Page 50 - DIY Investor Magazine | Issue 31

GREEN OFF-PISTE WITH BLACKROCK ESG MULTI-ASSET ETFS My recent Vanguard LifeStrategy analysis triggered lots of reactions and messages with a couple of recurring questions from readers: • Can I invest through an ESG-friendly portfolio? • Can it include Inflation Linked Bonds? While I suspect the majority of UK and European Investors will choose Vanguard for its simplicity, BlackRock has something to offer that is slightly off-piste. A greener one. BlackRock recently launched a series of ETFs that aim to compete with Vanguard LifeStrategy. The funds are also available in GBP. This analysis below is a comparison, not an introduction to fund of funds. If funds of funds, like Vanguard LifeStrategy, are new to you read this first. WHAT ARE BLACKROCK MULTI ASSET ETFS? The three Blackrock ESG multi-asset ETFs that were launched use iShares ETFs to provide access to stocks and bonds according to three risk profiles – conservative, moderate and growth – with the aim of delivering a total return; each is available on XETRA (EUR) and LSE (GBP) BlackRock ESG Multi-Asset Conservative Portfolio UCITS ETF - MACG BlackRock ESG Multi-Asset Moderate Portfolio UCITS ETF - MAMG BlackRock ESG Multi-Asset Growth Portfolio UCITS ETF - MAGG WHAT IS THE DIFFERENCE BETWEEN BLACKROCK FUNDS? BLACKROCK ESG FUNDS’ RISK TARGETS The BlackRock funds differ by the level of risk; the allocation to equity and bonds is only indicative – BlackRock is not committed to rebalance these on a regular basis to these levels. The investment objective is to generate the highest Total return within a risk limit (volatility target calculated on a 5-year basis); e.g. the BlackRock ESG Multi-Asset Growth Portfolio UCITS ETF has a target annual volatility of 10-15%, measured as an average over 5-years. HOW IS THIS OBJECTIVE DIFFERENT TO VANGUARD? VANGUARD LIFESTRATEGY HISTORICAL RISK Risk by Vanguard is measured by the allocation to equities (that’s why LifeStrategy Funds are called Relative Risk Funds); BlackRock Funds target a volatility level (these funds are called Target Risk Funds). Given the levels of risk observed on LifeStrategy funds over the past two decades, the broad guidance seems adequate. E.g. the BlackRock ESG Multi-asset Growth Fund investors may reasonably expect that these ranges could vary between 70% and 80% of allocation to Equities (unlikely to go materially higher given that target volatility is measured over 5-year horizon, and tail risks, like 2001 or 2008 can have a major impact over such time horizon). That’s one of the reasons BlackRock funds are active – their objective is to keep volatility within the range no matter the market conditions. BLACKROCK ESG MULTI-ASSET VS. VANGUARD LIFESTRATEGY WHAT MAKES THEM SIMILAR? Vanguard LifeStrategy and BlackRock Multi Asset ETFs have some common charcateristics: DIY Investor Magazine · Nov 2021 50