June 18, 2014 / 6:57 PM / 5 years ago

BlackRock readies new 'global macro' fund for retail investors

NEW YORK (Reuters) - BlackRock Inc (BLK.N), already the leader in alternative funds aimed at retail investors, is planning to roll out a new fund that will take big bets on interest rates and currencies, a company executive said on Wednesday.

Frank Porcelli, head of U.S. wealth advisory business at BlackRock, speaks during the Thomson Reuters Global Wealth Management Summit in New York June 18, 2014. REUTERS/Lucas Jackson

The firm plans to launch a new Global Macro fund aimed at retail investors in the next couple of months, said Frank Porcelli, head of BlackRock’s U.S. Wealth Advisory Business, at the Reuters Global Wealth Management Summit in New York.

“We’ve been working on it for a while,” Porcelli said, noting that his team plans to engineer their fund differently from the competition. “There are slightly different flavors out there, but I think this is a true Global Macro fund and will be a nice fit for advisers looking for uncorrelated returns and access to those markets.”

The firm is targeting returns for the fund that will be cash plus 6 percent. Porcelli said BlackRock plans to leverage its existing relationships with alternative managers to construct their offerings and put them into a ‘40 Act mutual fund.

BlackRock is rolling out the new offering at a time so-called global macro funds that take big directional bets have struggled, with some top fund managers bemoaning that there hasn’t been a real trend to sink their teeth into.

Global macro hedge funds have inched up only 0.31 percent in the first five months of the year, far less than the average hedge fund’s 1.99 percent gain this year, HFR data show.

With hedge funds delivering generally more lackluster returns over the last years, investors have begun complaining about their high fees and demanding these types of strategies at lower costs.

This helped spark the quick-paced creation of so-called alternative mutual funds or liquid alts at some of the industry’s most storied investment managers.

It has also become an increasing point of focus for BlackRock, the world’s largest money manager that now manages more than $4 trillion in assets.

BlackRock executives on Tuesday told investors in New York that one of its top priorities is to “own” the retail alternatives space.

“Alternatives is an area where we must succeed,” said Andy Stewart, co-head of BlackRock Alternative Investors. “The alternatives markets is already large. It continues to grow, and the landscape is evolving in our favor,” noting that while historically alternatives products were used by a small subset of clients, they are now being used by mainstream investors.

Alternatives currently represent about 30 percent of all asset management industry revenue, according to BlackRock, with an opportunity to grow by $23 billion through 2016.

BlackRock launched its first retail alternatives funds in 2011: a long/short emerging markets fund, a commodities strategies fund and a long/short credit opportunities fund.

According to Morningstar, the alternatives category has grown by 36 percent over the last year with funds taking in $927 million in April, which helped boost the year-to-date total to $11.6 billion.

Reporting by Ashley Lau and Svea Herbst-Bayliss in New York; Editing by Meredith Mazzilli

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