BlackRock Launches New Tool to Help Advisors Allocate to Private Markets

With interest rates near record lows and stock market valuations near record highs, many advisors are looking to private markets to diversify and potentially amplify returns for their clients. BlackRock has launched the Expected Return Analyzer, an innovative portfolio analysis tool, to help advisors meet that need. Powered by BlackRock’s Aladdin technology, the Expected Return Analyzer draws on the BlackRock Investment Institute’s proprietary Capital Market Assumptions to show advisors how adding private markets or other asset class exposures to their clients’ portfolios can help meet their return targets.

The new tool is part of BlackRock’s commitment to increasing accessibility to alternative investments and helping advisors better understand the role alternatives can play in wealth portfolios to address their clients’ needs.

A BlackRock study indicates that the traditional 60/40 portfolio will not only fall short of the moderate returns of the past but may increase investment risk as well. In fact, the study showed that the average advisor portfolio is about 25% more volatile than it was a year ago, even though it has retained the same 60/40 stock/bond split.¹

“In today’s low rate world, there is a mismatch between investors’ return expectations and their exposure to private markets,” said Scott Reeder, Head of the Alternative Investment team in BlackRock’s U.S. Wealth Advisory business. “With volatile equity markets and bond yields near record lows, alternatives can have an increasingly important role to play as clients look to enhance returns, reduce risk and build portfolio resilience. We believe that the allocation to private markets in wealth portfolios should increase from 5% today to 20% over the next several years.²”

Moving from Problem to Plan

Advisors can help optimize their clients’ portfolio by uploading it into the Expected Return Analyzer. Within seconds, they can see how the portfolio stacks up against targeted return expectations. Based on those results and the advisors’ inputs, the tool suggests alternative exposures that can help meet their needs based on asset allocation, projected performance and volatility. Once a proposed portfolio is selected, advisors can use the Expected Return Analyzer to model how different alternative portfolio allocations can help meet their clients’ investment goals.