Active equity thematic investing

Transcription

1 FOR PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY Active equity thematic investing

2 What are megatrends? Megatrends are long-term, global structural shifts that underpin game-changing investment stories. Unlike shorter-term cyclical themes investors typically refer to, such as valuations, volatility, interest rates and currency values, megatrends are structural themes that occur as one-off shifts, overhauling an existing paradigm. These powerful, transformative forces have the potential to change the global economy, entire industries and segments of society. Megatrends don t look at the next quarter, they look at the next quarter century. They don t focus on single companies, rather they look at the evolution of entire industries. And they don t focus on how the individual s life is affected, but how the world is set to change. 2 THEMATIC INVESTING

3 At BlackRock we have identified five megatrends that can transcend sectors, industries and countries, each offering huge investment potential. Shifting economic power Climate change and resource scarcity Technological breakthroughs Demographics and social change Rapid urbanisation Shifting economic power The growing strength of emerging economies is changing the balance of the global economy Demographics and social change The increasing age and size of the global population is fundamentally changing the needs of its inhabitants Climate change and resource scarcity An expanding global population is increasing the demand for food and water, and putting pressure on finite resources Technological breakthroughs A technological revolution is having a profound impact on the global economy Rapid urbanisation According to the United Nations, by 2030 two-thirds of the world s population will reside in cities THEMATIC INVESTING 3

4 Investing in megatrends Identifying the potential for change is a key driver of investment decision-making. As megatrends are defined by far-reaching, structural changes, their transformational qualities can present broad opportunities. BlackRock s research team has identified a range of themes that tap into at least one of these megatrends: Future of FinTech Next Generation Sustainable Transport Technology Energy Each of these themes must adhere to three criteria: z It must be enduring rather than faddish z It must be a global theme, rather than have a specific regional focus z It must be investable through global equity markets BlackRock has developed a range of actively-managed equity funds that focus on individual themes. 4 THEMATIC INVESTING

5 Future of Transport Fund A sub-fund of BlackRock Global Funds (BGF) FinTech Fund A sub-fund of BlackRock Global Funds (BGF) Positioned for the transport revolution, the BGF Future of Transport Fund recognises the opportunity that the expected growth of electric transport presents. The fund seeks to invest in companies set to benefit from transport becoming more: Electrified relying less on oil for power Autonomous increasing safety and efficiency by moving away from 100% driver-controlled transport Connected linked to the internet of things and smart solutions Example: We will invest in mining companies that produce battery materials, such as lithium, and companies that manufacture components for electric vehicles. The BGF FinTech Fund focuses on the growth of digital finance and the impact of technology on the entire financial system. Three characteristics underpin the theme: Digital adoption is changing consumer behaviour 94% of consumers under 35 actively use online banking and nearly 2/3 of banking clients would consider leaving their bank if digital channels are not integrated Electronification of payments is a powerful trend with huge growth while digital payments have risen substantially, 56% of global consumer transactions are still in cash creating a large opportunity for digital payments companies Large profit pool available for disruption financial companies account for onequarter of earnings of the MSCI World Index Example: We will seek to capitalise on technology disruption within the finance industry by investing in areas such as payments, banking, investments, insurance and software. Portfolio managers Portfolio manager Alastair Charlie Hannah Vasco Bishop Lilford Gray Moreno THEMATIC INVESTING 5

6 Next Generation Technology Fund A sub-fund of BlackRock Global Funds (BGF) New Energy Fund A sub-fund of BlackRock Global Funds (BGF) The BGF Next Generation Technology Fund is designed to seek out the world s foremost disruptors and innovators. There are multiple emerging technologies which we believe will reshape the world. Among those are: Robotics and automation from surgical robots to driverless trucks, robotics are reshaping entire industries The Internet of Things (IoT) Gartner estimates that by 2020, more than 26 billion devices will be communicating with one another via IoT 1 The Cloud By the end of 2018, Deloitte estimates that spending on IT-as-a-service for data centres, software, and services will be $547bn 2 Example: We will invest in companies that are developing artificial intelligence- based software for industrial processes and companies developing hardware such as LiDAR for autonomous vehicles. Portfolio manager As the world transitions to a lower carbon economy, the BGF New Energy Fund is designed to unearth companies that benefit from this. This fund will target investments that sit in the following areas: Energy efficiency reducing energy demand with solutions that do more with less Transportation beneficiaries of transport becoming more electrified, autonomous, and connected Power clean energy, smart networks, and digitisation will all play an increasingly important role Example: We will invest in companies that provide solutions aimed at reducing the energy intensity of the built environment. Portfolio managers Tony Kim Alastair Bishop Charlie Lilford Source: BlackRock, Gartner press article, accessed May Deloitte Technology, Media and Technology Predictions, THEMATIC INVESTING

7 Adding thematics exposure to a portfolio Megatrends could offer enhanced investment opportunities and diversified exposures within investors portfolios. To illustrate this we have put together a hypothetical Thematics sleeve 1 which provides access to various megatrends in three portfolios with varying risk-return budgets, referred to as Conservative, Balanced and Aggressive 2. The sleeve has been fitted by proportionately scaling down the total equities allocation of the three portfolios by either 10% or 20%. The home bias in the starting Conservative and Balanced portfolios has also been proportionately scaled down. Adding the Thematics sleeve to all three portfolios enhanced annualised returns compared with the respective starting portfolio over the tested time period, but only made limited changes to total portfolio risk (annualised standard deviation). The slight increase in portfolio risk in the Conservative and Balanced portfolio could be attributed to higher FX risk a consequence of moving away from home bias. This is seen in the examples, where all equities allocation is scaled down proportionately, removing some home-bias tilts, and increasing exposures to foreign currency risk. Risk-return spectrum Annualised Returns, % Annualised Standard Deviation, % Conservative Balanced Aggressive Conservative w 10% Thematics Balanced w 10% Thematics Aggressive w 10% Thematics Conservative w 20% Thematics Balanced w 20% Thematics Aggressive w 20% Thematics Source: BlackRock, Morningstar. Time Period: 01/07/ /06/2018. Frequency: Monthly. Rebalancing Methodology: Annually. Currency: GBP. 1 Thematics sleeve includes 25% Stoxx Factset Ageing Population Index, 25% Stoxx Factset Digitalisation Index, 25% Stoxx Factset Healthcare Innovation Index and 25% Stoxx Factset Automation and Robotics Index. 2 These portfolio asset allocations are based on MSCI WMA Private Investor Index series for Conservative, Balanced and Global Growth portfolios, as of July THEMATIC INVESTING 7

8 The Sharpe ratio increased for all portfolios by between 4% and 6% compared with the starting portfolio after adding the Thematics sleeve. This improved ratio is even more visible when adding a 20% allocation to the Thematics sleeve. The Balanced portfolio has the highest increase in Sharpe ratio whether adding a 10% or 20% Thematics sleeve, closely followed by Conservative. Investors could consider adding exposures to megatrends in not only their aggressive and highrisk portfolios but throughout the risk spectrum to offer diversified exposures that could enhance risk-adjusted returns. 4% - 6% Sharpe ratio increase Investors could consider adding exposures to megatrends throughout the risk spectrum Percentage increase in Sharpe ratio Aggressive w 20% Thematics 6% Aggressive w 10% Thematics 4% Balanced w 20% Thematics 11% Balanced w 10% Thematics 7% Conservative w 20% Thematics 10% Conservative w 10% Thematics 6% Source: BlackRock, Morningstar. Time Period: 01/07/ /06/2018. Frequency: Monthly. Rebalancing Methodology: Annually. Currency: GBP. 8 THEMATIC INVESTING

9 Why BlackRock for thematic investing? The Thematic Research Investment Group (TRIG), includes portfolio managers and analysts from across our global active equity teams to identify attractive investment themes. With vast internal research, risk platforms, and well-resourced teams, we feel well-placed to comprehensively assess themes around the world, and to discover optimum investment opportunities across both active and passive investment approaches. Our on-the-ground expertise in Silicon Valley, large, multilingual team across Asia and emerging markets, and specialist collectives in natural resources, sustainable energy, finance, and technology endeavour to drill as deeply as possible into our investment ideas both explored and avoided to generate returns. Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. THEMATIC INVESTING 9

10 Overview of the thematics range Fund name BGF FinTech Fund BGF Future of Transport Fund BGF Next Generation Technology Fund BGF New Energy Fund Use this fund to Access companies benefitting from the fintech-driven growth in digital finance and changing consumer behaviours Access beneficiaries of the expected transition to electric and autonomous vehicles Access the world s foremost disruptors and innovators, and emerging technology such as robotics, the internet of things, and the cloud Access companies that enable doing more with less in the transition to a lower carbon economy Managed by Vasco Moreno Alastair Bishop Charlie Lilford Hannah Gray Tony Kim Alastair Bishop Charlie Lilford Fund inception Number of stocks Fees (A2 share class) Fees (D share class) September 2018 September 2018 September 2018 April stocks stocks stocks stocks 1.82% 2.08% 1.82% 1.82% 1.00% 1.33% 1.00% 1.00% SRRI 10 THEMATIC INVESTING

11 Overview of our sector funds BlackRock also offers a range of sector funds that invest solely in businesses that operate in a particular industry or sector of the economy. Fund name BGF World Financials Fund BGF World Technology Fund BGF World Healthscience Fund Access the broad Access technology firms Access opportunities financials universe, that can continually in healthcare, including off-benchmark innovate, and new pharmaceuticals, Use this fund to areas such as fintech. disruptive companies. medical technology, and supplies as well as the development of biotechnology. Managed by Vasco Moreno Tony Kim Erin Xie Fund inception June 2008 March 1995 April 2001 Benchmark MSCI AC World MSCI World All Country MSCI World Health Financials Index Information Technology Care Index Net Return - Net Return in USD in EUR Number of stocks stocks stocks 98 stocks Fees (A2 share class) Fees (D share class) 1.50% 1.82% 1.82% 1.07% 1.08% 1.07% SRRI THEMATIC INVESTING 11

12 Risks BGF Next Generation Technology Fund Emerging market risk Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore, the value of these investments may be unpredictable and subject to greater variation. Smaller company Smaller company investments are often associated with greater investment risk than those of larger company shares. Equity risk The values of equities fluctuate daily and a Fund investing in equities could incur significant losses. The price of equities can be influenced by many factors at the individual company level, as well as by broader economic and political developments, including daily stock market movements, political factors, economic news changes in investment sentiment, trends in economic growth, inflation and interest rates, issuer-specific factors, corporate earnings reports, demographic trends and catastrophic events. Specific sector The fund invests in a limited number of market sectors. Compared to investments which spread investment risk through investing in a variety of sectors, share price movements may have a greater effect on the overall value of this fund. Stock Connects risk Funds that may invest in China A-Shares via the Stock Connects (meaning each of the Shanghai- Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect and collectively the Stock Connects ) will be subject to additional risks associated with such investment, including risks associated with investment in China generally, quota limitations which apply to such investments, regulatory and legal risk, clearing and settlement and suspension risk, trading and operational risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. Capital at risk The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Risks BGF Future of Transport Fund Specific sector The fund invests in a limited number of market sectors. Compared to investments which spread investment risk through investing in a variety of sectors, share price movements may have a greater effect on the overall value of this fund. Stock Connects risk Funds that may invest in China A-Shares via the Stock Connects (meaning each of the Shanghai- Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect and collectively the Stock Connects ) will be subject to additional risks associated with such investment, including risks associated with investment in China generally, quota limitations which apply to such investments, regulatory and legal risk, clearing and settlement and suspension risk, trading and operational risk. Emerging market risk Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore, the value of these investments may be unpredictable and subject to greater variation. Smaller company Smaller company investments are often associated with greater investment risk than those of larger company shares. Equity risk The values of equities fluctuate daily and a Fund investing in equities could incur significant losses. The price of equities can be influenced by many factors at the individual company level, as well as by broader economic and political developments, including daily stock market movements, political factors, economic news changes in investment sentiment, trends in economic growth, inflation and interest rates, issuer-specific factors, corporate earnings reports, demographic trends and catastrophic events. 12 THEMATIC INVESTING

13 Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. Capital at risk The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Risks BGF FinTech Fund Stock Connects Risk Funds that may invest in China A-Shares via the Stock Connects (meaning each of the Shanghai- Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect and collectively the Stock Connects ) will be subject to additional risks associated with such investment, including risks associated with investment in China generally, quota limitations which apply to such investments, regulatory and legal risk, clearing and settlement and suspension risk, trading and operational risk. Specific sector The fund invests in a limited number of market sectors. Compared to investments which spread investment risk through investing in a variety of sectors, share price movements may have a greater effect on the overall value of this fund. Concentrated portfolio risk The fund typically invests in a concentrated portfolio of investments and should a particular investment decline in value, this will have a pronounced effect on the overall value of the fund. Equity risk The values of equities fluctuate daily and a Fund investing in equities could incur significant losses. The price of equities can be influenced by many factors at the individual company level, as well as by broader economic and political developments, including daily stock market movements, political factors, economic news changes in investment sentiment, trends in economic growth, inflation and interest rates, issuer-specific factors, corporate earnings reports, demographic trends and catastrophic events. Smaller company Smaller company investments are often associated with greater investment risk than those of larger company shares. Emerging market risk Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore, the value of these investments may be unpredictable and subject to greater variation. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. Capital at risk The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Risks BGF New Energy Fund Exchange rate risk The return of your investment may increase or decrease as a result of currency fluctuations. Specific sector The Fund invests in a limited number of market sectors. Compared to investments which spread investment risk through investing in a variety of sectors, share price movements may have a greater effect on the overall value of this fund. Smaller company Smaller company investments are often associated with greater investment risk than those of larger company shares. Emerging markets Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore the value of these investments may be unpredictable and subject to greater variation. THEMATIC INVESTING 13

14 Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Risks BGF World Financials Fund Exchange rate risk The return of your investment may increase or decrease as a result of currency fluctuations. Specific sector The Fund invests in a limited number of market sectors. Compared to investments which spread investment risk through investing in a variety of sectors, share price movements may have a greater effect on the overall value of this fund. Finance Sector Companies. The Fund 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 affect on the activities of the Fund. Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Risks BGF World Technology Fund Exchange rate risk The return of your investment may increase or decrease as a result of currency fluctuations. Specific sector The Fund invests in a limited number of market sectors. Compared to investments which spread investment risk through investing in a variety of sectors, share price movements may have a greater effect on the overall value of this fund. Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Risks BGF World Healthscience Fund Exchange rate risk The return of your investment may increase or decrease as a result of currency fluctuations. Specific sector The Fund invests in a limited number of market sectors. Compared to investments which spread investment risk through investing in a variety of sectors, share price movements may have a greater effect on the overall value of this fund. Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Important information Unless indicated, the fund information displayed only provides summary information. Investment should be made on the basis of the relevant booklet together with the Prospectus and Key Investor Information 14 THEMATIC INVESTING

15 Document, which are available from the Manager. Reference to individual investments mentioned in this communication is for illustrative purposes only and should not be construed as investment advice or investment recommendation. The number of shares quoted for each Fund are indicative and actual numbers may fall outside of the ranges shown. This material is for distribution to Professional Clients (as defined by the FCA or MiFID Rules) and Qualified Investors only 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. Registered in England No Tel: For your protection, telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited. 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Morgan AG, CIB/Investor Services Trustee & Fiduciary, Taunustor 1 (Taunus Turm), D Frankfurt am Main. Netherlands: The risk indicator shown on this document refers to the A2 share class of the Fund. Higher or lower risk may apply to the other share classes of the Fund. Issued in the Netherlands by the Amsterdam branch office of BlackRock Investment Management (UK) Limited: Amstelplein 1, 1096 HA Amsterdam, Tel: BlackRock Global Funds ( BGF ) is a UCITS (icbe) as defined in section 1:1 Financial Markets Supervision Act (Wet op het financieel toezicht; FMSA ). BSF and its sub-funds are listed in the register as defined in section 1:107 FMSA. Please refer to the Key Investor Information Document (essentiele beleggersinformatie; EBI ) for further information about BSF and its sub-funds. The prospectus and EBI of BSF and its sub-funds are available on BlackRock s website www. blackrock.nl. All financial investments contain a certain risk. The value of the assets managed by BSF and its sub-funds may greatly fluctuate as a result of the investment policy and your initial investment is not guaranteed. Poland: BGF has been registered on the official list of the Financial Supervision Commission (Komisja Nadzoru Finansowego) for distribution in Poland. Issued in Poland by the representative office BlackRock Investment Management (UK) Limited, Dubiński, Fabrycki, Jeleński i Wspolnicy Kancelaria Prawna sp.k., ul. Zielna 37, Warszawa. Paying agent in Poland is Bank Handlowy w Warszawie SA, ul. Senatorska 16, Warsaw, Poland. Norway: The prospectus and KIID are available at BlackRock Investment Management (UK) Limited. Sweden: The prospectus and KIID are available at BlackRock Investment Management (UK) Limited, Stockholm branch, Norrlandsgatan 16, Stockholm, Sweden. Investors should read the KIID before making an investment decision. Switzerland: For qualified investors in Switzerland: this document shall be exclusively made available to, and directed at, qualified investors as defined in the Swiss Collective Investment Schemes Act of 23 June 2006, as amended. The BlackRock Global Funds (BGF) World Energy Fund is domiciled in Luxembourg. BlackRock Asset Management Schweiz AG, Bahnhofstrasse 39, CH-8001 Zurich, is the Swiss Representative and State Street Bank International GmbH, Munich, Zurich Branch, Beethovenstrasse 19, CH-8002 Zurich, the Swiss Paying Agent. The Prospectus, Key Investor Information Document, the Articles of Incorporation, the latest and any previous annual and semi-annual reports are available free THEMATIC INVESTING 15

16 of charge from the Swiss Representative. Investors should read the fund-specific risks in the Key Investor Information Document and the Prospectus. 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. The views expressed do not constitute investment or any other advice and are subject to change. They 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 document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ishares, BUILD ON BLACKROCK, SO WHAT DO I DO WITH MY MONEY and the stylised i logo 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. THINK EN Want to know more? blackrock.com investor.services@blackrock.com +44 (0) blackrock.nl benelux@blackrock.com +31 (0)