BlackRock Short Duration SMA US SMA

Transcription

1 BlackRock Short Duration SMA 1

2 Table of Contents 1. Introduction to BlackRock 2. Investment Process 3. Investment Team 4. Target Portfolio Details Investing involves risk. Certain information contained herein has been obtained from various third party sources believed to be reliable, but we cannot guarantee its accuracy or completeness. Any information expressed herein is historical and subject to change, and is not a guarantee or an indication of future results. The information expressed herein does not constitute an offer to buy or sell any securities or derivative instruments. 2

3 Introduction to BlackRock 3

4 BlackRock: Built for These Times Many investors are asking: How do I achieve the outcomes I need? BlackRock s capabilities are built around our clients greatest needs: Client focus We partner with clients and their advisors to build portfolios that reflect their objectives, risk tolerance and time horizons Broader capabilities to help improve outcomes We provide an industry-leading breadth of investment solutions across active management, quantitative, and index strategies, including our ishares funds A dedicated group Client Solutions creates customized, multi-asset solutions to address specialized needs Global insights to uncover opportunities Investment teams in over 30 1 countries share their best thinking to gain the insights that can help change outcomes Culture of risk management BlackRock s risk management team works with portfolio managers while remaining as distinctly separate groups, so their recommendations are impartial and portfolio managers can make more informed decisions Expertise Across Asset Classes Alternatives 1 2% Active Fixed Income 13% Passive Equity 48% Passive Fixed Income 17% $6.32 trillion in assets as March 31, ¹Includes commodity and currency mandates Multi-Asset 8% Cash Management 7% Advisory 0% Active Equity 5% 1. As of March 31, AUM in USD as of March 31, MKTG0418U

5 Significant Presence in all Major Markets Our global footprint enables a deep understanding of local markets / industries / regulatory dynamics 25 primary investment centers worldwide facilitate access to major capital markets Global trading capabilities enable us to source assets and negotiate favorable terms for investors Valuable insights through access to management and perspective as an investor across the capital structure in thousands of companies worldwide Investment insight gained at a local level and shared globally maximizes investment opportunities for our clients Investment platform promotes knowledge sharing across the firm; daily calls connect investment teams, linking the insights from up to seven trading desks and over 100 portfolio teams across asset classes and geographies Over 13,000 employees, including more than 2,000 investment professionals, leverage the firm s global resources Offices in over 30 countries provide local expertise and global experience to our diverse client base Investment Centers 1 Beijing Kuala Lumpur Philadelphia Shanghai Boston London Pittsburgh Singapore Charlotte Melbourne Princeton Sydney Dublin Munich San Francisco Taipei Edinburgh New York Sao Paulo Tokyo Frankfurt Newport Beach Seattle Toronto Hong Kong Paris Seoul Zurich 1. BlackRock Primary Investment Centers as of March 31, Additional regional offices located throughout the continental US. Data as of December 31, MKTG0418U

6 Americas, EMEA, APAC The BlackRock Organization Regions Investments Fixed Income Active Equity Beta Multi-Asset Alternatives Trading, Liquidity & Investments Platform Strategic Product Management Investment Stewardship BlackRock Investment Institute Client Businesses Retail ishares Institutional BlackRock Solutions Technology & Business Operations BPI Aladdin Risk & Quantitative Analysis Finance Human Resources Global Strategy Legal & Compliance Marketing & Comms Gov t Relations Internal Audit MKTG0418U

7 Extensive Resources Dedicated to Fixed Income Culture of teamwork and information-sharing captures the power of BlackRock s global resources in seeking to generate alpha across fixed income portfolios Global platform driven by senior leadership Team structure facilitates sharing of local insights and ideas to help benefit client portfolios Wide breadth of strategies, styles, and capabilities Broad product range across mutual funds, ETFs, commingled funds, and separate accounts Comprehensive global market coverage on a single platform Daily communication among fixed income, liquidity, equity, real estate, and credit research teams worldwide Technology platform facilitates sharing of ideas Risk management embedded in BlackRock s culture Risk analytics and technology internally developed since firm s inception BlackRock Solutions (BRS) and Risk & Quantitative Analysis (RQA) work together to support the fixed income platform RQA partners with investment teams to analyze portfolio risks and improve investment process Index Institutional Indexing Aggregate Global Government Government/Credit Credit Emerging Markets MBS/CMBS/ABS Inflation-Linked International ishares ishares Long / Short Fixed Income Long-Only: $1.9tr 1 Asian Credit Capital Structure Diversified Relative Value Fixed Income Global Opportunities Global Credit Global Diversified Alpha Global Rates Total Return (Enhanced and Active) US Bond Multi-Sector (Core Strategies/Intermediate Duration) Investment Grade Corp/Long Duration Mortgages Short Duration Financial Institutions On Balance Sheet Crossover Strategic Cash Stable Value Leveraged Finance High Yield/Distressed Debt Bank Loan Distressed Debt Global/Non-Dollar Global Bond (Aggregate, Credit) Local Currency (AUD, CAD, EUR, GBP, JPY) Inflation-Linked Liability-Driven Emerging Market Debt Municipals Total Return Income Liability-Matching Crossover Strategic Cash 1. AUM in USD as of March 31, MKTG0418U

8 Investment Process 8

9 Investment Process Taxable Fixed Income Why BlackRock for fundamental fixed income Seasoned and well-resourced team Product knowledge across global Fixed Income sectors Deep and experienced research team Global expertise key to understanding complex markets We leverage professional expertise globally to seek to optimize investments Systems and processes evolve to stay current Disciplined investment process reinforces global communication and idea-sharing Culture of information-sharing Approach blends bottom-up and top-down investment themes Risk management is a core component of BlackRock s culture Focus on understanding risk and seeking to generate risk-adjusted returns Commitment to ongoing development and enhancement of risk tools and models BlackRock Value Proposition Experienced Fixed Income Team Disciplined Investment Process Exceptional Market Knowledge Integrated Risk Management MKTG1117U

10 Investment Process Taxable Fixed Income Seeking to deliver benefits to the client through active management Expertise Proprietary risk management tools and analytics Access to robust credit research and market trend insight Scale and execution The size and capabilities of institutional fixed income money managers like BlackRock can potentially deliver savings to the client vs. retail transactions Customizing individual client accounts Ability to accommodate client restrictions where appropriate Why choose a Separately Managed Account from BlackRock? Fixed Income Expertise Liquidity Considerations Efficient Portfolio Structure Total Active Portfolio Management Diversification Risk Management Expertise through BlackRock Solutions Investing involves risk. MKTG1117U

11 Markup Investment Process Taxable Fixed Income How institutional scale and execution can benefit retail investors Institutional money managers are typically able to achieve better pricing and execution than retail investors Access Professional money managers access the bond desks of the entire street Scale / Pricing Money management institutions can benefit from discounted pricing vs. a retail client Execution BlackRock employs dedicated bond traders who use proprietary trading tools to seek the best execution for clients Pricing Advantage of a Professional Money Manager* 2% Money managers typically buy here Retail investors typically buy here Brokerage desk Institutional pricing Retail broker Retail client 0% Many Issuer Number of Relationships with Dealers Few *This is a hypothetical illustration only. When we buy and sell bonds for our clients accounts, we are typically able to eliminate several layers of expenses that are commonly included in the prices that retail brokers charge their clients. Since these charges vary widely and are imbedded in the prices and not explicitly segregated, it is difficult to measure with precision the relative price improvement an institutional money manager is able to achieve. Based upon data compiled buy the Municipal Securities Rulemaking Board (MSRB), we believe that the illustration above presents a reasonable reflection of the difference between an institutional and retail execution. Investing involves risk. MKTG1117U

12 Investment Process Taxable Fixed Income Philosophy 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 Investment teams Bottom-up idea generation and research Global rates Securitized assets Investment grade credit Investment strategy meetings Market outlook meeting Trade ideas Intra-sector and security selection Focus topics Rick Rieder Chief Investment Officer Scott Thiel Deputy CIO Portfolio strategy meeting Asset allocation Sector rotation Duration / curve decisions Portfolio teams Top-down determination of themes and portfolio construction Multi-sector and mortgage Corporate credit European and Non-US Fixed Income Leveraged finance Municipals Investment teams Portfolio teams Lead portfolio managers Lead investment managers Financial institutions Municipals MKTG1117U

13 Investment Process Taxable Fixed Income Five key risk parameters Risk Definition Cause and Effect Interest rate risk Yield curve risk Cash flow risk Credit risk Liquidity risk The risk associated with ongoing decline and rise of interest rates The risk associated with the changing slope of the yield curve The uncertainty of future cash flows to a bond holder The risk that a bond will default and not make timely payments The risk that a bond cannot be bought or sold quickly Rising yields cause bond prices to fall A flattening yield curve causes short-term bonds to under-perform long-term bonds In a low interest rate environment, a bond may be called prior to maturity, resulting in fewer interest payments than anticipated Bonds may lose value if their credit ratings are downgraded A market crisis can reduce liquidity resulting in difficulty in selling undesired bonds, further depressing the price of those bonds How a Professional Money Manager can help Manage these Risks Professional money managers can actively seek to manage this risk by buying shorter- or longer-term bonds based on the direction they believe interest rates are heading Professional money managers can actively seek to target precise yield curve changes and can reposition long and short-term bonds based on expected changes in yield curve slope Professional money managers can be proactive through the use of sophisticated tools to model prepayment trends and can assess the likelihood of a Mortgage-Backed Security (MBS) being prepaid prior to maturity Professional money managers can assess a bond s risk / reward tradeoff based on fundamental credit research and market conditions Professional money managers can monitor market liquidity to determine the ease with which bonds may be sold MKTG1117U

14 Investment Process Taxable Fixed Income Why Sector Selection is Important Performance of various Fixed Income sectors varies frequently. Selecting what sectors to overweight and underweight is a vital step in the portfolio construction process Annual Total Returns for Taxable Fixed Income Indices ( ) Mortgage Backed 5.3% US Treasury 9.1% US Treasury 14.0% Corporate 19.8% Corporate 9.5% US Treasury 9.8% Corporate 10.4% Asset Backed Securities 0.5% Corporate 7.5% Mortgage Backed 1.5% Corporate 6.0% Cash Equivalents 4.9% Agencies 8.0% Agencies 8.5% Asset Backed Securities 16.0% US Treasury 5.9% Agencies 9.0% Asset Backed Securities 3.2% Cash Equivalent 0.1% Mortgage Backed 6.1% Asset Backed Securities 1.2% Asset Backed Securities 2.2% Asset Backed Securities 4.9% Mortgage Backed 7.0% Mortgage Backed 8.3% Mortgage Backed 5.8% Mortgage Backed 5.7% Corporate 7.5% Mortgage Backed 2.6% Mortgage Backed -1.4% US Treasury 6.0% Agencies 0.9% Mortgage Backed 1.7% Corporate 4.4% Cash Equivalents 5.0% Cash Equivalents 2.1% Agencies 2.5% Asset Backed Securities 5.6% Mortgage Backed 6.1% US Treasury 2.2% Corporate -1.5% Agencies 4.9% US Treasury 0.8% US Treasury 1.1% Agencies 3.5% Corporate 4.6% Corporate -6.8% Cash Equivalents 0.2% Agencies 5.0% Asset Backed Securities 3.1% Agencies 2.0% Agencies -2.6% Asset Backed Securities 1.6% Cash Equivalent 0.1% Agencies 1.0% US Treasury 3.1% Asset Backed Securities 3.9% Asset Backed Securities -8.4% US Treasury -3.7% Cash Equivalent 0.1% Cash Equivalent 0.1% Cash Equivalent 0.1% US Treasury -3.4% Cash Equivalent 0.0% Corporate -0.6% Cash Equivalent 0.2% Data as of 12/31/2016. Source: Informa, PSN Enterprise. Past performance does not guarantee or indicate future results. The information provided is for illustrative purposes only and is not meant to represent the performance of any particular investment. Investing involves risk. Asset class returns are represented by the returns of indexes and are ranked on an annual total return basis. It is not possible to invest directly in an index. Cash Equivalents is represented by the BofA Merrill Lynch 3-Month Treasury Bill Index; Mortgage Backed is represented by the BofA Merrill Lynch Mortgage Master index; Agencies is represented by Barclays Government Related Index; US Treasury is represented by the BofA Merrill Lynch US Treasury Master Index; Corporate Bond is represented by the BofA Merrill Lynch US Corporate Master Index; Asset Backed Securities is represented by the BofA ML US Fixed Rate ABS index. For descriptions of the indexes, please see Important Notes at the end of the presentation. MKTG1117U

15 Investment Process Taxable Fixed Income Adding value through sector and sub-sector rotation and security selection Investment strategy meetings establish parameters for bottom-up sector rotation and security selection Value is added primarily through sector and sub-sector rotation Proprietary, cutting-edge risk analytics help identify which sectors may offer the most attractive relative value BlackRock s relative value approach encompasses a broad range of sub-sectors within the corporate and mortgage sectors Rigorous quantitative analysis is used to give insight into each individual security Sector specialists make buy and sell recommendations on individual Fixed Income securities All securities are evaluated within our risk management framework Fundamental credit research Quantitative risk analytics MKTG1117U

16 Investment Process Taxable Fixed Income BlackRock fixed income a team approach Our team approach consists of dedicated portfolio managers and analysts who specialize by sector and are supported by the firm s integrated research, trading, and risk management platforms On-going idea sharing between the investment strategy group and sector specialists Sector specialists work together to address the needs of all portfolios Constant interaction between specialists facilitates a consistent fixed income investment process US Gov t / agency Analysts are integrated with the portfolio management team The result is an integrated, disciplined approach to managing fixed income portfolios Investment grade corporates High Yield Residential mortgages Municipals Short duration Asset Backed Securities Non-dollar global Emerging Markets Commercial mortgages MKTG1117U

17 Portfolio Overview Short Duration Taxable Fixed Income Target Portfolio Overview Investment objective Management style Credit quality Duration band Portfolio positions (individual securities) Eligible investments Total Return that seeks to exceed the BofA Merrill Lynch 1 3 years Treasury Index. Seeks to create alpha through sector rotation and security selection (relative value). Investment grade or better at time of purchase. + / - 20% of the benchmark (BofA Merrill Lynch 1 3 years Treasury Index). Minimum position will be no lower than 1% of the total portfolio at time of purchase. Maximum position will be no greater than 10% of the total portfolio at time of purchase (treasuries, agencies and mortgages can exceed the 10% limit). Individual securities BlackRock Bond Allocation Target Shares (BATS) Series S Investing involves risk. The investment process discussed herein is based on the current process for selecting portfolio investments and is subject to change. MKTG0717U

18 Portfolio structure Short Duration Taxable Fixed Income strategy is a Separately Managed Account strategy that combines individual securities with BlackRock Bond Allocation Target Shares (BATS) (Series S) for expanded diversification and flexibility Approximately 60% of the target portfolio is invested in individual securities, while the remaining 40% of the portfolio is invested in BATS (Series S), a fee-waived mutual fund that invests in Fixed Income securities Target Portfolio Allocation Agency and Non-Agency Mortgage-Backed Securities Non-US Obligations Obligations of Domestic and Non-US Corporations Asset-Backed Securities Preferred Stock US Treasuries and Agencies Cash Equivalents Repurchase Agreements Mortgage Dollar Rolls 40% 60% US Treasuries and Agencies Mortgage Pass-Throughs Corporates Cash and Cash Equivalents Asset-Backed Securities Individual securities BATS Series S Investing involves risk. The investment process discussed herein is based on the current process for selecting portfolio investments and is subject to change. Target portfolio allocation is based on current strategy for a fully discretionary, unconstrained account and is not the result of actual trading. Actual portfolios may differ as a result of account size, client-imposed investment restrictions, the timing of client investments and market, economic and individual company considerations. Accounts generally will be rebalanced to the target allocations if either allocation is over or under its target by more than 5%. Investing in BATS has risks, which include interest rate risk and credit risk. BATS also invest in foreign securities which involve risks such as currency risks, political and social risk. BATS have higher than normal portfolio turnover, which may increase transaction costs and may also result in the recognition of a short-term capital gain or loss. See Important Notes for more information on BATS. MKTG0717U

19 Investment Process Taxable Fixed Income Benefits of using Bond Allocation Target Shares (BATS) Exposure to additional Fixed Income sectors improves diversification Commercial Mortgage-Backed Securities Collateralized Mortgage Obligations Asset-Backed Securities Mortgage-Backed Securities Efficient and effective portfolio management Portfolio Managers have more freedom to add value through sector and sub-sector rotation Institutional execution more access to traders Enhanced liquidity across sectors when selling bonds Access to a greater range of research professionals BATS are fee-waived funds BATS fees and operating expenses (except for interest and extraordinary expenses) are waived or reimbursed by the fund s investment adviser Shares of BATS are available only through separate accounts managed by BlackRock Investing involves risk. Investing in BATS has risks, which include interest rate risk and credit risk. BATS also invest in foreign securities which involve risks such as currency risks, political and social risk. BATS have higher than normal portfolio turnover, which may increase transaction costs and may also result in the recognition of a short-term capital gain or loss. See Important Notes for more information on BATS. MKTG1117U

20 Investment Process Taxable Fixed Income Important Notes The BATS Funds are an investment option for certain wrap-fee or other separately managed account program clients for which BlackRock Investment Management, LLC or certain of its affiliates (individually or collectively referred to as BIM LLC ) receives compensation pursuant to an investment management agreement. Wrap-fee program participants pay a wrap-fee to the sponsor of the program which typically covers investment advice and transaction costs on trades executed with the sponsor or a designated brokerdealer. You should read carefully the wrap-fee or other program brochure provided to you by your program sponsor or investment adviser. The brochure is required to include information about the fees charged to you and, in case of a wrap-fee program, the fees paid by the sponsor to BIM LLC. The Funds pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund s performance. MKTG1117U

21 Investment Team 21

22 Taxable Fixed Income Michael Heilbronn Director Michael Heilbronn, Director, is a member of BlackRock s Fixed Income Separately Managed Account (SMA) Team. In this capacity, he is responsible for managing mid-sized institutional taxable bond portfolios. Additionally, Mr. Heilbronn is part of a liaison team that coordinates the SMA Fixed Income portfolio strategy and credit research with the rest of the firm. He works closely with each group to facilitate idea sharing and trade ideas across portfolios. Mr. Heilbronn s service with the firm dates back to 1998, including his years with Merrill Lynch Investment Managers (MLIM), which merged with BlackRock in At MLIM, he was a Product Specialist for the firm s entire range of Fixed Income portfolios, and also served as an Associate Asset Management Advisor. Mr. Heilbronn joined MLIM in 2000, after working with the mutual funds marketing team at the Merrill Lynch Private Client Group for two years. Mr. Heilbronn earned a BS degree from the Pennsylvania State University in Thomas Musmanno, CFA Managing Director and Portfolio Manager Thomas Musmanno, CFA, Managing Director, is a member of the Multi-sector and Mortgages Group within BlackRock Fundamental Fixed Income. He is a Portfolio Manager on the Short Duration Portfolio Team. Mr. Musmanno s service with the firm dates back to 1991, including his years with Merrill Lynch Investment Managers (MLIM), which merged with BlackRock in At MLIM, he was a Fixed Income and money market Portfolio Manager. Mr. Musmanno joined MLIM in 1991 as an Analyst and held a variety of positions, including Fixed Income research analyst in trust accounting in Merrill Lynch s Private Client Group. Mr. Musmanno earned a BS degree in finance in 1991 from Siena College and an MBA degree in finance from St. John s University in David Antonelli Director David Antonelli, Director, is Head of the Multi Sector and Rates team within Portfolio Solutions for BlackRock's Global Fixed Income Group. He focuses on asset allocation, risk budgeting and consistency across BlackRock's Customized Core, FIG, Short duration and Inflation portfolios. Mr. Antonelli transferred to BlackRock's fixed income team in He joined BlackRock in 2002 as a member of the Operations group where he was responsible for trade confirmations and cash and position reconciliations for BlackRock's fixed income business. Mr. Antonelli earned a BS degree in finance and accounting from Georgetown University in 2002 MKTG0717U

23 Target Portfolio Details 23

24 Short Duration Model Portfolio Data *Supplemental Information Sector Allocation as of March 31, 2018 ABS 11.10% C ash 0.85% C ommercial MBS 4.57% C orporates 30.65% R esidential MBS 11.61% T reas uries 41.22% Average C oupon E ffective Duration Nominal Weighted Average Life BOA Merrill Lynch 1-3 Year Treasury Index 2.0% 1.9 years 1.9 years Short Duration 2.1% 1.8 years 2.7 years *The above model portfolio information is supplemental to the Short Duration SMA composite disclosure slide located in the appendix. Investing involves risk. Model portfolio data based on current strategy for a fully discretionary, unconstrained account and is not the result of actual trading. Actual portfolios may differ as a result of account size, client-imposed investment restrictions, the timing of client investments and market, economic and individual company considerations. MKTG0418U

25 Short Duration Composite Performance **Supplemental Information Quarterly Performance (% returns, not annualized for less than one year) Y ear to date 3/31/18 6/30/18 9/30/18 12/31/18 S hort Duration C omposite (Net) S hort Duration C omposite (G ross) BOA Merrill Lynch 1-3 Y ear Treasury Index Average annual total returns (%) through 3/31/18 1-Y ear 3-Y ear 5-Y ear 10-Y ear S ince Inception (4/1/96) S hort Duration C omposite (Net) S hort Duration C omposite (G ross) BOA Merrill Lynch 1-3 Y ear Treasury Index Historical performance (% yearly total returns) S hort Duration C omposite (Net) S hort Duration C omposite (G ross) BOA Merrill Lynch 1-3 Y ear Treasury Index Data as of 3/31/18. **The above information is supplemental to Short Duration composite presentation located in the Appendix. Investing involves risk. P ast performance does not guarantee or indicate future results. P lease see Important Notes for additional performance and fees, benchmark and composite information. MKTG0418U

26 Important Notes THE INFORMATION CONTAINED HEREIN MAY BE PROPRIETARY IN NATURE AND HAS BEEN PROVIDED TO YOU ON A CONFIDENTIAL BASIS, AND MAY NOT BE REPRODUCED, COPIED OR DISTRIBUTED WITHOUT THE PRIOR CONSENT OF BLACKROCK, INC. AND/OR ITS SUBSIDIARIES (TOGETHER, BLACKROCK ). This document contains general information only and does not take into account an individual s financial circumstances. An assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a professional adviser before making an investment decision. 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 investment strategy. The opinions expressed 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. 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. Statements concerning financial market trends are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions. Outlook and strategies are subject to change without notice. For more complete information, please ask your Financial Advisor for the client agreement and disclosure document. Please read them carefully before you invest and consider the strategy s investment objective, risks, charges and management expenses among other information contained in the documents This communication and its content represent confidential information. Performance and Fees. Past performance is no guarantee of future results. Certain performance figures do not reflect the deduction of investment advisory fees (please refer to Part 2 of BlackRock s Form ADV) in the case of separate accounts; but they do reflect commissions, other expenses, and reinvestment of earnings. Such fees that a client may incur in the management of their investment advisory account may reduce the client's return. For example, assuming an annual gross return of 8% and an annual management/advisory fee of.40%, the net annualized total return of the portfolio would be 7.58% over a 5-year period. The net of fees performance figures reflect the deduction of actual investment advisory fees but do not reflect the deduction of custodial fees. All periods longer than one year are annualized. When BlackRock invests a client s separate account in mutual funds or exchange traded funds, such funds may charge fees and expenses payable to third parties and/or BlackRock that are in addition to the fee payable to BlackRock in connection with its management of the separate account. Composite and Benchmark Descriptions and Additional Performance Detail. Investing involves risk. The performance information shown reflects the performance of a composite of accounts (or portions of accounts) that does not necessarily reflect the performance that any particular account investing in the same or similar securities may have had during the period. Actual account performance is likely to differ from the composite performance shown for a variety of reasons, including but not limited to: differences in market conditions, portfolio turnover and in the number, types, availability and diversity of securities that can be purchased; economies of scale, regulations and other factors applicable to the management of large separate accounts and mutual funds; client-imposed investment restrictions; the timing of client investments and withdrawals; the deduction of taxes; tax considerations; and other factors. Composite and benchmark / index performance results reflect realized and unrealized appreciation and the reinvestment of dividends, interest, and / or capital gains. Taxes have not been deducted. Gross composite returns do not reflect actual performance because they do not reflect the deduction of any fees or expenses. Due to the compounding effect of these fees, annual net composite returns may be lower than stated gross returns less stated maximum fee. The firm s performance results are the product of the efforts of numerous personnel and the firm-wide global resources made available to them. The personnel and resources contributing to the firm s performance results include portfolio managers and their staff, research analysts, risk management professionals, in-house trading professionals, investment supervisory personnel, and the firm s proprietary investment processes, integrated global research systems and access to third-party research sources. MKTG0617U

27 Important Notes (cont.) Risk Investment involves risk. Stock and bond values fluctuate in price so the value of your investment can go down depending upon market conditions. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. The principal on mortgage- or asset-backed securities may be prepaid at any time, which will reduce the yield and market value of these securities. Obligations of US Government agencies and authorities are supported by varying degrees of credit but generally are not backed by the full faith and credit of the US Government. Investments in non-investment-grade debt securities ( high-yield bonds or junk bonds ) may be subject to greater market fluctuations and risk of default or loss of income and principal than securities in higher rating categories. Income from municipal bonds may be subject to state and local taxes and at times the alternative minimum tax. International investing involves risks related to foreign currency, limited liquidity, less government regulation, and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are often heightened for investments in emerging / developing markets or smaller capital markets. Model Portfolio Information concerning portfolio allocations, holdings, and characteristics is representative of the model portfolio for this strategy and does not necessarily reflect an actual account. Actual portfolios may differ as a result of account size, client-imposed investment restrictions, the timing of client investments and market, economic, and individual company considerations. Credit Quality The credit quality of a particular security or group of securities does not ensure the stability or safety of an overall portfolio. The quality ratings of individual issues/issuers are provided to indicate the credit worthiness of such issues/issuer and generally range from AA, (highest) to D (lowest). Securities Referenced Any reference herein to any security and/or a particular issuer shall not constitute a recommendation to buy or sell, offer to buy, offer to sell, or a solicitation of an offer to buy or sell any such securities issued by such issuer. BlackRock may or may not own the securities referenced and, if such securities are owned, no representation is being made that such securities will continue to be held. Tax & Legal This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. You should consult your tax or legal advisor regarding such matters. Forward Looking Information This material may contain forward-looking information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition. Moreover, where certain historical performance information of other investment vehicles or composite accounts managed by BlackRock has been included in this material and such performance information is presented by way of example only. No representation is made that the performance presented will be achieved, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns that are presented herein by way of example. There is no guarantee that any forecasts made will come to pass.. MKTG0617U

28 Important Notes (cont.) Definitions Standard deviation is a statistical measure that depicts how widely the returns of an investment varied over a certain period of time. Investors can use the standard deviation of historical performance to try to predict the range of returns that may occur for a particular investment. A higher standard deviation indicates greater volatility or a wider range of returns. Beta is a historical measure of the degree of change in value in a portfolio given a change in value in a benchmark index. A portfolio with a beta greater than one generally exhibits more volatility than its benchmark index, and a portfolio with a beta of less than one generally exhibits less volatility than its benchmark index. Alpha measures the difference between a portfolio s actual returns and its expected performance, given its beta and the actual returns of the benchmark index. Alpha is often described as a measurement of the value added or subtracted by a portfolio s manager. Up-market capture ratio is a measure of manager s performance in up markets relative to the market itself. The higher the manager s up-market capture ratio, the better the manager capitalized on a rising market. In this presentation, quarterly data is used. Down-market capture ratio is a measure of manager s performance in down markets relative to the market itself. The lower the manager s down-market capture ratio, the better the manager protected capital during a market decline. In this presentation, quarterly data is used. THIS MATERIAL IS HIGHLY CONFIDENTIAL AND IS NOT TO BE REPRODUCED OR DISTRIBUTED TO PERSONS OTHER THAN THE RECIPIENT BlackRock, Inc. All Rights Reserved. BLACKROCK is a registered trademark of BlackRock, Inc. and its subsidiaries. All other trademarks are the property of their respective owners. MKTG0617U

29 Historical Data: BlackRock Short Duration SMA Composite Calendar Year Pure Gross of Fee Composite Return (%) Net of Fee Composite Return (%) Benchmark Return (%) Number of Portfolios Composite Dispersion (%) Composite 3-Year Annualized Standard Deviation (%) Benchmark 3-Year Annualized Standard Deviation (%) Total Assets at End of Period (US$mn) * * * * * Percentage of Firm Assets < < < < < < < <1 Past Performance is not indicative of future results. 1. Performance results presented for periods prior to December 1, 2010, occurred while these assets were not part of the current firm definition. Data shown may be subject to revisions from time to time based on availability of new information. Any such revisions are not material. U-LD GIPS0118U/E

30 Historical Data: BlackRock Short Duration SMA Composite (Cont d) Notes: 1. For purposes of compliance with the Global Investment Performance Standards (GIPS ), the firm refers to the investment adviser and national trust bank subsidiaries of BlackRock, Inc., located globally. This definition excludes: i) BlackRock subsidiaries that do not provide investment advisory or management services, ii) the Absolute Return Strategies (funds-ofhedge-funds) business unit under the BlackRock Alternative Advisers platform, iii) BlackRock Capital Investment Corporation, LLC, and iv) FutureAdvisor, Inc.. 2. BlackRock claims compliance with the GIPS standards and has prepared and presented this report in compliance with the GIPS standards. BlackRock has been independently verified for the periods 1 January 1993 through 31 December The verification reports are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. The firm is verified annually by Deloitte & Touche LLP. 3. Portfolio returns are calculated monthly, using the Modified Dietz method. Trade date accounting has been used since the inception of the composite. The returns are expressed in US dollars and are asset-weighted since inception. 4. The benchmark index shown is the BofA Merrill Lynch 1 3 Years Treasury Index. 5. Composite dispersion measures represent the consistency of a firm s composite performance results with respect to the individual portfolio returns within a composite. Composite dispersion is the square root of the sum of monthly variances of portfolio returns around the composite returns. The monthly variance is the sum of the asset-weighted squared differences between the individual portfolio returns and the composite returns. Only portfolios that have been included in the composite style for a full month are accounted for in the dispersion calculation. For composites containing only one account, a measure of dispersion is not meaningful (NM). 6. Percentage of Firm Assets are rounded to the nearest whole percent. 7. There have been no alterations of the composite due to changes in personnel or other reasons. 8. The SMA strategy does not invest directly in derivatives, shorting or leverage. However, underlying funds where permitted by investment guidelines may utilize derivatives, shorting and leverage. 9. Gross of fee performance results are presented before management, custodial fees, broker fees and transaction costs, but net of withholding taxes (if applicable). The wrap fee covers the firm s management services and transaction costs. Net returns are calculated by subtracting the highest applicable wrap fee (1.64% on an annual basis, or 0.41% quarterly). 10. A complete list and description of all composites maintained by BlackRock and the related performance results are available upon request by ing SMAMarketing@BlackRock.com. Additional information regarding policies for calculating and reporting returns is also available upon request. BlackRock Short Duration SMA Composite: This investment strategy seeks total return derived primarily from coupon interest and capital appreciation. It invests primarily in government securities, investment grade corporate bonds, asset-backed and mortgage-backed securities, and approximately 40% in shares of a fee-waived mutual fund, which can invest in a wide variety of investment grade Fixed Income Securities. These portfolios are expected to have durations of one to three years. An investor selecting this strategy may risk some loss of principal. More detailed information on this strategy is available upon request. The performance results from May 1, 2009 to the end of the most recent calendar year represents the composite of all fully discretionary, unconstrained Separately Managed Account (SMA) program accounts managed in this style by the firm for at least two months. The performance results from January 1, 2008 April 30, 2009 represent the composite of all fully discretionary, unconstrained SMA program accounts managed in this style by the firm for at least three months. The performance results from July 1, 2006 December 31, 2007 represent the composite of all fully discretionary, unconstrained SMA program accounts with a minimum market value of $240,000 managed in this style by the firm for at least three months. Results prior to July 1, 2006 represent BlackRock s unconstrained, discretionary institutional accounts with a minimum of $25mn managed in this style for at least three months (although none held BlackRock Bond Allocation Target Shares (BATS)). BATS are utilized in an attempt to provide an investment experience that is similar to that achieved by BlackRock s institutional accounts managed in this style. Therefore, the performance of such institutional accounts is included in the composite because BlackRock believes it is relevant to prospective clients. The creation date of the composite is December 31, New accounts and accounts that have changed their investment mandate to that of the composite are included in the composite upon the completion of the second full month under management. Closed accounts and accounts that change their investment mandate are included in the composite through the completion of the last full month under management or the last full month under the old strategy. U-LD GIPS0118U/E