider and therefore we strongly recommend you seek financial advice prior to investing. Investors should note that the BlackRock Consensus 100 Fund has the flexibility to invest 0-100% in equities. This means that at any time the Fund may be either entirely invested in equities or alternatively invested entirely in fixed income or other assets. In reality, the Fund will generally maintain an exposure to both equity and fixed income. For each of the Funds, investors should note that as the allocation to equities increases, the impact of rising and falling equity markets will be greater which can increase the risk of capital loss on the investment. The Risk Categories range from 1 (lowest risk) and 10 (highest risk) based on Distribution Technology s analysis of the portfolios of the Funds. The provision of the Risk Categories by Distribution Technology does not constitute investment advice on the part of Distribution Technology or BlackRock and should not be relied upon by any person as such. No representation or warranty (including as to liability towards any party associated with any investment in the Funds and any third party), express or implied, is made by BlackRock as to the accuracy, reliability or completeness of the risk categorisations provided by Distribution Technology or the suitability therefore of any of the Funds for investors individual circumstances. It should be noted that the risk categorisations of the Funds are correct as at the date of this document but may be subject to change through a periodic review performed by Distribution Technology. The Risk Categories are also made available through Distribution Technology s website ( [8] blackrock consensus funds

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12 Why choose BlackRock Consensus Funds? BlackRock Consensus Funds provide a transparent and cost-effective * way of accessing investment returns from a range of asset classes and global markets The Funds offer investors: Diversification the Funds provide access to a combination of asset classes, industry sectors and geographic regions. For investors, multi-asset funds such as BlackRock Consensus Funds can provide a lower-risk investment option than a pure equity fund, but with greater potential for capital growth than a pure bond fund. However, these outcomes are of course not guaranteed and the asset allocation policy pursued will be a significant contributor to the performance of the Funds. Simplicity and efficiency BlackRock Consensus Funds are designed to be simple and transparent investment solutions. The underlying index funds they invest in are highly transparent in their investment objective to achieve results in line with their index. The Funds risk ratings aim to enable investors and their advisers to select a Fund based on their investment objectives and attitude to risk. Choice the Funds cater for a variety of risk appetites from lower-risk through to higher risk (as indicated by the independent risk rating). The choice of five funds also allows investors to switch exposures between the different funds as their particular needs and requirements change over time. Investors should note that a switch between funds is considered a disposal for capital gains tax purposes. * Class D units have an annual management charge (AMC) of 20bps. [10] blackrock consensus funds

13 4 5 Cost-effective solutions By design, index funds require fewer portfolio management and analyst resources. These products therefore are a cost-efficient means for the BlackRock Consensus Funds to implement their multi-asset investment strategy. The Funds also benefit from the asset allocation expertise of the BlackRock Beta Strategies group, as well as our efficient and robust index-tracking portfolio management process. Proven experience BlackRock has managed this type of investment strategy for over 11 years. For example the BlackRock Consensus 85 Fund (previously the BlackRock Consensus Fund, a sub-fund of the BlackRock Qualified Investor Schemes) was launched in 2005 and has assets (AUM) of 7.2 billion (as at 30 June 2013). We remind investors that all financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. For more details of the specific risks of investing in the BlackRock Consensus Funds, please see pages 14 and 15.! blackrock consensus funds [11]

14 More about the Fund range BlackRock Consensus Funds provide investors with access to five professionally managed and diversified investment products, across the risk/return spectrum. The Funds seek to achieve total return through a combination of capital growth and income, by investing primarily in units of BlackRock index funds within the BlackRock Collective Investment Funds (BCIF) range. These funds may gain exposure globally to asset classes including: shares, bonds (issued by governments, companies and other institutions), cash and alternative asset classes (such as property). Risk and return All investments carry a trade-off between risk and reward. The graph opposite intends to illustrate that the more risk you re willing to take, the greater the opportunity for capital growth, although of course at the same time, the greater the potential for losses. For example, if you re nearing retirement, you may want a lower risk approach, to lessen the possibility of your final retirement pot being eroded through loss of capital. Alternatively, if you don t need to access your money for some years, you may prefer a higher risk approach, knowing you can weather some short-term losses. How do I decide which Fund is best for me? You should consult your financial adviser who will perform a thorough assessment of your tolerance or attitude towards risk, your investment goals and your investment time horizon. Based on this, your adviser will help you decide which Fund best matches your individual needs. [12] blackrock consensus funds

15 CONSENSUS 85 The following diagram illustrates where each of the Funds sit on a theoretical risk/return spectrum. The number in the fund name reflects the maximum allocation to equities (company shares). As the allocation to equities increases so does the potential for greater investment returns when the market rises, yet as does the risk of capital loss when the market falls. Theoretical risk and returns of the different Blackrock consensus funds assuming rising stock markets Return CONSENSUS CONSENSUS CONSENSUS CONSENSUS Risk The diagram above is provided for illustrative purposes only and does not provide an accurate representation of the level of risk and return which an investor would experience. blackrock consensus funds [13]

16 Information to consider when investing Before investing you should be aware that all financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. Many BlackRock Funds invest overseas so changes in the relevant exchange rate will affect the value of the investment in funds which invest a large portion of their assets denominated in other (non-sterling) currencies. If, after reading this brochure, you have any questions or would like any additional information, please contact your financial adviser or speak to our Investor Services Team on *.! BlackRock Consensus Funds The Funds may be exposed to finance sector companies, as a service provider or as counterparty for financial contracts. Liquidity in the financial markets has been severely restricted, causing a number of firms to withdraw from the market, or in some extreme cases, becoming insolvent. This may have an adverse effect on the activities of the Funds. Through investment in the underlying index funds the Funds are exposed to economies and markets which may be less developed and compared to more established economies, the value of investments may be subject to greater volatility due to increased uncertainty as to how these markets operate. Certain of the underlying funds invest in fixed interest securities issued by companies which, compared to bonds issued or guaranteed by governments, are exposed to greater risk of default in the repayment of the capital provided to the company or interest payments due. These securities are exposed to changes in interest rates which will affect the value of any securities held. Over 35% of certain of the underlying funds may be invested in securities issued by any one government; therefore if these investments decline in value, this will have a pronounced effect on the overall value of the Fund. *For your protection telephone calls are usually recorded. [14] blackrock consensus funds

17 Index Funds Index funds are subject to tracking error (the difference in performance between the index and the index-tracking fund). Tracking error may arise due to the impact of fees and expenses on the funds and/or the inability to hold all the index constituents, for example where there are local trading restrictions, and/ or where regulations limit exposure to the index constituents. It should be noted that index providers do not provide any warranties or accept any liability in relation to the quality, accuracy or completeness of data in respect of the indices, nor any guarantee that the published indices will be in line with the index calculation methodology. Index providers may carry out additional rebalancing of indices, for example, to correct an error in the selection of index constituents. Any transaction costs arising from additional rebalances would be met by the fund and may cause additional tracking error. blackrock consensus funds [15]

18 The BlackRock investment advantage We re one of the world s largest asset managers, with 2.5 trillion * in assets under management for clients worldwide. Experts at indexing Choice of manager is just as important for index investing as it is for actively managed funds. Not all index managers offer the same degree of skill, expertise and benefits to investors. BlackRock s experience of managing index funds stretches back many years. In fact, we pioneered the first index strategy in the 1970s, and our innovative focus has ensured consistent delivery of market returns to clients along with a stream of performance enhancements designed to improve results for clients. Investors should of course be mindful that past performance is not a guarantee of future performance. Scale matters Investing is a business which benefits from scale. As the world s largest provider of index funds, with over 1.5 trillion * in indexed assets, we re in a position to negotiate on the costs of transacting in the markets and through our depth of products provide access to global markets. Dedicated and experienced teams BlackRock Consensus Funds are managed by the Index Asset Allocation team within the BlackRock s Beta Strategies group. The Asset Allocation team comprises 25 investment professionals who globally manage about 400 billion*. Working closely with this team are the managers of BlackRock index funds within the BCIF range. There are over 200 investment professionals globally engaged in index investment strategies*. BCIF managers are directly involved and responsible for the management of the underlying fixed income and equity index tracking funds. Risk management Management of risk lies at the heart of BlackRock s investment process. BlackRock is renowned for its pioneering approach to risk management, and we have developed state-of-the-art tools to analyse portfolios and manage risk. Our expertise, supported by the broader research and analysis undertaken throughout BlackRock, helps keep risk in check. *Source: BlackRock. All data as at 30 June [16] blackrock consensus funds

19 How to invest? It s simple and straightforward to invest with BlackRock. Application Forms can be downloaded from blackrock.co.uk. The BlackRock Consensus Funds may be held inside or outside of a BlackRock ISA. The favourable tax treatment of ISAs is subject to government legislation and, as such, is subject to change. Prior to investing in the Funds, you should ensure you have read and understood the Simplified Prospectus which is available on request or through our website blackrock.co.uk. You may also request a copy of the Full Prospectus and latest annual or interim Report and Accounts (when available). BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. To ensure you understand whether our product is suitable, please read the Simplified Prospectus which details more information about the risk profile of the investment. We also recommend you seek independent professional advice prior to investing. If after reading this brochure, you have any questions or would like any additional information, please speak to your financial adviser or call our Investor Services Team on *. Freepost RLTZ-KHUH-KZSB BlackRock PO Box 9036 Chelmsford CM99 2XD * uk.investor@blackrock.co.uk blackrock.co.uk Our Investor Services Team is available from (8.30 a.m p.m., Monday to Friday). blackrock consensus funds [17]

20 WHY BlackRock As the world s largest investment manager, we believe it s our responsibility to help investors of all sizes succeed in the New World of Investing. We were built to provide the global market insight, breadth of capabilities and deep risk management expertise these times require. The resources you need for a new world of investing Investing with BlackRock gives you access to every asset class, geography and investment style, as well as extensive market intelligence and risk analysis, to help build the dynamic, diverse portfolios we believe these times require. The best thinking you need to uncover opportunity With deep roots in all corners of the globe, our 100 investment teams in 30 countries share their best thinking to translate local insight into actionable ideas that strive to deliver better, more consistent returns over time. The risk management you need to invest with clarity With more than 1,000 risk professionals and premier risk management technology, BlackRock digs deep into the data to understand the risk that has to be managed for the returns our clients need and bring clarity to the most daunting financial situations. BlackRock. Investing for a new world. Source: BlackRock, data as at 30 June Issued by BlackRock Investment Management (UK) Limited (authorised and regulated by the Financial Conduct Authority). Registered office: 12 Throgmorton Avenue, London EC2N 2DL. Registered in England No Tel: For your protection, telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ALADDIN, ishares, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD and BUILT FOR THESE TIMES are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. The Risk Categories assigned to each of the Funds are provided by use of Distribution Technology s Dynamic Planner risk profiling and asset allocation service. The Risk Categories are intended to provide risk profiling information to Financial Advisers in order to assist their understanding of a client s attitude to risk and assessment of whether an investment in the Funds is suitable for their clients. ( Sep) for more information uk.investor@blackrock.co.uk blackrock.co.uk