General Investing Powered by BlackRock® | June 2023 Reoptimisation

Analysed and guided by BlackRock®

• Market Overview and Impact
• Conservative, Balanced, and Aggressive Model Portfolios
• Very Aggressive Portfolio

BlackRock Market Overview and Impact 

Most major asset classes declined in May. Global equities ended the month down slightly, with developed market equities outperforming its emerging market counterparts. US stocks managed to squeeze out a positive return in May, driven by mega-cap tech stocks and upbeat sentiment around generative artificial intelligence. European equities fell during the month with Germany's confirmation of a technical recession and persistent inflation. Asian equity markets posted mixed results. Enthusiasm over China's economic recovery seems to be losing steam, dampened by high youth unemployment and weak consumer confidence. Meanwhile, Japanese equities rallied during the month against a stronger economic outlook and continued easing of monetary policy.

Fixed income markets ended May in negative territory, as growth concerns weighed on riskier sectors and higher rate expectations weighed on longer duration sectors. Debt ceiling posturing by US politicians and a slew of economic data drove intra-month volatility across government bonds. Riskier parts of the fixed income market, including corporate credit indices and emerging market debt, also saw losses.

Debt ceiling negotiations remained in focus throughout the month, with a deal agreed on the final weekend of May to suspend the country’s debt limit until 2025 and cap non-defense spending. The Federal Reserve hiked rates by 25 basis points with markets adjusting to higher rate expectations later in the year. Despite volatility in the banking sector that led to a sharp selloff at the start of the month, regional banks rallied somewhat as the fear of contagion dissipated into month’s end.

Conservative, Balanced, and Aggressive Model Portfolios

Performance Commentary

Most major asset classes declined in May as US debt ceiling negotiations dominated headlines and inflation remained sticky. The core models posted negative performance for the month and quarter-to-date, but remains positive year-to-date..

In the most recent month-end:

Within equities, the majority of portfolio exposures saw negative returns with global equities slightly down for the month. The US and Japan were outliers, propelled respectively by the rally in technology stocks and a strong economic outlook for Japan. BlackRock’s US minimum volatility exposure, however, detracted. BlackRock’s underweight in the UK, on the other hand, saw positive contribution.

Within fixed income, overall exposures also saw negative returns as broad fixed income markets closed the month down. Long-term treasuries were the largest detractors while short-term treasuries and floating rate bonds supported returns due to fading expectations of rate cuts later this year as a result of sticky inflation. BlackRock previously took a neutral to underweight stance in US credit, which cushioned against its tumble and drove positive active contribution.

Source: BlackRock, Morningstar as of 31 May 2023; Performance is based on USD total returns with income reinvested and net of total expense ratios but gross of transactions costs. Past performance does not guarantee future results.

* Inception date for Conservative, Moderate and Aggressive models is 31 Dec 2014; Income and Equity model at 31 Oct 2016

** Using Global AGG/MSCI ACWI until 31 Dec 2017, US Universal/MSCI ACWI EUR/GBP Hedged to USD after 31 Dec 2017

Reoptimisation Commentary

BlackRock is increasing the portfolio’s equity exposures to overweight from improving investor sentiment and earnings momentum.

Within equities, BlackRock is increasing their US allocation to a small overweight as broad analyst sentiment has improved.

BlackRock is trimming their US minimum volatility exposures and adding back to market cap tickers to align with their modestly increasing risk appetite. This also reduces the underweight to the technology sector at the portfolio level. They remain constructive on Europe on the back of strong earnings momentum, and are also neutralising their previous

underweights in Japan and UK as earnings have improved. Japan’s economic recovery remains strong with inflation under control. BlackRock’s optimistic view on such developed markets is funded by exposures from Canada, which they are bringing back to neutral. Elsewhere, BlackRock is reducing their overweight to Asia Pacific ex-Japan. While earnings in Australia appear weak, they believe valuation of the region remains attractive.

BlackRock is underweighting emerging markets as earnings have deteriorated and China’s recovery has shown signs of slowing. They are, however, closely monitoring China’s policy changes for any upside opportunities.

Across fixed income, BlackRock is neutralising their 20+ year US Treasury position and reducing their underweight in high yield as supported by improved spread momentum. Overall portfolio duration has increased by around 0.1 year.

Within alternatives, BlackRock is trimming their Treasury Inflation-Protected Securities (TIPS) exposure back to neutral. Living with higher inflation is still a possible scenario, but they have started to see more downward pressure on inflation, particularly rent inflation. For diversification purposes, they are keeping allocations in gold and real estate investment trusts (REITs).

Very Aggressive Portfolio

Performance Commentary

Performance of the equity model was negative for the month and quarter-to-date while underperforming its benchmark. Year-to-date, however, the model is still positive in terms of absolute performance.

In the most recent month-end:

Majority of portfolio exposures posted negative performance, while allocation to US, Korea and Japan contributed positively to absolute returns. BlackRock’s US minimum volatility exposure detracted.

Source: BlackRock, Morningstar as of 31 May 2023; Performance is based on USD total returns with income reinvested and net of total expense ratios but grossof transactions costs. Past performance does not guarantee future results.

* Inception date for Conservative, Moderate and Aggressive models is 31 Dec 2014; Income and Equity model at 31 Oct 2016

** Using Global AGG/MSCI ACWI until 31 Dec 2017, US Universal/MSCI ACWI EUR/GBP Hedged to USD after 31 Dec 2017

3 Peer group statistics generated by Morningstar. Please refer to page 10 for more details. Please note that the Morningstar statistics included in the presentationare preliminary and may be subject to change.

Reoptimisation Commentary

Within equities, BlackRock is increasing their US allocation to a small overweight as they see sentiment from broad analyst consensus has improved. They are trimming US minimum volatility exposures and adding back to market cap tickers to align with their increasing risk appetite. This also reduces the underweight to the technology sector at the portfolio level.

BlackRock remains constructive on Europe on the back of strong earnings momentum, and are also neutralising their previous underweight in Japan and UK as earnings have improved. Japan’s economic recovery remains strong with inflation under control. Their optimistic view on such developed markets are funded by exposure to Canada, which they are bringing back to neutral. Elsewhere, they are trimming the overweight to Pacific ex-Japan. While earnings in Australia appear weak, BlackRock believes valuation of the region remains attractive.

BlackRock is underweighting emerging markets as earnings have deteriorated. They are also bringing the overweight in China back to neutral as the country’s recovery has been slower than expected. They are, however, closely monitoring China’s policy changes for any upside opportunities.

Source: BlackRock, Performance commentary as of 31 May 2023. Reoptimisation date is 28 Jun 2023.

This information should not be relied upon as investment advice, research, or a recommendation by BlackRock regarding (i) the iShares Funds, (ii) the use or suitability of the model portfolios or (iii) any security in particular. Only an investor and their financial advisor know enough about their circumstances to make an investment decision. Past Performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy.

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