We’ve launched an international managed portfolio

We have partnered with BlackRock to bring you our very first international equity portfolio. The iShares Enhanced Strategic International Managed Portfolio is a dynamically managed diversified portfolio made up of 10-20 ETF holdings, providing exposure to over 2,500 underlying securities. Continue reading to learn more about BlackRock, their investment philosophy and portfolio construction framework.

Investment philosophy

BlackRock believes that superior investment outcomes are best achieved through a disciplined, objective investment process. The investment process seeks to harvest return premia, while managing risks and implementation costs through optimisation-based portfolio construction. 

BlackRock makes use of fundamental-based, top-down macroeconomic analysis in building long-term return forecasts across regions and sectors. This is balanced with proprietary portfolio and risk management systems, enabling them to produce a diversified international equity portfolio that is benchmark aware with controlled levels of active risk. BlackRock integrates trading costs into the portfolio construction methodology to help identify the optimal trade-off between expected returns, risks and the certainty of costs.

Portfolio construction

BlackRock has adopted a four-step framework for the managed portfolio construction process.

1. Strategic country and sector allocations 

These strategic allocations are guided by BlackRock’s long-term return expectations, risk and correlation assumptions across countries and sectors. BlackRock utilises a mean-variance optimisation framework to determine the optimal risk adjusted strategic weights, while also controlling for tracking error against the benchmark. This process is repeated annually in order to evolve the portfolio and incorporate updates to the expected return and risk assumptions. 

2. Dynamic tilting 

Tactical country and sector tilts relative to the strategic holdings are made 4-6 times per annum based on a set of market-aware proprietary signals including valuation insights, momentum and fundamental economic indicators. The tactical overlay process seeks to add value by deviating away from the long-term strategic weights and respond to changing market conditions. 

3. Portfolio implementation

The portfolio is constructed using a range of ASX-listed iShares ETFs that individually aim to track country and sector indices across both developed and emerging markets, along with smart beta exposures such as Minimum Volatility. These low-cost, transparent ETFs allow for efficient portfolio implementation and act as natural candidates for the dynamic tilting process. 

4. Monitor, assess and help protect the portfolio

BlackRock’s Aladdin® technology helps them better understand potential risk exposures with holdings-based analysis in addition to traditional, backward-looking performance analysis. They use detailed risk analytics and stress testing capabilities, in combination with portfolio manager insight to monitor the health of the portfolio.

About the investment manager

BlackRock is a global investment manager that has served the Australian market for over three decades, with a commitment to helping more people plan for their financial future. As a fiduciary to investors and a leading provider of financial technology, BlackRock helps millions of people build savings that serve them throughout their lives by making investing easier and more affordable.

The Australian investment team has been managing portfolios for Australian investors since 1992, leveraging the firm’s global capabilities and best practices to consistently deliver investment outcomes for their clients.