Building resilient investment portfolios

In December, we told you about several changes we were making to strengthen the resilience of our international equities exposure.

These included removing two legacy managers and adding a core passive mandate through Northern Trust. We noted that one final appointment was yet to be made and that our investment partner, BlackRock, would manage those assets on an interim basis as we worked through the decision.

We’re pleased to confirm this work has now been completed, and an updated line-up of managers is reflected in your portfolio.

BlackRock will retain this allocation, but under a new low tracking-error mandate, which we refer to as BlackRock Systematic. This uses a systematic approach, which simply means it applies a clear, repeatable, rules-based process to make investment decisions. It combines data, technology and human expertise to identify opportunities in a consistent way.

While it is an active strategy, rather than relying on large individual bets, it makes many small, diversified decisions, helping performance remain close to the benchmark. It does this by using data-driven insights about company fundamentals, market sentiment and broader economic trends, all applied through a disciplined, team-led process. BlackRock keeps tight controls on country, sector and style exposures so that the mandate stays broadly aligned with the market.

As part of our due diligence process, the BlackRock Systematic mandate scored strongly across the areas we assess when appointing external managers – including the strength of the team, the repeatability of the process, responsible investment integration and operational robustness. It also stands on its own merits, with a near-20-year record of delivering against its objectives through different market conditions.

This appointment reflects several of our investment beliefs: diversifying return sources, using the right mandate in the right place, and partnering with global experts.

The core of our developed market exposure pairs Northern Trust’s passive mandate with the new BlackRock Systematic mandate – one is designed to match the market, the other to stay close while aiming to add small, steady gains. We also include the PIMCO Enhanced Equity mandate in this core. It too is a low tracking-error approach, which stays close to the market while adding another steady source of active return.

We retain the BlackRock Multi-Factor mandate. Because the two BlackRock mandates do different jobs and add value in different ways, we’re comfortable having BlackRock manage both within the line-up. We also retain LSV as a higher-conviction mandate. Together, the five-mandate line-up benefits from a broad mix of investment styles and stock-picking approaches.

Underlying all of this is the value we get from our global partnerships. Tools like the Aladdin platform help us understand how each mandate fits within the international equities line-up, and we already know and work with BlackRock.

To keep our international equities exposure balanced, and to achieve our goal of building portfolios that perform across market conditions, we’ve made a few benchmark and weighting adjustments to our other mandates.

These ensure we can incorporate the new BlackRock Systematic mandate while avoiding too much emphasis on any one particular style or approach. Here’s what our manager line-up looks like now:

We’ll continue to monitor each mandate and keep the line-up aligned with our best thinking and strongest convictions.

You’ll get a more diversified spread of return drivers, through a portfolio structure that’s designed for resilience.

There’s no change to how much you have invested in international equities, only to how that exposure is being managed. The updates apply to your developed market international equities exposure; any emerging markets and Australasian equities exposure stays the same, through specialist in-house and external active managers.

If you have any questions, please contact your Private Banker.