“There are times to be bearish. And there are a lot of geopolitical risks out there. Certainly things you need to consider in a portfolio,” McCorry said at the Australian Wealth Management Summit 2025 on Friday.
“I have the tremendous luxury of having an Aladdin system where I can look at tail risks, I can work with our risk people, let’s create a scenario where this and this happens. What would that look like? How would that impact this portfolio or that portfolio? That helps you think about the portfolio.”
McCorry said markets remain choppy and volatile, making the traditional 70/30 mix of equities and fixed income unlikely to deliver the returns investors once relied on.
In fact, BlackRock projects annualised returns for these portfolios to fall from 9.1 per cent to 5.6 per cent over the next decade.
As such, McCorry argued that investors now need a more flexible structure, with roughly 70 per cent equities, 15 per cent fixed income, and 15 per cent allocated to hedge funds to better manage downside risk.
BlackRock’s own 70/30 portfolio – which blends equities with market-neutral and multi-strategy hedge funds – illustrates how the firm manages downside risk while remaining slightly overweight equities.
“So, right now if you look at our 70/30 portfolio, that has a bit of market neutral and multi-strategy hedge fund in it, we are a little bit overweight equities, but we have good spreads in there protecting a bit of the downside,” McCorry said.
“We keep challenging ourselves as a team, what could be the trigger that could cause the unravelling of equities, but we don’t know what that is. The first 5 per cent, that is fine, but as you go more than 5 per cent out to 15–20 per cent, we want some protection.”
On multi-strategy hedge funds, McCorry said they offer diversified return drivers and are supported by rigorous risk management, controlled leverage, active capital allocation and liquidity that can be monthly or, in select cases, daily.
“What does that look like in a portfolio? We’ve taken the 30 part of the defensive portfolio, shrunk it down to 15, and put 15 into a multi-strategy daily liquid hedge fund,” he said. “What you see is the risk goes from 9.5 per cent to 9.1 per cent … return goes from 9.4 per cent to 11 per cent, [and] the Sharpe ratio goes from 6.4 per cent to 8.4 per cent.”
Ahead of his summit keynote, the CIO said in May that volatility and macroeconomic headwinds are reshaping portfolio construction, with many investors now pivoting towards alternatives.
“Alternatives are no longer limited to a single sleeve of the portfolio,” he said, adding that investors are using them “as flexible, multi-outcome tools that can complement or even replace traditional equity or fixed income exposures,” he said.
He previously highlighted the “democratisation of alternatives” during the Morningstar Investment Conference 2025 in Sydney, pointing to innovations such as interval and evergreen funds, which provide periodic liquidity, as “a huge step forward.”
Distinguishing strategy from scenario planning
When asked about the rapid back-and-forth from the BlackRock Investment Institute – which moved from a neutral stance on equities following US President Donald Trump’s “Liberation Day” tariffs in early April to overweight a week later – McCorry emphasised the difference between scenario analysis and active portfolio management.
“That was the BlackRock Investment Institute, a bunch of economists. People who are actually managing the money weren’t necessarily chopping and changing,” he said.
According to McCorry, the institute initially expected the tariffs’ impact to persist before reassessing as policy signals evolved.
“There was the flipping. It’s on, it’s off. These tariffs are on, these tariffs are off … And so with all that chopping and changing, it’s important to look through, be stable, be diversified, and we challenged ourselves within the team not to be too bearish and where we were bearish, get some asymmetric protection,” he added.
