Page 51 - DIY Investor Magazine | Issue 31

• Provided by world’s top two largest ETF asset managers with strong track record • One cheap (0.25% TER) fund covers all your needs and provides exposure to world equity markets and bonds • A choice of three/four investor risk profiles • Regularly rebalanced by the asset manager to maintain risk profile WHAT MAKES BLACKROCK MULTI ASSET ETFS DIFFERENT? BlackRock ETF offering provides some differentiating factors: • Actively managed • BlackRock makes an ESG commitment – at least 80% of assets track ESG Indices • Targeting a certain risk profile not fixed allocation to Bonds and Equities WHAT ARE THE UNDERLYING ETFS? BlackRock is using an asset allocation that is not too dissimilar to a World Equity Benchmark; ultimately, they want to compete with Vanguard LifeStrategy – I suspect they won’t venture too far away from a World Index. However, the underlying funds are using iShares ETFs that have ESG benchmarks e.g. over 50% of the exposure to US Equities are through ETFs tracking an index very closely correlated to MSCI USA – an Index slightly larger (600+ companies) than the S&P 500: • MSCI USA ESG Enhanced Focus Index • MSCI USA SRI Select Reduced Fossil Fuels Index • MSCI USA ESG Screened Index Why does BlackRock need three different ETFs to track one market? Probably for the same reasons as Vanguard LifeStrategy – due to limitations imposed by UCITS (20% threshold per ETF). You shouldn’t be too concerned about that. HOW MUCH DOES IT DIFFER FROM PASSIVE FUNDS? EQUITY - ILLUSTRATIVE DIFFERENCE IN EXPOSURE BlackRock ETFs are not tracking any specific benchmark but they have a large overlap with a World ETF (and broadly similar composition to passive funds like LifeStrategy). I had a look at the Growth Fund Equity portfolio and there seems to be a home bias in the allocation and lack of certain other countries (e.g. Canada). Whether that’s an active call or an ESG consideration is not entirely clear. This is, of course, subject to change with the portfolio managers’ forward looking views. BONDS - ILLUSTRATIVE ALLOCATION Looking again at the growth fund, bonds seem to be well diversified across traditional and inflation linked bonds. This is great and something Vanguard LifeStrategy (EUR) lacks (LifeStrategy in GBP does include them, though). 51 Diy Investor Magazine · Nov 2021