BlackRock Consensus 85: September 2021 fund update

• BlackRock has been managing index portfolios since 1971
• This fund provides a low-cost option for accessing multiple international markets through one investment
• The fund has a diversified mix of investments including shares, bonds, property and cash
• This fund is not on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The BlackRock Consensus 85 fund offers a low-cost solution for tracking the average pension fund. The fund is ‘multi-asset’ meaning it invests in a combination of shares, bonds, property and cash. This allows investors access to a variety of international markets with one investment. A mixture of assets spreads investment risk across multiple sectors, resulting in smaller up and down swings in performance over the longer term. We think this fund could help provide a starting point for a diversified investment portfolio.

Manager

Steve Walker, who’s responsible for Europe, Middle East and Africa (EMEA) Index Asset Allocation, runs the wider team at BlackRock that manage the Consensus 85 fund. Walker’s been with BlackRock since 2009 and previously worked as a portfolio manager for Barclays Global Investors before the two firms merged together.

BlackRock’s global approach allows it to work closely with its teams across the world, helping drive more efficient management of its funds. We have positive conviction in the ability of BlackRock to provide simple and effective tracking options for investors.

Process

The investment team use an asset allocation strategy based on the Lipper ABI Mixed Investment 40-85% Shares Pension Sector. This means that each month Lipper, an investment data provider, takes a survey on what investments are held in the average pension fund across the UK. The results of that survey provide a starting point for BlackRock to choose which passive investments are best suited to track the corresponding markets.

Part of the survey accounts for a 6.5% weighting to alternative investments, like private equity, hedge funds or commodities. BlackRock believes it’s difficult to invest in these using passive investments, so the team avoid them altogether and reallocate the money to other sectors.

The number 85 refers to the maximum percentage of the fund that can be invested in shares. However, in practice the fund will typically hold less than this amount – it’s currently just over 70%. When there’s a reduction, the team will increase its holdings in other securities.

A proportion of this fund is also invested into emerging markets, smaller companies and high yield bonds, all of which are higher risk. The tracking error targets for the fund are monitored on a daily and monthly basis by BlackRock’s risk team to ensure the portfolio managers are on track.

BlackRock uses stock lending within its portfolios to try and add value for its clients. Stock lending is when a fund makes short-term loans of its assets (e.g. stocks or bonds) to other providers to incrementally increase returns for investors. However this can also increase risk.

Since BlackRock’s lending program started in 1981, only three borrowers with active loans have defaulted. In each case, BlackRock was able to repurchase every security out on loan with collateral on hand and without any losses to clients.

The fund receives 62.5% of the revenue from stock lending. The remaining 37.5% is retained by BlackRock.

Culture

BlackRock is the largest asset manager in the world, running $9 trillion globally as of September 2021. The company was founded in 1988 by eight partners including current CEO Larry Fink. It’s known for both active and passive strategies across the world.

Employees at BlackRock are encouraged to hold shares in the company so that they are engaged with helping the company perform well and grow. The company is committed to broadening employee share ownership and offers an employee stock purchase plan to help achieve this goal. For passive funds, the managers are incentivised to track the index as closely as possible. We think this helps align the company’s interests with its long-term investors’.

This is not an Environmental, Social and Governance (ESG) specific fund. However, over recent years BlackRock has increased its drive towards stewardship and promoting ESG based products. This involves direct dialogue with companies on governance issues that have a material impact on sustainable, long-term financial performance.

It performs independent research and analysis, and contributes to voting decisions, including the re-election of directors that they believe are in the best long-term economic interest of their clients. Between July 2020 and June 2021, Blackrock engaged over 3,100 times with companies held in the fund.

The team running the fund also work closely with various equity and risk departments across the business. We believe this adds good support and challenge on how to run the fund effectively.

Cost

The fund has an ongoing annual fund charge of 0.23%, but a discount of 0.13% is available for HL investors, which reduces the charge to 0.10%. The HL platform charge of up to 0.45% per annum also applies.

The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP.

Performance

The fund has performed in line with the IA Mixed Investment 40-85% Shares sector since its launch in August 2005. Over this time, it’s grown 189.8% versus 172.9%* for the sector. While it has done well, the aim of this fund is not to explicitly outperform the sector, simply represent it over time.

A glance at the five-year performance table below shows in some years the fund has tracked the sector closer than others. On occasion it has ended up slightly ahead of the benchmark, although this won't necessarily happen in the future. Remember, past performance isn’t a guide to future returns.

Past performance isn't a guide to the future. Source: *Lipper IM to 31/08/2021.

More about the BlackRock Consensus 85 Fund including charges

BlackRock Consensus 85 Key Investor Information