FOR PROFESSIONAL CLIENTS ONLY DRIVING RETURNS: PRIVATE ASSETS WRITTEN BY

Transcription

1 FOR PROFESSIONAL CLIENTS ONLY DRIVING RETURNS: ASIA GLOBAL PACIFIC INSURERS INSURERS RECONSIDER RECONSIDER FIXED FIXED INCOME INCOME AND AND PRIVATE ASSETS WRITTEN BY

2 FOREWORD FOREWORD As we approach the final few months of the year, insurers continue to face As we approach the final few months of of the year, insurers continue to to face multiple challenges. The low for longer yield environment remains with us, which, multiple challenges. The low for longer yield environment remains with us, which, combined with persistent slow economic growth, is driving insurers to reevaluate combined with persistent slow economic growth, is is driving insurers to reevaluate their portfolios in the search for income. Across the industry there is a widespread their portfolios in the search for income. Across the industry there is is a a widespread acknowledgement that we need to evolve to meet the challenges ahead, but acknowledgement that we need to evolve to meet the challenges ahead, but accomplishing this is no simple matter and individual firms are at very different accomplishing this is no simple matter and individual firms are at very different stages of execution. stages of execution. As our report shows, increasing numbers of insurers are, for example, reconsidering the As our report shows, increasing numbers of insurers are, for example, reconsidering the appropriateness of using current fixed income benchmarks to position their portfolios and expect to appropriateness of using current fixed income benchmarks to position their portfolios and expect to focus more on absolute returns in the future. Many are looking to private market assets such as real focus more on absolute returns in the future. Many are looking to private market assets such as real estate and infrastructure to achieve this, although internal barriers need to be overcome before the estate and infrastructure to achieve this, although internal barriers need to be overcome before the widespread allocation to investments such as these becomes the norm. Overall, however, we expect widespread allocation to investments such as these becomes the norm. Overall, however, we expect insurers to increase their allocation to illiquid assets over the next few years, and as they do so it will insurers to increase their allocation to illiquid assets over the next few years, and as they do so it it will become more important than ever for them to find the right partners in order to identify the most become will become more more important than than ever ever for them for them to find to find the right the right partners partners in order in order to identify to identify the most the most suitable kind of opportunities and execute them effectively. suitable kind of opportunities and execute them effectively. Growing numbers of insurers are outsourcing part of their investment management function to Growing numbers of insurers are outsourcing part of their investment management function to external external providers. However, this can be a daunting step the shift to utilising third party investment external providers. providers. However, However, this can this be a can daunting be a daunting step the step shift the to utilising shift to utilising third party third investment party investment managers managers may require a significant change of culture within a firm, and is not something that can managers may require may a significant require a significant change of culture change within of culture a firm, within and a is firm, not something and is not something that can be that rushed. can Time be rushed. Time may be needed to educate boards about how an external partner could help them to be may rushed. be needed Time to may educate be needed boards to educate about how boards an external about how partner an external could help partner them could to take help advantage them to of take advantage of opportunities they would be unable to pursue in-house. The importance of such take opportunities advantage they of opportunities would be unable they to would pursue be in-house. unable to The pursue importance in-house. of The such importance education of cannot such be education cannot be underestimated. education underestimated. cannot be underestimated. But whether firms choose to ultimately outsource some of their investment management decisions But whether firms choose to ultimately outsource some of their investment management decisions or or work with external providers in other ways, partnership of one form or another will become work work with with external providers in other in other ways, ways, partnership of of one one form form or another will will become increasingly increasingly important over the next few years as insurers seek to shape their portfolios to meet increasingly important over important the next over few the years next as few insurers years seek as insurers to shape seek their to portfolios shape their to portfolios meet the challenges to meet the challenges ahead. That is why it is the responsibility of managers like BlackRock to continue the ahead. challenges That is why ahead. it is That the responsibility is why it is the of responsibility managers like of BlackRock managers like to continue BlackRock delivering to continue a flexible delivering a flexible partnership model underpinned by deep insurance expertise. It is indeed in delivering partnership a flexible model underpinned partnership model by deep underpinned insurance expertise. by deep insurance It is indeed expertise. in this spirit It is indeed that we in present this spirit that we present this report, which is intended to shine a light on the key issues facing this spirit report, that which we present is intended this to report, shine which a light is on intended the key issues to shine facing a light the on insurance the key issues industry facing so that, the insurance industry so that, together with our partners, we can identify the most appropriate the together insurance with our industry partners, so that, we can together identify with the our most partners, appropriate we can solutions. identify the I hope most that appropriate you find the solutions. I hope that you find the report informative and useful as you plot a course through the solutions. report informative I hope that and you useful find as the you report plot informative a course through and useful the testing as you period plot a course ahead. through the testing period ahead. testing period ahead. Sincerely, Sincerely, Sincerely, David Lomas, ACII David Lomas, ACII Global Head, Financial Institutions Group, BlackRock s Institutional Client Business Global Head, Financial Institutions Group, BlackRock s Institutional Client Business financialinstitutions@blackrock.com financialinstitutions@blackrock.com [2] D RIVING RETURNS [2] [2] D DRIVING RETURNS

3 Driving returns: Asia Pacific insurers reconsider fixed income and private assets CONTENTS About the research...4 Executive summary...5 Section 1: Seeking greater flexibility...6 Section 2: Preparing for change...9 Section 3: The growing appeal of private asset classes...11 Conclusion...15 GLOBAL INSURERS RECONSIDER FIXED INCOME AND PRIVATE ASSETS [3]

4 About the research In June and July of 2014 The Economist Intelligence Unit, on behalf of BlackRock, surveyed senior executives from insurance and reinsurance companies around the world to understand how they were responding to the pressures that their fixed-income portfolios are under, and how they viewed private-market asset classes such as real estate and infrastructure as an investment opportunity. This report is based on the survey responses of insurers in the Asia Pacific region. In total, we surveyed 243 respondents worldwide, who between them have over US$6.2trn in assets under management (AuM), and of whom 44 are in Asia Pacific with approximately US$1.3trn in AuM. Insurers were grouped by AuM: there were 13 with more than $75bn in AuM (30%); three with $25bn-75bn (7%); five with $10bn-25bn (11%); two with $5bn-10bn (5%); 11 with $1bn-5bn (25%); and ten with $500m-999m (24%). Life insurers accounted for 16 responses (36%); property and casualty for 14 (32%); multiline for nine (20%); health for four (9%); and one was a reinsurer (2%). We are grateful to the following interviewees for their time and insights: Don Guo, chief investment officer, Asia Capital Reinsurance Group Carlos Wong-Fupuy, senior director, A.M. Best Arthur Piper was the author of this report. [4] DRIVING RETURNS

5 Executive summary Growing pressure on the profitability of insurers has made boosting returns on investment a top priority for the industry. An upsurge in appetite to take on a more varied range of investment risks is evident in the willingness among insurers to allocate a greater proportion of their portfolios than ever before to higheryielding opportunities, in particular to private asset classes. With availability of good-quality fixed-income investments in Asia Pacific also a concern, almost one-half of insurers in the region intend to allocate more than 15% of their portfolio to private asset classes such as infrastructure and real estate over the next three years, nearly doubling the proportion that do so today. However, they face significant barriers in achieving that goal. In addition, the more fragmented regulatory landscape across different markets makes managing compliance issues a top priority for investors in the region. The key findings from the research are as follows. Asia Pacific insurers are most concerned about the risk of weak economic growth and inflation. Almost one in two respondents in the Asia Pacific region sees weak economic growth as the biggest single macro risk to their fixed-income portfolios, while almost two in five cite concerns over inflation (41%). The top market risks identified by insurers in the region are credit (50%) and liquidity (48%). Managing regulatory affairs is set to replace book yield as the top priority for investors. The main focus currently for those managing investment-grade core fixed-income portfolios is increasing or maintaining book yield (45%), as well as managing duration risk (41%). Priorities, however, are set to change, with almost one-half of survey respondents from Asia Pacific (48%) saying that their chief concern over the next three years will be complying with regulatory requirements. Appetite for risk among insurance investors is increasing across the region. One in three insurers in Asia Pacific intends to increase their risk exposure over the next three years. For a majority, the most common reason for doing so is to replace or enhance investment income (73%). Many are also motivated by the benefits of seeking greater diversification in their portfolios (60%). Private asset classes are becoming more attractive to insurers seeking greater diversification in their portfolios. Beyond their core fixed-income portfolios, more Asia Pacific insurers are looking to increase rather than decrease their investment into private asset classes over the next three years. Assets backed by real estate or infrastructure are particularly popular. Some 66% of those surveyed strongly agree that private asset investments represent a very attractive option, and 55% say that they offer a diversified source of risk and return. GLOBAL INSURERS RECONSIDER FIXED INCOME AND PRIVATE ASSETS [5]

6 SECTION 1 Seeking greater flexibility Insurers in Asia Pacific see weak global growth as the biggest macro risk to their investment strategies over the next three years, echoing the concerns of the global insurance community. However, any worry about the effect of persistent low interest rates on their investments is 14 percentage points lower in Asia Pacific compared with the rest of the world. Inflation is perceived as a serious macro risk to their investment portfolios by 41% of survey respondents in the region. With regard to market risks, a significant number of them are also concerned about credit (50%) and liquidity (48%) [See charts 1 and 2]. 1. WHICH OF THE FOLLOWING DO YOU CONSIDER TO BE THE MOST SERIOUS MACRO RISKS TO YOUR FIRM S INVESTMENT STRATEGY/ PORTFOLIO OVER THE NEXT THREE YEARS? SELECT UP TO TWO. % Geo-political risk Environmental / climate / catastrophe risk Weak global economic growth Inflation risk Regulatory risk Deflation risk [6] DRIVING RETURNS

7 2. WHICH OF THE FOLLOWING DO YOU CONSIDER TO BE THE MOST SERIOUS MARKET RISKS TO YOUR FIRM S INVESTMENT STRATEGY/ PORTFOLIO OVER THE NEXT THREE YEARS? SELECT UP TO TWO. % Persistent low interest rate environment Credit risk Liquidity risk Asset price volatility Investors are looking to reduce credit risk and reduce volatility in their balance sheets, says Carlos Wong-Fupuy, senior director at A.M. Best, a rating services provider to the insurance industry. At the same time, they are trying to find ways of optimising their capital needs, and one of those ways is by improving the quality of their investment portfolios. For instance, 34% of Asia Pacific survey respondents say that they are increasing their risk exposure over the next three years only 20% say that they will decrease it both within the fixed-income portfolio and outside it. Among those insurers planning to take on more risk, 73% want to do so with the intention of replacing or enhancing investment income and 60% with the aim of increasing diversification benefits. On the investment-grade core fixed-income side, persistent low interest rates remain a challenge for many investors (38%), but a lack of supply of such investments is the main concern of insurers in the Asia Pacific region (57%) [See chart 3]. In addition to the current emphasis on increasing or maintaining book yield, that has encouraged investment managers to diversify within fixed income. GLOBAL INSURERS RECONSIDER FIXED INCOME AND PRIVATE ASSETS [7]

8 SECTION 1 Seeking greater flexibility continued 3. PLEASE INDICATE HOW CONCERNED YOU ARE, IF AT ALL, ABOUT EACH OF THE FOLLOWING CHALLENGES FACING YOUR INVESTMENT-GRADE CORE FIXED-INCOME PORTFOLIO. PLEASE SELECT ONE OPTION FOR EACH ROW. % Persistent low interest rates Lack of supply of fixed-income instruments Market volatility Changing operating environment (ie, new regulatory and capital constraints) Rising interest rates Compressed credit spreads Widening credit spreads Very concerned A little concerned Not at all concerned A lot of insurance companies are moving to a more flexible approach to fixed income as managers seek more latitude in what they can invest in, says Don Guo, chief investment officer at Asia Capital Reinsurance Group. We are not as exclusively focused on the highest-quality bonds as we used to be. Asia Capital Re now also invests in other fixed-income assets, such as emergingmarket credit, non-agency mortgage-backed securities and certain bank loan products. As well as providing better yield, they should also help to protect the portfolio from any sudden rise in interest rates, he says. [8] DRIVING RETURNS

9 Preparing for change SECTION 2 A rise in interest rates in Asia Pacific markets could eventually lead to better yields within fixed-income portfolios, but a spike would also pose its own set of challenges to insurers. Changes in interest rates can add to asset and liabilities mismatches, for example, and lead to further liquidity concerns for insurers. 1 Long duration is quite a challenging investment at the moment, especially among life insurers, says Mr Guo of Asia Capital Re. But as a non-life re-insurer, we would welcome an interest-rate rise because as bonds mature, we can reinvest in the higher-yielding products, and as new premium comes in, we can invest that too. A striking feature across Asia Pacific is the pre-eminence of regulatory risk as a major concern among insurers. While 36% of survey respondents see it as a macro risk, 48% say that it will be a top priority in managing investment-grade core fixedincome over the next three years a significant increase from the 30% who cite it as a main priority currently [See chart 4]. 4. WHAT ARE YOUR TOP PRIORITIES IN MANAGING YOUR INVESTMENT-GRADE CORE FIXED-INCOME PORTFOLIO NOW AND OVER THE NEXT THREE YEARS? PLEASE SELECT UP TO THREE IN EACH COLUMN. Now Over the next three years Changing / optimising external manager line-up Increasing or maintaining book yield Managing volatility Managing duration risk / matching liabilities Maintaining liquidity Managing regulatory requirements Managing credit risk Managing around gain and / or loss limitations Enhancing investment policy flexibility Allocating more to other sources of return outside investment grade core fixed income Rising interest rates pose challenge for Asia Insurers, Risk.net, 30 April 2014 GLOBAL INSURERS RECONSIDER FIXED INCOME AND PRIVATE ASSETS [9]

10 SECTION 2 Preparing for change continued Unlike in the US and Europe, regulation in Asia Pacific tends to be highly fragmented. Solvency II, which comes into effect in the EU on January 1st 2016, is making many insurers adopt a more sophisticated risk-based capital (RBC) approach to regulation. While Taiwan, Singapore, Malaysia, China and South Korea have adopted some regulatory measures similar to those incorporated in Solvency II, regulation still retains a strong national flavour in countries across the region. Given that the ratings of bonds issued in the region tend to be lower than those issued in Europe and the US, insurers also face the prospect of higher capital charges if Asia Pacific regulators adopt more of the stipulations that govern the industry in other parts of the world. With the supply of investment-grade core fixed-income products in the region comparatively low, change could be costly for investors. In some respects, however, insurers in Asia Pacific are in harmony with global trends. For example, over the next three years investors in the region will be most interested in tracking the performance of their overall portfolio by looking at the absolute return that it provides (41%), while the current importance of measuring excess return to benchmark is set to decline [See Chart 5]. 5. WHAT WAS YOUR FIRM S PRIMARY METHOD FOR ASSESSING THE PERFORMANCE OF ITS FIXED-INCOME PORTFOLIO OVER THE LAST THREE YEARS? WHAT WILL IT BE OVER THE NEXT THREE YEARS? SELECT ONE OPTION IN EACH COLUMN. % Book Yield/income Excess return to benchmark Absolute return Achieving a suitable liability match Over the last three years Over the next three years [10] DRIVING RETURNS

11 The growing appeal of private asset classes SECTION 3 Regulatory changes are also playing a part in making insurers in Asia Pacific further diversify their asset allocation, particularly into investment opportunities linked to real estate and infrastructure. Currently 27% of them have exposure to commercial real estate mezzanine debt, but over the next three years that figure is set to rise to 45% [See chart 6]. Infrastructure, in particular, can almost be a fixed-income replacement because of the inherent coupon and yield dates, according to Mr Guo of Asia Capital Re. 6. HAS YOUR FIRM INVESTED IN, OR HAVE PLANS TO INVEST IN, THE FOLLOWING TYPES OF PRIVATE- MARKET ASSETS? SELECT ALL THAT APPLY. Co-investment / special situations Commercial real estate senior debt Commercial real estate mezzanine debt Direct lending Infrastructure debt Infrastructure equity Power / energy Private equity Real estate equity Timber / agriculture Other (please specify) None of the above Currently invested Will invest / increase investment in the next three years Along with their peers in other parts of the world, investors in Asia Pacific are increasing the overall proportion of their portfolios allocated to private assets. Fewer than one in ten survey respondents from the region had more than 15% of their portfolios allocated to private-market assets three years ago. Today the proportion is close to one in four, but in three years time, that figure is set to rise to almost one in two (46%) [See chart 7]. GLOBAL INSURERS RECONSIDER FIXED INCOME AND PRIVATE ASSETS [11]

12 SECTION 3 The growing appeal of private asset classes continued 7. WHAT PERCENTAGE OF YOUR PORTFOLIO HAS BEEN, OR WILL BE, ALLOCATED TO PRIVATE-MARKET ASSETS? HOW MUCH DO YOU ANTICIPATE INVESTING IN THESE ASSETS THREE YEARS FROM NOW? SELECT ONE OPTION IN EACH COLUMN. % Three years ago Now Three years from now 0% 1-5% 6-10% 11-15% 16-20% 20%+ Don t know The reasons why private-market assets are becoming more popular among Asia Pacific insurers are quite clear: two-thirds strongly agree that investment opportunities in this asset class are very attractive, and 55% say that they offer a diversified source of risk and return. Given that such assets usually offer the promise of relatively higher yields to compensate for their less liquid nature, the rationale for investing in private-market assets becomes quite compelling for many insurers. But the barriers to turning intent into action are significant, too. Most typically, insurers complain of trouble with portfolio pricing and transparency (45%) in private-market assets, and with accessing the right opportunities and modelling risk factors (36% each) [See Chart 9]. Insurers are typically interested in largescale projects with very sizeable issuers behind them and potentially some government guarantee, and the number of those is limited, Mr Wong-Fupuy of A.M. Best says. [12] DRIVING RETURNS

13 9. WHICH OF THE FOLLOWING DO YOU EXPECT TO BE THE MOST SIGNIFICANT CHALLENGES OR RISKS WHEN INVESTING IN PRIVATE-MARKET ASSETS OVER THE NEXT THREE YEARS? PLEASE SELECT UP TO THREE OPTIONS. Calculating the valuation and expected rate of return on these assets Access to opportunities Modelling risk factors / performing scenario analysis / accessing historical data Conducting manager searches / knowing which questions to ask during due diligence Understanding regulatory treatment / regulators view of the asset class Portfolio pricing and transparency Portfolio ramp-up periods / J-Curve Liquidity / long manager lock-up periods Fee structures Ability to demonstrate required internal governance / oversight to regulators GLOBAL INSURERS RECONSIDER FIXED INCOME AND PRIVATE ASSETS [13]

14 SECTION 3 The growing appeal of private asset classes continued THE ATTRACTIONS OF INFRASTRUCTURE FOR ASIA PACIFIC INSURERS usiness. Asian insurers are particularly interested in pursuing infrastructure investments in the US and in Europe as a way of diversifying portfolios and increasing yield in a low interest rate environment, according to Don Guo, chief investment officer at Asia Capital Re. Many of these investments share some characteristics with fixed-income style products, including an attractive coupon rate, or fixed yield rate, sometimes coupled with a guarantee for the investor, Mr Guo says. Some products even carry inflation protection, which means that if the economy does well, the guaranteed yield automatically increases. he preferred option. date.. k record. Opportunities in this asset class come with risks, however. Both developed and emerging markets infrastructure projects involve significant regulatory, legal and liquidity risk, among other things. Typically, investment capital is tied up for ten to 15 years. In addition, despite the likelihood of higher yield on emerging market investments, many investors prefer to invest in developed markets. Europe s green energy projects or US shale gas pipeline developments are quite attractive in that context, Mr Guo says.. [14] DRIVING RETURNS

15 Conclusion Weak investment incomes buffeted by an uncertain economic recovery, concerns about interest rates and inflation, and diverse regulatory regimes are combining to make Asia Pacific insurers rethink their investment strategy. Diversifying out of core fixed income and into higher-yielding options, including private asset classes, is emerging as a key component of this strategy. Most insurers are likely to proceed with caution on this path as the risks and hurdles that they face in making this transition are still significant. Increasingly, though, investors are realising that they must be willing to step out of their comfort zones if they have to meet their income and diversification objectives. Across Asia Pacific, insurers are preparing for change. GLOBAL INSURERS RECONSIDER FIXED INCOME AND PRIVATE ASSETS [15]

16 WHY BLACKROCK BlackRock helps millions of people, as well as the world s largest institutions and governments, pursue their investing goals. We offer: ` ` A comprehensive set of innovative solutions ` ` Global market and investment insights ` ` Sophisticated risk and portfolio analytics We work only for our clients, who have entrusted us us with managing $4.6 $4.6 trillion 1, 1 earning, BlackRock the the distinction of of being the world s largest fiduciary investment manager 2.. About BlackRock s Financial Institutions Group We work in close partnership with insurers, offering investment management, strategic advice, liability assessment and, in partnership with our colleagues in BlackRock Solutions, investment accounting and risk management services. Through our deep commitment to this partnership, we seek to to help our clients succeed in in an an investment environment characterised by increasingly complex financial, accounting and regulatory developments. ` ` Team of 80 3 client service professionals located in in New York, San San Francisco, Princeton, London, Munich, Copenhagen and Milan ` ` Manage $337 billion in unaffiliated general account and subadvisory assets for for approximately 200 clients in 28 countries 3 ` ` Provide risk management and investment accounting services to to insurers 3 through BlackRock Solutions 1 AUM as of 30 June Source: Pensions & Investments as as of of 31 December Correct as as at at June 2014 Want to know more? +44 (0) blackrock.co.uk FinancialInstitutions@blackrock.co.uk For Professional Clients only blackrock.co.uk 2014 BlackRock, Inc. All Rights Reserved. This material is for distribution to Professional Clients (as defined by the FCA Rules) and should not be relied upon by any other persons. The opinions expressed are as of 29 September 2014 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. There is no guarantee that any forecasts made will come to pass. Any 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. Past performance is no guarantee of future results. The content is provided for information only. It is purely observation-based and does not present a forecast or a view of what may or may not happen, nor is BlackRock giving any indication about whether and how this information is used on behalf of its clients. In the EU 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: In Hong For Kong, your this protection, information telephone is issued calls by are BlackRock usually Asset recorded. Management BlackRock North is a trading Asia Limited. name of This BlackRock material Investment and the BlackRock Management website (UK) ( Limited. Issued in Switzerland have not by been BlackRock reviewed Asset by the Management Securities and Schweiz Futures AG, commission. Bahnhofstrasse This material 39, Postfach is for 2118 distribution CH-8022 to Zürich. Professional This is for Investors use by Qualified (as defined Investors in the Securities only as defined and Futures in the Swiss Ordinance Collective (Cap.571 Investment of the laws Schemes of Hong Act of Kong)) 23 June and 2006, should as not amended be relied ( CISA ) upon by and any its other implementing persons. In ordinance. Singapore, In this Hong document Kong, the is information issued by BlackRock provided (Singapore) is issued by Limited BlackRock (company (Hong registration Kong) Limited number: and is N) only for distribution for to institutional professional investors investors only. (as For defined distribution in the in Securities Korea for and Institutional Futures Ordinances Investors only (Cap. (or 571 professional the laws clients, of Hong as Kong)) such term and should may apply not be in local relied jurisdictions). upon by any other For distribution persons. In in Singapore, Taiwan this for Institutional is issued by Investors BlackRock only. (Singapore) Independently Limited operated (company by registration BlackRock number: Investment N) Management for institutional (Taiwan) Limited. investors Address: only. For 28/F, distribution No. 95, Tun in Hwa Korea South for Professional Road, Section Investors 2, Taipei only 106, (or professional Taiwan. Tel: (02) clients, as such This term document may apply is for in distribution local jurisdictions). to professional For distribution and institutional EMEA and investors Korea, only for Professional and should not Investors be relied only upon (or professional by any other persons. clients, as This such document term may is provided apply in for relevant informational jurisdictions). purposes This only material and does has not not constitute been approved a solicitation for distribution of any securities in Taiwan. or In BlackRock Japan, not funds for use in with any individual jurisdiction investors. which In such Canada, solicitation this material is unlawful is intended or to any for person accredited to investors whom it is only. unlawful. This material Moreover, is being it neither distributed/issued constitutes an offer in Australia to enter and into New an investment Zealand by agreement BlackRock with Financial the recipient Management, of this Inc. document ( BFM ), nor which an invitation is a United to respond States domiciled to it by making entity and is offer exempted to enter under into an ASIC investment CO 03/1100 agreement. from the Past requirement performance to hold is not an Australian a guide to Financial future performance. Services License There are and risks regulated associated by the with Securities investing, and including Exchange loss Commission of principal. under Changes US laws in the which rates of differ exchange from Australian between currencies laws. In Australia may cause this the document value of investments is only distributed to fluctuate. to wholesale This document and professional is for informational investors purposes within the only meaning and does of not the constitute Corporations an offer Act or invitation In New Zealand, to anyone this to invest document in any is BlackRock not to be distributed fund and has to retail not been clients. prepared BFM believes in connection that the with information any such offer. in this Any document research is in correct this document at the time has of been compilation, procured but and no may warranty have been of accuracy acted on or reliability by BlackRock is given for its and own no purpose. responsibility The results arising of in such any other research way for are errors being and made omissions available (including only incidentally. responsibility The views to any expressed person by do reason not constitute of negligence) investment is accepted or any by other BFM, advice its officers, and are employees subject to change. or agents. They In do Latin not America, necessarily for reflect Institutional the views and Professional any company Investors in the BlackRock only. This material Group or is any solely part for thereof educational and no purposes assurances and are does made not as constitute to their accuracy. investment This advice, document or an contains offer or general a solicitation information to sell only or and a solicitation does not take of an into offer account to buy any individual s shares of circumstances any funds (nor shall and consideration any such shares should be offered be given or to sold talking to any to a person) financial or any other jurisdiction professional within adviser Latin America before making which an such investment an offer, decision. solicitation, You purchase are reminded or sale to refer would to be the unlawful relevant under prospectus the securities for specific laws risk of that considerations jurisdiction. If which any funds are available are mentioned from BlackRock or inferred websites. to in this material, it is possible that some or all of the funds have not been registered with the securities regulator of Brazil, Chile, Colombia, Mexico, Peru or any other securities regulator in any Latin American country, BlackRock and thus, is a registered might not trademark be publicly offered BlackRock, within Inc., any such or its country. subsidiaries The securities in the United regulators States of and such elsewhere. countries All have other not trademarks, confirmed the servicemarks accuracy of or any registered information trademarks contained are herein. the No property information of their discussed respective herein owners. can be provided to the general public in Latin America 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 2014 subsidiaries BlackRock in the Inc. United All rights States reserved. and elsewhere. All other trademarks are those of their respective owners c-FIG SEP