Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
MANAGING ALLOCATIONS TO ALTERNATIVES
THE CHALLENGE
How can I manage my alternatives allocation within my portfolio?
Investments in private markets are becoming an increasingly core component of asset allocations for investors. With this comes the need to manage cash more efficiently to prevent cash drag on performance, as asset managers deal with capital calls, expiring vintages, or due diligence before an investment is made.
THE ACTION
ETFs could act as an interim vehicle for holding cash, while allowing investors to gain access to the broad economic exposures of the asset class before the capital calls are made.
Source: BlackRock, as at May 2020.
For illustrative purpose only.
Case studies are for illustrative purposes only; they are not meant as a guarantee of any future results or experience, and should not be interpreted as advice or a recommendation.
THE OUTCOME
While risk-return profiles and the idiosyncratic nature of private markets differ from public markets, macroeconomic and style exposures driving these investments may be more similar.
By using ETFs as an interim vehicle for their private market investments, the client could gain earlier access to the targeted exposure, with a beta of 0.93.*
*Source: BlackRock, Morningstar, Cambridge Associates. Beta measured against the Cambridge Associates Global Buyout Index, calculated using quarterly returns from 31/12/2009 - 31/12/2019.
Risk: There can be no guarantee that the investment strategy can be successful and the value of investments may go down as well as up.
WHY INDEXING?
The liquidity of the ETF market enabled ETFs to be used as tactical investments solutions, to help manage cash flows and allow the portfolio to remain more closely aligned to its strategic asset allocation.
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