BlackRock has launched the BlackRock ACS World ESG Insights Protective Strategies fund, the first downside-protected equity fund on its UK retirement platform, to help pension schemes manage downside risk without reducing long-term growth potential.
The fund is for UK pension schemes, particularly defined contribution plans with members nearing retirement, and has been designed as a complement to traditional de-risking, which reduces equity exposure as retirement approaches.
BlackRock ACS World ESG Insights Protective Strategies invests through the asset manager’s existing World ESG Insights equity strategy, giving global equity exposure with sustainability criteria built in, including a target to reduce carbon emissions intensity. This brings the fund into the scope of BlackRock Investment Stewardship’s Climate and Decarbonization Stewardship programme.
The portfolio’s downside protection comes from an options-based overlay, which aims to mitigate the impact of significant equity market declines. Rather than selling call options, as some protection strategies do, the fund buys them to add upside participation with no cap on gains.
BlackRock’s diversified strategies team, which has more than two decades of experience in derivatives-based risk management within multi-asset portfolios, manages the fund. BlackRock’s risk and quantitative analysis team provides independent oversight, supported by the firm’s Aladdin risk management platform.
Adam Ryan, head of diversified strategies at BlackRock, said: “A growing range of clients, across both Defined Contribution and Defined Benefit pension schemes, and increasingly in wealth, are looking for greater resilience in their equity allocations.
“Traditionally, achieving downside protection often meant limiting participation in equity market gains. Our approach is different. By balancing protection with participation, we are providing clients with greater choice in how they allocate, with a solution designed to manage the impact of market declines without giving up the long-term growth potential of equity markets.”