Page 52 - DIY Investor Magazine | Issue 31

ARE THE BONDS CURRENCY HEDGED? The documentation is not fully clear on how exactly currency hedging is performed, but given the volatility targets, bonds are certainly hedged. E.g. the conservative fund has 80% of exposure to bonds, including 50% to US Treasuries and US Inflation Linked Bonds. The aggregate currency exposure is 93% in EUR. For the Growth fund, some of the underlying holdings are short USD FX forwards confirming this also being the case. The most likely scenario is that the EUR funds are dynamically hedged to meet the goal of target portfolio volatility. It is also a view of the fund’s portfolio manager. The GBP Funds are then hedged vis-à-vis the Fund Base currency (i.e. EUR). WHAT ELSE DO I NEED TO KNOW? Similarly to Vanguard LifeStrategy, BlackRock ESG Funds have been recently launched in EUR. In that respect, they do not have a track record. However, BlackRock has already tested the ground in the UK with a range of funds called BlackRock MyMap. Both the UK and the newly established European Funds are managed by the same portfolio managers – Rafael Iborra and John Wang. There are numerous factors you need consider before buying an ETF; some apply to BlackRock’s ESG Multi Asset ETFs – I have listed them below. KEY CONSIDERATIONS • Available in Accumulating UCITS Format • Available to UK and European Investors • Active funds with potential biases towards regions/sectors • Lower US withholding taxes (Irish Domiciled Fund) • Physical replication • Available on Xetra and London Stock Exchange • No assets under management yet • Slightly confusing components due to UCITS law CONCLUSIONS WHEN SHOULD YOU CHOOSE BLACKROCK From a passive investor’s perspective, the main selling points for these funds vs. Vanguard LifeStrategy are: • Strong ESG Focus • Inclusion of Inflation Linked Bonds Note, that UK Vanguard LifeStrategy funds have inflation linked bonds so that’s only a differentiating factor for European investors. BlackRock is managing these funds actively, which may or not outperform a more passive approach like Vanguard. SHOW ME THE FUNDS. These are the funds with their ISINs on the LSE; most brokers would allow you to access Xetra – see ISINS here. What’s the difference between accumulating and distributing? Here is the answer. FUND BlackRock ESG Multi-Asset Conservative Portfolio UCITS ETF GBP Hedged (Acc) BlackRock ESG Multi-Asset Moderate Portfolio UCITS ETF GBP Hedged (Acc) BlackRock ESG Multi-Asset Growth Portfolio UCITS ETF GBP Hedged (Acc) Distribution policy Accumulating Accumulating Accumulating ISIN IE00BLP53N06 IE00BLLZQ797 IE00BLLZQ912 GOOD LUCK AND KEEP’EM* ROLLING ! (* WHEELS & DIVIDENDS) DIY Investor Magazine · Nov 2021 52