The US asset management giant is rolling out its BlackRock ESG Flex Choice Series, made up of three sub-funds under the BlackRock Global Funds roof. The series offers three investment solutions aimed at different risk levels, and in three share classes. 

WealthBriefingAsia recently interviewed Robert Ronneberger, lead strategist for model portfolios and retirement solutions in Asia for BlackRock, about the offering, what it can bring that is distinctive, and where the ESG agenda goes from here.

Why launch this fund now, given that already there seem to be a lot of funds and other structures playing to the ESG agenda? What's distinctive about this offering? 
One of the key backdrops for launching these three funds was a lack of cost-effective solutions for retirement saving and spending in the region, coupled with increasing demand for sustainably managed portfolios – particularly in the context of long-term saving. Based on our market research, these funds are likely to be used as a core building block in a core-satellite portfolio constellation. So you might say that key distinctions are:

1)  Low cost: Low cost solution to maximize the compounding effect for retirement saving; 
2)  ESG-centric (SFDR Article 8): Exposure to investments with strong ESG characteristics by following an ESG-centric investment approach;  
3)  For lifecyle saving: Three risk options with share class features catering for the needs of retirement saving and spending; and 
4)  Diversified (7,000+ securities): Truly multi-asset with allocations to equity, fixed income, and alternative assets, blending active funds with passive ETFs.

What sort of clients is it aimed at – intermediaries, end-clients (mass affluent, HNW, institutions, other)? 
The key client segments are end clients cutting across mass retail all the way to HNW individuals. Institutional clients have also expressed interest to leverage these funds as a core target allocation holding.

In what markets is the fund available? 
Currently, the funds are distributed by Standard Chartered Bank in Hong Kong. The funds could also be made available in other jurisdictions – subject to registration with the relevant regulators and authorities. 

The fund covers a range of risk tolerances and market positions. In your view, is this an area that you think is underserved by the current industry? 
Unlike most traditional active products in the market, the underlying investment philosophy for this fund series is to deliver alpha through asset class allocation rather than security selection; academia has proven that it is the single most important driver for portfolios returns. Targeting to achieve this effectively and with low cost, the investment universe consists of exchange-traded funds and mutual funds. Given the breadth of available exposures by BlackRock, we can easily express our investment views across geographies and asset classes. Our market research has shown that the vast majority of funds focus on security selection and invest in single securities.

Our approach is very differentiated. To respond to market changes, we use these to position the portfolio adequately in times of higher market uncertainty for instance, with allocation to minimum volatility and quality. This means that our strategy focuses on investing in the right market timing rather than security selection (stock picking) and allows more agility in response to market conditions.

ETFs are low-cost baskets of securities. Using them allows us to sell this fund for less than 1 per cent in total fees, which may be attractive in the context of long-term investing such as retirement. New exposures are added constantly, and the latest are those with strong environmental, social and governance (ESG) characteristics; these allow us to satisfy SFDR Article 8 requirements, in order to launch a more sustainable strategy that targets and lowers carbon emissions.

As well as using a universe of assets with strong ESG characteristics, sustainable investing is a core principle for this strategy which is reflected throughout the investment process. To add more colour – our strategy aligns with the BlackRock sustainable Capital Market Assumptions when defining the asset allocation. It leverages our big-data-driven ESG signals for tactical allocations.

From your point of view, where would you expect this fund to sit in investors' portfolios? 
The BGF ESG Flex Choice Fund series offers three core multi-asset strategies of investors’ choice, with a variety of share classes ranging from total return to distributing that aim to address key needs over a lifecycle, tailored to their risk tolerances and investment goals. We believe that these funds are a one-stop solution for retirement saving and spending. The chart below provides examples of how the funds fit the needs of investors at different stages of their lives. And, as iterated above, these funds also sit attractively in portfolios either as a core holding or in a core-satellite constructed portfolio.  

Disclaimer

In Singapore, this material is issued by BlackRock (Singapore) Limited (company registration number: 200010143N). This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

The Fund mentioned in this material is a fund of BlackRock Global Funds.

Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Investors may not get back the amount they invest. Changes in the rates of exchange between currencies may cause the value of investments to go up and down. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

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