BlackRock, the world’s leading fund manager, manages $ 6.3 trillion almost as much as the GDP of Germany and France combined.
‘Barbell strategy’. Or the ‘strategy of the weights’. This is the move with which BlackRock , the world’s largest manager of assets under management, wants to attack Wall Street after raising its recommendation of US stocks to ‘overweight’.
What does it consist of? It is about adapting to an uncertain market plagued by ‘black swans’ by acting equally spontaneously. To do this, balance is not sought in the portfolio … quite the contrary.
The portfolio thus becomes divided into two halves: one with a very low risk and hardly exposed to volatility, and the other with a greater exposure to risk, but without overdoing it. In the case of ‘black swan’, the risky half of the portfolio will be the one that puts the bread on the table and produces profits.
In this case, BlackRock dedicates the riskiest part of its portfolio to large caps “that can benefit from structural growth trends”, and the most cautious to smaller companies that can take advantage of “a possible cyclical rebound during 2021” .
EUROPE, THE WORST STOP
Should investors stick to the quality companies, recent winners, or rotate their portfolios to the stocks most battered by their cyclical exposure? This is one of the questions raised by the manager in her latest report. “We believe that neither of the answers is correct, and we can keep the best of both, ” their strategists respond.
BlackRock defends that this approach to the stock markets will give the portfolios great resilience against uncertainties, such as the distribution of the vaccine and the approval of new fiscal and monetary stimuli to mitigate the effects of the coronavirus.
The manager concludes her report by examining those stocks exposed to cyclical swings, among which stand out small and medium-sized US companies, emerging market stocks and Asian stocks, except for the Japanese. The worst performer is Europe , which BlackRock downgrades to ‘underweight’ due to its high exposure to the financial sector, which will continue to be pressured by low rates.