B L A C K R O C K . C O M / G L S E
With the world full of uncertainty, investors have shied away from equity markets, sacrificing long-term growth potential.
Today, investors need an investment solution that can reap the benefits of the global stock markets without experiencing the accompanying turbulence.
Equity Investing in Volatile Markets
} Investors Are Cautious of Re-Entering Stock Markets: Despite markets rallying, investors continue to shy away from owning stocks.
} It’s Harder to Find Equity Investments with Low Correlations: Over the last 15 years, global stock markets have had high correlations to each other and similar risk/return characteristics.
} Diversification Through Long/Short Investing: Combining long and short investing can increase a portfolio’s diversification by limiting exposure to market-related risks and expanding the investment universe.
GLOBAL LONG/SHORT EQUITY FUND
Institutional: BDMIX A: BDMAX • C: BDMCX
Morningstar Analyst Rating
™Morningstar has awarded the fund a Bronze medal. Fewer than 10% of U.S. open-end funds hold medalist ratings. (Effective 7/15/15)
1Investment Approach The team emphasizes careful, fundamentally-based stock selection from a universe of over 2,500 developed market companies. The fund will employ a dedicated long/short strategy to manage net market exposure and seek to mitigate volatility.
Morningstar Category Market Neutral
Lipper Category
Alternative Long/Short Equity Number of Holdings (Range) } Total holdings: 600–1200 • Long positions: 300–600 • Short positions: 300–600 } Average position ≈ 0.5%
} Individual position limit: 3%
Net Market Exposure } Target: 15%
} Range: -10–40%
Investable Universe } Companies: ~2,500 } Countries: 24 MANY INVESTORS ARE STARVING FOR GROWTH BUT ARE TOO
AFRAID OF RISK TO DO ANYTHING ABOUT IT
International U.S. International U.S.
7.00 % 4.43 %
18.16 %
14.67 %
10-Year Annualized Returns 10-Year Annualized Volatility
Standard Deviation
Source: Informa Investment Solutions, December 31, 2004 – December 31, 2014. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an index. Risk is measured by standard deviation based on quarterly returns. Returns and risks for international are based on the MSCI EAFE Index and US on the S&P 500 Index.
Past performance is no guarantee of future results.
An Alternative to Traditional Equities
The BlackRock Global Long/Short Equity Fund is a dedicated long/short strategy with the goal of adding equity growth while minimizing market risk.
1 A LOW VOLATILITY ALTERNATIVE TO TRADITIONAL
GLOBAL EQUITIES 2 ANSWERING FUNDAMENTAL QUESTIONS
USING BIG DATA 3 SEEKING RETURNS
INDEPENDENT
OF MARKET
DIRECTION
The BlackRock Global Long/Short Equity Fund is designed to provide one of the least volatile ways to access the long-term growth potential of equities.
Unlike traditional, long-only strategies that rely heavily on rising markets for returns, the fund’s dedicated long/short strategy focuses on generating returns that are independent of markets moving up, down or sideways.
To accomplish this, the managers buy (“go long”) companies they anticipate will outperform the market and short sell (“short”) companies they
anticipate will underperform to reduce the fund’s net market exposure.
% LONG SECURITIES – % SHORT SECURITIES = % NET MARKET EXPOSURE By targeting just 15% net market exposure, the fund seeks to deliver significantly reduced sensitivity to equity market volatility.
1
Long/Short Investing is…
A non-traditional investment strategy that can benefit from both rising and falling stock prices. The fund manager buys stocks they expect to go up (buys “long”) and sells borrowed stocks they expect to go down (“short selling” or “shorting”). This approach can limit market risk (volatility) while doubling an investor’s opportunity set.
Short Selling is…
An investment strategy that involves borrowing securities from a third party to
“short sell” companies the fund manager considers unattractive or trading at inflated prices. If a shorted stock declines in value, it can be bought back for less than the original price, thus earning a profit. Conversely, if a shorted stock rises in value, the manager pays a higher price to buy the stock back to cover the sale and suffers a loss.
Beta is…
A measure of a portfolio’s sensitivity to general market movements. If a portfolio’s beta = 1, the portfolio will tend to move with the market. If beta is < 1, the portfolio will generally be less volatile than the market; conversely, a beta > 1 indicates the portfolio will generally be more volatile than the market.
Investing in long/short strategies presents the opportunity for significant losses, including the loss of your total investment.
Such strategies could create a situation whereby a long/short strategy could increase volatility, and in general are not suitable for all investors.
A Low Volatility Alternative to Traditional Global Equities
HOW SENSITIVE IS YOUR PORTFOLIO?
Hypothetical Illustration of the Amount of Volatility Generated by Beta
This chart is for illustrative purposes only.
LOWER MARKET EXPOSURE = LOWER MARKET SENSITIVITY
CONSERVATIVE LONG-ONLY
FUND (BETA = 0.80)
BLK GLOBAL LONG/SHORT EQUITY FUND (BETA ≈ 0.15) INDEX FUND
(BETA = 1.00)
100 % ≈80 % ≈15 %
AGGRESSIVE LONG-ONLY
FUND (BETA = 1.20)
≈120 %
MARKET EXPOSUR E
Answering Fundamental Questions Using Big Data
2
Investors today are deluged with more information than ever. For example, on an average day, over 4,000 analyst reports are generated around the globe, compared to just a few dozen a generation ago. In the hands of a skilled investor, armed with 21st century tools, this potentially overwhelming flow of data can instead be used to uncover hidden opportunities.
The Fund’s portfolio managers seek to identify these “non-obvious”
opportunities using the insights gleaned from a massive proprietary database of company and market information—four times larger than the Library of Congress and eight times Wikipedia. Managed by an in-house team of “data scientists,” with experience from world-class organizations like NASA, the FBI and Google, this wealth of data allows the Fund’s management team to create a “virtual ecosystem” of possible connections around 8,000+ companies across the globe.
This powerful information advantage helps the team quickly discover companies they believe will be caught in the “ripple effects” of other company-specific or market-wide events, looking past obvious trades to capitalize on more select investment opportunities.
Markets Are More Complex Today
Last Generation…
} Tens of billions of dollars worth of stock traded each day
} Dozens of industry research reports are published each day
} Approximately 150 data providers globally
Today…
} Hundreds of billions of dollars worth of stock traded each day
} Thousands of industry research reports are published each day
} More than 400 data providers globally
CASE STUDY: CAPTURING TRENDS IN THE IT SECTOR
Over the past few decades, semiconductors, or materials that can conduct electrical currents, went from being found only in computers to much broader usage. By looking at its virtual ecosystem, the Fund’s team analyzed millions of data connections between firms and was able to get a view of all of the companies that use semiconductors in their products.
The team also found that many of these other industries buying semiconductors were gaining momentum, something that many other investors were slower to notice. The Fund quickly bought into semiconductor stocks, which was a top-performing industry in 2014.
Source: BlackRock. All other industries account for 26%.
32 %
Computer Hardware
Chemicals Retail
Auto Companies Commercial Services
Machinery
Aerospace and Defense
Telecommunications
Household Durables Health Care
Equipment