BlackRock launches Fund of Alternatives

BlackRock has launched a ‘Fund of Alternatives' pooled fund for pension schemes, charities and other institutional investors.

The Fund invests in a range of alternative investments, aiming to generate positive absolute returns with limited correlation to traditional equity and bond markets. The Fund leverages BlackRock's market-leading position in alternative investments and its expertise in asset allocation and managing the risks associated with investing in these instruments.

Alternative assets - a broad term used to define assets which exclude traditional equities, bonds and cash - are increasingly popular as a way for pension schemes to diversify their portfolios. However, investing in alternatives can be difficult for those schemes with limited in-house resources, which may lack the necessary governance structure to monitor specialist asset classes or the expertise or time necessary for effective manager selection and asset class analysis. Schemes may also not be able to devote sufficient funds to achieve diversification across alternative asset classes.

Ewen Cameron Watt, Managing Director, BlackRock's Multi-Asset Portfolio Strategies (MAPS) group, said: "Following the appointment of BlackRock to manage a portfolio of alternatives for Cumbria County Council's pension scheme, we have seen increasing demand for a pooled solution which provides one-stop access to a diversified range of alternatives.

"Institutional investors should consider an alternatives component for their portfolio. Alternatives offer diversification and help to enhance long-term returns and to reduce volatility. Depending on the maturity of a pension scheme, we estimate that funds should allocate around 10-15% of total assets, or 25% of non-bond assets, to alternatives.

"But managing an alternatives portfolio needs time and attention particularly in terms of monitoring risk and asset allocation. For investors without the necessary resources to do this, a pooled fund is ideal."

BlackRock's Fund of Alternatives will be a one-stop-shop giving investors access to a diversified portfolio of alternative investments via a single product. Clients will benefit from BlackRock's expertise in actively managing asset allocation and manager selection - BlackRock's Multi-Asset Portfolio Strategies (MAPS) team has been managing asset allocation driven approaches for almost ten years and provides asset allocation input for assets of over $50bn - key skills in alternatives investing that BlackRock has built up over many years of investing in alternatives. BlackRock will also optimise the risk/return ratio by assessing risk across all the assets, most of which have different risk profiles.

The Fund will invest across the full spectrum of alternatives, including hedge funds, funds of hedge funds, commodities, property and infrastructure, and will have the flexibility to invest in funds run by external managers as well as directly into BlackRock's own alternatives funds. Clients will also have the option of investing in a BlackRock-managed private equity fund within the portfolio.

The Fund will be managed by BlackRock's Multi-Asset Portfolio Strategies (MAPS) team, and will be led by Ewen Cameron Watt.