BGF Global Allocation A2 |
by Jason Kephart
BlackRock Global Allocation's skillful management team has only been in its current form for a few years, but it has made impressive improvements to the strategy’s process that should serve investors well going forward. Its Process rating earns an upgrade to High from Above Average, resulting in an upgrade of the U.S. fund’s cheapest shares to a Morningstar Analyst Rating to Gold from Silver. The more expensive mutual fund shares and non-U.S.-domiciled vehicles continue to earn Silver to Neutral ratings. The strategy's proven leader has this global 60/40 strategy on the right path. BlackRock named global fixed-income CIO Rick Rieder as lead manager in April 2019 alongside comanagers Russ Koesterich and David Clayton. Rieder and the firm's highly-regarded fixed-income team have brought stability after a series of manager changes and analyst turnover following strategy architect Dennis Stattman's 2017 retirement. Rieder and company have improved the strategy's process since taking charge. The fundamental equity portfolio, which accounts for about 80% of the stock holdings, no longer includes a long tail of small positions that weren't adding value; the number of stock holdings has shrunk to between 80 and 120 names from more than 400. The stock selection focus has also shifted more toward companies with strong cash flows, like mega-cap stocks Apple AAPL and Alphabet GOOG, and away from an emphasis on valuation. Rieder has changed the strategy's approach to top-down positioning, too. While previous management's focus on relative valuations steered toward Japan and Europe, Rieder's macro overlay favors the U.S. because o the country's higher growth expectations. There has also been an increased emphasis on incorporating more nontraditional high-frequency data, like web traffic, to determine where economic growth is being over or under anticipated, which is used to help inform portfolio positioning. Management has also sharpened the strategy's risk management capabilities. The team leverages BlackRock's vast risk management resources to ensure there are no unintended bets and exposures. Altogether, these changes make for a more robust process than many peers leading to an upgrade of the Process rating to High from Above Average. |
Morningstar Pillars | |
People | Above Average |
Parent | Above Average |
Process | High |
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