For investors who are unsure how to position themselves for the year ahead, examining the strategies of the world’s largest asset manager, BlackRock, may provide useful guidance.
Being nimbler and more granular has been a key investment theme for BlackRock throughout 2023, according to Tamara Stats, iShares ETF and index investments specialist at BlackRock Australasia, and will remain so heading into 2024.
“Despite some of the headwinds that you might expect with having restrictive monetary policy for broad asset class returns, it was always our view that opportunities certainly existed within markets for those who were able to be slightly more targeted, more granular, more nimble,” Ms Stats explained to InvestorDaily.
“By that, we mean really taking a proactive approach to asset allocation and a proactive approach to making decisions on where you park your money, and in fact, we’ve just been working on our 2024 outlook and that theme is actually going to continue. So it really is around steering portfolio outcomes, grabbing the wheel of the investment bus, and really taking a proactive approach to asset allocation.”
On what BlackRock specifically means by being nimbler and more granular in its approach, Ms Stats pointed to a number of potential opportunities within global equity markets.
“We see real pockets of opportunity, be that in specific geographies or specific sectors. For example, developed market (DM) equities. We’re actually starting to become a little bit more positive on DM equities after being a little bit cautious over the course of this year,” she said.
In particular, Japan has been on BlackRock’s radar for much of 2023, with the asset manager maintaining a fairly high conviction in Japan as a real opportunity within DM.
“That is because of the structural corporate reform that’s happening in that particular part of the world, as well as the culmination of a long period of restoring what once was the ‘Japanese miracle’,” Ms Stats said.
“[This] was an economy that suffered from a very low rate of inflation, or disinflation, back for some time and now that’s changing, so we are seeing that the investment thesis for Japan is one particular opportunity. That’s an example of being tactical or granular.”
Asked whether the end of the year is a good time to assess performance, rebalance portfolios, and make strategic adjustments, Ms Stats indicated that she was unable to provide specific recommendations for investors.
“In terms of our own processes, regular strategic asset allocation reviews will typically occur annually. That said, there’s generally tactical reviews and we would absolutely advocate for being far more tactical and granular, just as we spoke about just then,” she continued.
“I think there are opportunities in certain parts of the market, and we’re not saying now’s necessarily a time to really put on a lot of risk, but we do think it is the time to start putting money to work.”
Ms Stats highlighted significant investor interest in asset classes that have lower correlation to broader equity markets. Two iShares ETFs centred around infrastructure and physical gold have both received substantial inflows since launching this year.
“We find that gold, a lot of people are looking to that for its diversification benefits. It is often thought of as one of those uncorrelated asset classes,” Ms Stats noted.
“It doesn’t have a high correlation with other parts of, more traditional parts of, multi-asset portfolios, like the S&P/ASX 200 for example. The correlation between gold and that over the last 10 years is only 0.1, which is quite low.”
Turning to specific opportunities within global equity markets, the healthcare sector remains a key area of focus for BlackRock.
“We have liked healthcare and still continue to like healthcare given some of the characteristics that it offers, particularly when you have persistently high rates and maybe structurally higher inflation,” said Ms Stats.
“We think healthcare is one of those that has more of an inelasticity of demand. So we do like healthcare. It also benefits from being at the cutting edge of some of the technological advances.”
Looking ahead to the outlook for 2024 more broadly, Ms Stats asserted that portfolio allocation decisions will need to be made with a granular lens.
“We think there is uncertainty in the world. There is uncertainty in investment markets. It’s not necessarily the type of market where we think it’s set and forget. It’s really about keeping your hands on the steering wheel across asset classes,” she said.
In a final note on fixed income, Ms Stats said the market is becoming increasingly granular, with investors able to access all parts of the market through instruments like ETFs.
“You don’t necessarily need to take on a lot of risk to harness income by investing in certain parts of the curve. So, I think it is really around steering portfolio outcomes, being very deliberate, measured, and keeping your hands on the steering wheel,” she concluded.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.