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.

The challenge

How can I manage my portfolio to express short-term market views?

Expressing differentiated views across countries, sectors, factors, durations or credit qualities is often a key value proposition among portfolio managers, in an attempt to differentiate from both the benchmark and their peers.

In heightened market volatility, the importance of tactical portfolio overlays is ever more in focus, as investors attempt to harness short-term gains as well as limit potential drawdowns.

The action

Stress testing can help to identify ways to improve portfolio outcomes. BlackRock’s range of scenarios, based on simulations of possible outcomes of macro and geopolitical events, can help managers to conceptualise resultant economic, market and portfolio alpha impacts.

Hypothetical stress test analysis

Source: BlackRock, as at May 2020.
For illustrative purpose only.

Equity Volatility Increase represented by a move in the VIX index by 16.5%. EM Rebound based on MSCI Emerging Markets Index up 10%. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged, and one cannot invest directly in an index.

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

The client re-evaluated the instruments that they were using to express differentiated, tactical views. The incorporation of ETFs into their portfolio construction process enabled them to become more nimble with their tactical asset allocation views.

Why indexing?

The liquidity of the ETF market, helping to minimise costs of accessing these exposures, led the client to increasingly utilise these tools to dynamically tilt the portfolio in accordance with market events.


From case studies to full outsourcing, explore how our portfolio solutions can help you rethink your portfolio.