BlackRock plans to overhaul its Balanced Income Portfolio Fund, to make it more attractive to increasingly globally-focused investors.
In a letter to clients informing them of the proposed change, BlackRock explained that while the fund was repositioned in 2006 as a multi-asset solution and despite consistent performance, in the intervening years, “other funds adopting multi asset income strategies have proved more attractive to investors and so investor interest in the Fund has been muted”.
According to BlackRock, the key reason for this is that, unlike other multi-asset funds, the “source of the Fund's returns are closely linked to the UK which has restricted the fund’s ability to benefit from greater exposure to global assets.”
In order to combat this, BlackRock plans to remove the fund’s emphasis on the UK and lower its allocation to equities.
However, it added: “Although the Fund’s UK emphasis is to be removed, its exposure to non-sterling currencies will continue to be hedged (except for on the Fund’s income) so that the non-sterling currency risk is removed.
While the change will not affect the fee structure of the fund, it will result in a name change, should the proposal go ahead. If so, it will become the BlackRock Global Multi Asset Income Fund.
According to BlackRock, the changes are expected to increase the level and consistency of the annual income yield because, “the Fund will move from what is essentially an equity fund with enhanced income to a fixed income fund which follows a flexible asset allocation policy so as to not sacrifice the benefits of long-term capital growth.”
But it warned, that while income growth should be higher when following a fixed income approach, the potential for capital growth is lower as a result.
The changes are also expected to lower the volatility and risk profile of the fund.
If the proposal is accepted, the changes will come into effect on or around 12 January, 2015.
