BlackRock has launched a fund range into the UK, which exploits tech innovations such as big data analysis and machine learning to hunt out alpha.
Wealth Manager can reveal the Advantage Series range consists of six funds previously launched in the US in 2017: the World, US, Emerging Markets, Pan-European, Europe ex-UK and Asia ex-Japan strategies.
The range is are managed by BlackRock's 80+ strong Systematic Active Equity (SAE) team, based in San Francisco and London, responsible for $105 billion (£78.5 billion) in assets.
BlackRock co-head of systematic active equity, Raffaele Savi outlined how the fund range is designed for a brave new world.
'The pace of change in the world today is accelerating. The way people interact, transact, work and consume is unrecognisable from even a decade ago,' Savi (pictured below) said.
'With our new BlackRock Advantage series, we are building on that change and unlocking the opportunities presented by big data including internet search, the geolocation of smartphones and satellite images.'
He added: 'As pioneers in quantitative investment, we are excited to bring this product offering to a broader range of clients and to help them meet their investment objectives.'
According to BlackRock, 90% of the capital run by the team has outperformed benchmark over five years.
The team uses a range of technologies, including big data and machine learning to systematically select stocks.
It also creates 'investment signals' (see example below) from an array of investment signals, including earnings calls, internet traffic and satellite images, to support investment decisions.
These signals are then combined to create portfolios that seek consistent, differentiated sources of outperformance above the funds' benchmarks.
BlackRock’s SAE team uses its investment and technological expertise to create a variety of signals that work together within a model that helps determine whether to buy and sell a stock.
An investment signal the team created measures consumer foot traffic to forecast company sales. The team uses geolocation capabilities within smartphones to measure the traffic. This investment signal on consumer activity works with many macro, sentiment and fundamental signals within SAE’s model to render an investment decision on stocks. Here’s an example of how this signal worked:
A global fast-food chain with more than 14,000 US locations had remodelled store locations and revamped its menu. All the while, SAE’s models were monitoring the firm’s progress. The signals detecting foot traffic at restaurant locations began to reflect significantly rising consumer activity.
SAE’s macro models identified that the firm had locations in US regions where economic activity was heating up. Meanwhile, algorithms monitoring the sentiment of sell-side analysts started identifying that they were becoming more positive. As a result, SAE started building a position in the company’s stock.
Months later, the company reported a better-than-expected quarterly earnings report, sending its stock higher. The SAE model had gained a head start on the company’s prospects as result of investment signals created by the SAE’s team’s investment and technology expertise
The Advantage Series is one of the four suites comprising BlackRock’s Active Equities platform: Systematic Alpha (which includes the Advantage Series), High Conviction, Specialised Outcomes and Thematic.
BlackRock believes one of the big appeals of the range, which is available across Europe, is that it gives investors the opportunity to reassess the risk profile in their portfolio and cost, while accessing different sources of returns.
The funds have set ongoing charges figures of between 30-60 basis points (See table below).
|Range||Ongoing Charge Figures|
|World||40 basis points (bps)|
|Pan Europe||35 bps|
|Europe ex-UK||35 bps|
|Emerging Markets||60 bps|
|Asia ex-Japan||50 bps|
'Client demand has evolved beyond a binary call for active or index investment solutions,' said BlackRock head of EMEA retail Michael Gruener (pictured below).
He added: 'Portfolios are now constructed from a range of techniques to reflect the vast array of options and information available to investors.
'The Advantage range, and expansion of our product spectrum, bolsters our active equity franchise and our unique ability to deliver differentiated returns for our clients.'