Morningstar Magazine - June/July 2017 - 83

previous 12-month period. The reflationary
theme has also been played by boosting exposure
to commodity-related securities to 4% from 2%.
The equity allocation has been stable, at 55.3%
of assets. The team continues to trim U.S.
equities in favor of European and Japanese stocks,
largely on valuation grounds. One distinctive
trait has been a longtime tilt toward Japanese
stocks; at 18.2% of equity exposure, the stake was
almost twice the category average. A somewhat
uncommon top-10 holding within this valuetilted portfolio is Uber, which was added during
the firm's second fundraising and has
since appreciated.
Currency risk is partly hedged. Recently, after
strong appreciation, U.S. dollar exposure had fallen
to 66%, from 73% at the end of 2015. Exposure
to the euro and yen was 11% and 9%, respectively.
Performance Pillar: Positive ∞
This fund has participated in rising markets
and protected capital in rocky ones well enough to
earn it a Positive Performance Pillar rating.

It has outperformed its blended benchmark
and the category average over the 10- and 15-year
periods, while its Sharpe ratio has also been
higher. In 2008, the fund lost 20.4%, but that was
much less than the 29% loss of its typical peer.
The fund's performance drivers have been
varied. In 2016, for instance, the overweighting in
Japanese equities proved costly, but it was
rewarding in 2015. The underweighting in fixed
income was very additive in 2013, though it
was a drag in other years such as 2011. Currency
has also had a big impact on occasions. The
overweighting in the U.S. dollar in 2014 helped
mitigate negative stock selection during that year.
People Pillar: Positive ∞
The managers are supported by one of the
strongest teams in the industry. It's a firm within
a firm. Most of the team's 10 senior analysts
have worked on this strategy for more than
a decade. Each has expertise in particular sectors
and asset classes. A dozen research associates
and two quant associates round out the
investment research effort. Senior executive
officer Lisa O'Donnell and roughly a dozen
administrative and product specialist personnel
run the team's back-office operations.

Over five years through Feb. 28, the fund ranks
in the middle of the world-allocation category
and lags its blended benchmark by an annualized
1.08%. Yet markets have been mostly upwardtrending over that period, and the fund's
heavy stake in cash has been a drag. Over longer
periods comprising more-volatile market conditions
and drawdowns, the strategy has delivered strong
returns, both in absolute and risk-adjusted terms.

Parent Pillar: Positive ∞
BlackRock BLK is the largest asset manager in the
world, at $5 trillion in assets under management.
The firm isn't perfect: After struggling with its
active-equity capabilities for years, it's reorganizing
for the second time, and its iShares franchise

Style Map 04/30/2017

Regional Exposure Stats 04/30/2017

Giant Large Mid
Small Micro
Deep Value Blend Growth High
Value
Growth

launches some trendy funds. But the firm
has made great strides to lower fees, encourage
its portfolio managers to invest alongside
fundholders, and strengthen its investment
offerings. Consequently, we are raising the firm's
Parent rating to Positive from Neutral.
The firm has grown quickly, in large part thanks
to the strength of iShares and its active fixedincome and multiasset businesses, as well as
a growing institutional business, which includes
mostly index-based strategies. BlackRock's
solid stewardship of capital stems in large part
from its decision that to succeed as a publicly
traded asset manager, it must act as a responsible,
high-performing fiduciary. The firm uses its scale
and technological capabilities to achieve this goal.
BlackRock is constantly evolving and has focused
on technology in recent years to further growth,
including selling its proprietary risk management
system, Aladdin, to competitors and developinga
pared-down version for advisors. A recent decision
to move $7 billion in active equity to quant-driven
strategies demonstrates a willingness to
rely more heavily on technology to run portfolios.
Price Pillar: Positive ∞
The 1.07% expense ratio on the fund's A shares
and the 0.79% levy on the Institutional
shares are low relative to similarly distributed
world-allocation funds. Other share classes
also offer low or below-average expenses. K
Thomas Lancereau, CFA, is a director of fund analysis with
Morningstar Research Services.

Rolling-Returns Summary 04/30/2017
46%

Centroid:
Weighted avg. of
equity holdings

33
16
5

Zone: 75%
of fund's equity
holdings
Americas:
54.5%

Europe &
Africa:
22.6%

36-Month Rolling Periods
166 Observations, 13 Years.
The shading and percentages
correspond to how often the
fund's returns landed in each
category quartile.

Asia &
Australia:
22.9%

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Table of Contents for the Digital Edition of Morningstar Magazine - June/July 2017