BlackRock Funds (BGF) BGF EURO BOND FUND FOR PROFESSIONAL CLIENTS ONLY FUND IN FOCUS Fund objective The Fund seeks to maximise total return. The Fund invests at least 80% of its total assets in investment grade fixed income transferable securities. At least 70% of total assets will be invested in fixed income transferable securities denominated in euro. Currency exposure is flexibly managed. Fund Manager Invest. Universe Base Currency Investment Region Invest. Govt/Supra national Corp. Average Primary Currency Exposure Fund pe >3 years Michael Krautzberger Years at BlackRock 8 Please note that the above is for illustrative purposes only. Management style The product offers investors a modern-day Fund, which adopts a diversified investment approach to sourcing alpha from a wide array of active strategies. A team approach: Bottom-up portfolio construction is a team effort. Sector specialists source opportunities and work together to address the needs of all portfolios. Nearly 200 fundamental fixed income professionals in New York, London, Edinburgh, Tokyo and Singapore. Dedicated team, with an average investment experience of nine years. Investment process BlackRock s investment approach represents a collaboration between the dedicated local Fixed Income teams who work as part of and draw on the conclusions of the firm wide Fixed Income Portfolio and Investment teams. The investment process is centred around two weekly formal Investment Strategy Meetings involving lead global CIOs and senior portfolio managers. Following discussions with their teams, the Lead Investment Managers present their team views during the Market Outlook Meeting, to which all fixed income investment professionals are invited. Next, the Lead Managers from the Portfolio and Investment teams, along with representatives from our Risk & Quantitative Analysis Group, hold the Portfolio Strategy Meeting to discuss asset allocation, portfolio risk, and investment themes. This meeting is designed to share ideas across Portfolio teams as each determines the appropriate interest rate risk, convexity, term structure, credit quality, liquidity bias and sector allocations for individual strategies. The Fund is designed for investors who want to maximise their exposure to fixed income drawing on a broad range of alpha sources, utilising a range of flexibilities permitted by UCITS IV, and targeting stable alpha and a consistent competitive peer group position.
Investment process continued The outcome of these strategy meetings is then used as a key input into the local team meeting, where appropriate implementation and sizing of strategies is discussed and determined at the detailed portfolio level. While the investment themes are discussed formally on a weekly basis, the process is dynamic with ongoing discussion and modifications as needed. Ultimate responsibility for the performance of the BGF Funds rests with the dedicated Fund Manager, Michael Krautzberger. Collaborative process combining top-down and bottom-up investment insights Rick Rieder as Chief Investment Officer of Fixed Income, Fundamental Portfolios, leads the Investment Strategy Meetings. Investment Teams are responsible for research, analysis, security selection, and execution. Portfolio Teams are each independently accountable for asset allocation and portfolio construction. The following chart illustrates this formal decision-making progression; Investment Team meetings Sector specialists meetings: Rates Securitised assets Corporate Credit Municipals Focus on market catalysts Use quantitative tools and economic analyses to assist in idea generation Rick Rieder, Chief Investment Officer Scott Thiel, Deputy CIO Fixed Income Investment Strategy meetings Market outlook meeting Trade ideas Intra-sector and security evaluation Relative value analysis Focus topics Investment Teams Portfolio Teams Team Evaluate how current themes and trade ideas fit pean Portfolios Determine optimal sector allocation Responsible for Portfolio Construction Constant interchange with investment teams to optimise relative value, security selection, timing and execution Portfolio managers maintain active and ongoing debate over best opportunities with investment teams Fixed income trades are executed by the Investment teams, leveraging their experience and market knowledge. Investment managers are responsible for obtaining multiple bids/offers or negotiating a price to ensure best execution; trades typically are aggregated into block orders. All trades are allocated at the time of purchase (based on a percent of investable assets), and as such, are monitored by BlackRock s Compliance Department. Fundamental Research: The team emphasises fundamental analysis and employs a disciplined review process that focuses on a thorough analysis of the underlying issuer s creditworthiness and valuations. Research analysts and investment managers work together to assess the relative value of each potential investment, and research analysts play an active role in the decision-making process. A security may be purchased only after the sector-specific research analyst makes a fundamental credit decision. The team applies the same discipline to the ongoing surveillance of all holdings. This approach ensures that all credit positions benefit from the combined experience of our team of investment professionals. The credit review process assesses a company with respect to four key fundamental factors: industry attractiveness, competitive position, management quality and financial position. This basic framework can be applied universally to any issuer, and when complemented with other issuer specific factors that may be relevant, establishes a fundamental credit opinion. Once the fundamental conclusion is established, the analyst and portfolio manager work together to determine the relative value viewpoint and a buy/sell/hold decision. 2
Managing risk Target tracking error is typically 0.5% to 2% over a complete market cycle. Disciplined management of risk ensures that the Fund remains true to label within its peer group. Risk distributed evenly across potential alpha sources to ensure there is no dominance from one particular factor. Credit quality maintained at investment grade through the market cycle. (currently A+). Risk management is a key differentiator in modern UCITS mandates. BlackRock Solutions provides single, integrated technology platform with superior functionality for analysing and managing portfolio risk. Portfolio characteristics Adding Alpha Adding value from a broad range of sources: Yield curve rates Government relative value Inflation linked Currency Asset allocation Credit investment grade Credit non-investment grade Structures Flexibility: The flexibility of the Fund allows it to adopt an active approach, which we view as critical to the ability to add value in today s complex financial markets, where opportunities may emerge and disappear relatively quickly. 120 100 bps 80 60 40 20 0-20 Cross Market relative value Sector allocation (govies, Pfandbriefe, swaps, credit ) Government Selection Mortgage/CMBS/Asset backed FX Credit Micro trades (pair trades, issue selection) land Credit Macro trades (sector allocation etc) Yield Curve land Inflation linked land Option/Volatility Strategies FX plus plus Yield Curve plus Inflation linked plus The terms plus refer to positions which are global in nature rather than specific to the zone. Note: Cumulative attribution since fund re-structure 30 September 2005 to date 30 September 2013 based on internal Estimates. Source: BlackRock. 3
Awards and ratings Source & Copyright: CITYWIRE. Michael Krautzberger is + rated by Citywire for his three-year risk-adjusted performance for the period 30 September 2010 30 September 2013. S&P and Morningstar ratings are as at September 2013. Fund manager profile Michael Krautzberger, CFA, EFFAS, Managing Director and Portfolio Manager joined BlackRock in July 2005. Michael is one of the lead pean strategists within the Fixed Income Portfolio Management Group, and holds particular responsibility for the positioning and management of the pean Fixed Income Fund range. Prior to joining BlackRock, Michael was head of pean Fixed Income at Union Investment in Frankfurt, where he developed the pean fixed income business from 1999 to 2005. Previously, he spent five years with Deutsche Bank s DWS, where he managed global fixed income portfolios and was responsible for the pre-euro pean currency unit and structured products. Michael earned a degree in business administration and computer science from the pean Business School in 1994, and a degree in economics from the University of Hagen in 1996. Investment team BlackRock applies a team approach to portfolio management; we believe that this approach offers substantial benefits over one that is dependent on the investment expertise of only one or two people. The Fixed Income PMG includes Portfolio teams and Investment teams. Portfolio teams are responsible for top-down asset allocation and portfolio construction within specific strategies, and for ensuring portfolios are in compliance with client guidelines and constraints. Investment teams are responsible for research, bottom-up idea generation, ongoing surveillance on all positions, and trade execution, financing and settlement. Research analysts are part of the Investment teams and are responsible for credit and macroeconomic research. BlackRock s strategy is managed by the Fixed Income Portfolio team, under the direction of Michael Krautzberger. The team includes two lead and seven additional portfolio managers who work closely with the Investment teams. The fixed income platform is further enhanced by the technology provided through BlackRock Solutions as well as the support provided by the Risk & Quantitative Analysis Group. The Fixed Income Portfolio team is highlighted in the chart overleaf. 4
Investment team continued BlackRock Investment Institute research and knowledge sharing platform Portfolio Management Teams Sterling US Asia Fundamental Fixed Income Team Michael Krautzberger Tom Mondelaers Chris Allen Ronald van Loon Marco Carraro Jozef Prokes Theo Petropoulos Johan Sjogren Alex Merkulov Nuno Luis Risk Analysis BlackRock Solutions Risk & Quantitative Analysis (RQA) Investment Management Teams Sector specialists responsible for sector oversight, research, analysis, security selection, and trade execution Rates (4) Securitized (13) Credit (15) Mkts (8) (7) Agency MBS (6) Lev. Finance (10) US Credit (36) Municipals (45) Asia Pacific (8) Key facts Fund managers Michael Krautzberger Appointed to fund October 2005 Fund launch date 31.03.1994 ISIN code LU0050372472 Benchmark Bar Cap -Agg 500mm+ Bd Ind Currency /US$ Initial charge 5% Annual management fee 0.75% 5
Where this fund features in our range Funds Investment Universe Base Currency US Dollar Investment Region Asia Investment Govt & Supranational Corporate Minimum 70% index-linked World Income World Governmment High Yield Inflation Linked Fixed Income Opportunities Coroporate Local Asia Tiger Average > 3 years > 3 years > 3 years > 7 years 0-10 years > 3 years > 3 years < 2 years > 3 years Primary Currency Exposure Multi US Dollar US Dollar US Dollar Multi/US Dollar US Dollar US Dollar Multi US Dollar Funds Cash Funds lobal Investment Region Asia USA USA pe pe Investment Region USA pe Asia lobal porate ond Investment Universe Base Currency US Dollar Investment Govt & Supranational Local Asia World World Govt Mortgage Tiger Income Core Governmment Linked Corporate Minimum 70% Corporate index-linked High Yield US Inflation Fixed Income Opportunities Base Currency US Dollar years > 3 years Average < 2 years > 3 years > 3 > years 3 years > 3 1-3 years years > 7 > years 3 years 0-10 1-3 years Weighted > 3 years Average > Maturity 3 years 60 Days < 2 years 60 Days > 3 years Dollar US Dollar Primary Currency Multi Exposure US Multi Dollar US US Dollar Dollar US Dollar US Dollar US Dollar Multi/US Dollar Primary US Dollar Currency Exposure US Dollar US DollarMulti US Dollar Investment Universe Investment Coroporate Govt & Supranational Corporate Local Reserve Reserve Asia Tiger Please note that the above is for illustrative purposes only. 2013 Morningstar. All Rights Reserved. The information, data, analyses, and opinions contained herein (1) include the proprietary information of Morningstar, (2) may not be copied or redistributed, (3) do not constitute investment advice offered by Morningstar, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be correct, complete, or accurate. Morningstar shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Morningstar Analyst Rating is subjective in nature and reflects Morningstar s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, Morningstar does not guarantee that a fund will perform in line with its Morningstar Analyst Rating. Likewise, the Morningstar Analyst Rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund or of its underlying securities and should not be used as the sole basis for making any investment decision. An S&P Capital IQ fund grading represents an opinion only and should not be relied on when making an investment decision. Past performance is not indicative of future results. Currency exchange rates may affect the value of investments. Copyright 2013 by McGraw-Hill International (UK) Limited (S&P), a subsidiary of The McGraw-Hill Companies, 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.this material is for distribution to Professional Clients (as defined by the FCA Rules) and should not be relied upon by any other persons. Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: 020 7743 3000. Registered in England No. 2020394. For your protection telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited. Issued in Switzerland by the representative office BlackRock Asset Management Switzerland Limited, Zurich Branch, Bahnhofstrasse 39, Postfach 2118 CH-8022 Zürich from where the Company s Prospectus, Key Investor Information Document, Articles of Association, Annual Report and Interim Report are available free of charge. Paying Agent in Switzerland is JPMorgan Chase Bank, National Association, Columbus, Zurich Branch Switzerland, Dreikönigstrasse 21, CH-8002 Zurich. For further information, the prospectus, Key Investor Information Document, annual report and semi-annual report can be obtained free of charge in hardcopy form from the Austrian paying agent: Raiffeisen Zentralbank Österreich AG, A-1030 Vienna, Am Stadtpark 9.This information can be distributed in and from the DIFC by BlackRock Advisors (UK) Limited - Dubai Branch which is regulated by the Dubai Financial Services Authority ( DFSA ) and is only directed at Professional Clients and no other person should rely upon the information contained within it. Neither the DFSA or any other authority or regulator located in the GCC or MENA region has approved this information. This information and associated materials have been provided to you at your express request, and for your exclusive use. This document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution would be unlawful under the securities laws of such. Any distribution, by whatever means, of this document and related material to persons other than those referred to above is strictly prohibited. Please be advised that Blackrock Investment Management (UK) Limited is an authorised financial services provider with the South African Financial Services Board, FSP No. 43288. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested. BlackRock Funds (BGF) is an open-ended investment company established in Luxembourg which is available for sale in certain jurisdictions only. BGF is not available for sale in the US or to US persons. Product information concerning BGF should not be published in the US. It is recognised under Section 264 of the Financial Services and Act 2000. BlackRock Investment Management (UK) Limited is the UK distributor of BGF. Most of the protections provided by the UK regulatory system, and the compensation under the Financial Services Compensation Scheme, will not be available. A limited range of BGF sub-funds have a reporting fund status A sterling share class that seeks to comply with UK Reporting Fund Status requirements. Subscriptions in BGF are valid only if made on the basis of the current Prospectus, the most recent financial reports and the Key Investor Information Document, which are available on our website. Prospectuses, Key Investor Information Documents and application forms may not be available to investors in certain jurisdictions where the Fund in question has not been authorised. The fund invests a large portion of assets which are denominated in other currencies; hence changes in the relevant exchange rate will affect the value of the investment. The fund invests 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 to the fund. The fund investments may be subject to liquidity constraints, which means that shares may trade less frequently and in small volumes, for instance smaller companies. As a result, changes in the value of investments may be more unpredictable. In certain cases, it may not be possible to sell the security at the last market price quoted or at a value considered to be fairest. The fund invests in fixed interest securities such as corporate or government bonds which pay a fixed or variable rate of interest (also known as the coupon ) and behave similarly to a loan. These securities are therefore exposed to changes in interest rates which will affect the value of any securities held. The fund(s) may invest in structured credit products such as asset backed securities ( ABS ) which pool together mortgages and other debts into single or multiple series credit products which are then passed on to investors, normally in return for interest payments based on the cash flows from the underlying assets. These securities have similar characteristics to corporate bonds but carry greater risk as the details of the underlying loans is unknown, although loans with similar terms are typically packaged together. The stability of returns from ABS are not only dependent on changes in interest-rates but also changes in the repayments of the underlying loans as a result of changes in economic conditions or the circumstances of the holder of the loan. These securities can therefore be more sensitive to economic events, may be subject to severe price movements and can be more difficult and/or more expensive to sell in difficult markets. Unless indicated, the fund information displayed only provides summary information. 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 and 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 material 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 strategy in any jurisdiction in which such offer, solicitation or distribution would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. It is your responsibility to be aware of the applicable laws and regulations of your country of residence. 2013 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ishares, 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. (Splash/220576/Oct13) FOR MORE INFORMATION Tel: Int. +44 (0)20 7743 3300 Email: investor.services@blackrock.com Website: blackrockinternational.com