Is This 4-Star Morningstar Rated Fund Good Value?
If you’re in the investment industry, no doubt you’ll be familiar with the Blackrock Global Funds “Global Allocation Fund”, which is a giant actively managed multi-asset fund, and one of the longest running.
Many funds of this type are designed to be ‘all-in-one’ portfolios. By buying a multi-asset fund, investors can access a professionally managed mix of diversified assets – stocks, bonds, real estate, gold, etc.
Multi-asset funds are a compelling proposition for retail investors – no need to worry about picking stocks or funds, let the experts do it.
Here’s some information:
Fund name: BlackRock Global Funds - Global Allocation Fund A2 Acc USD
Launch date: January 1997
ISIN: LU0072462426
Fund Size: $15 billion
Share Class Size: $6.5 billion
Ongoing charges: 1.78% pa
Snippets from the manager:
“The Fund aims to maximise the return on your investment through a combination of capital growth and income on the Fund’s assets. The Fund invests globally at least 70% of its total assets in equity securities (e.g. shares) and fixed income (FI) securities in normal market conditions. FI securities include bonds and money market instruments (i.e. debt securities with short term maturities). It may also hold deposits and cash. Subject to the above, the asset classes and the extent to which the Fund is invested in these may vary without limit depending on market conditions.”
Where's the benchmark?
Downloading the latest fund factsheet however, I noticed something strange. In the performance charts, they seemed to have missed off a comparison benchmark. Presumably an administrative oversight, or perhaps a printing error.
Let’s fix it for them.
Plotting Blackrock Global Funds “Global Allocation Fund A2 Acc USD” versus the PIPS line.
Click to enlarge.
Looking at the above chart, in terms of risk-return trade-off, PIPS-USD-60E could be a suitable comparator benchmark for the Blackrock fund. Let’s work with that.
Here’s the 20-year performance chart.
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FE Analytics reports a correlation of 0.95 between the two. PIPS-60E does seem like a viable benchmark.
Let’s fill in the blanks for comparison against the benchmark.
Blackrock Global Allocation A2 Acc USD vs Benchmark
Data courtesy FEfundinfo with thanks.
Click to enlarge.
Comparing performance against a PIPS tracker
As we know, we can't invest directly into an index. We need to use a 'tracker' fund or ETF for that. PIPS (passive index portfolios) can be easily investible via iShares Core MSCI World USD (global equity), and Vanguard Global Bond H-USD (global bonds, hedged to USD).
PIPS-USD-Tracker-60E is a simple 60/40 equity/bond portfolio, rebalanced once per year in January.
Comparing Blackrock Global Funds "Global Allocation Fund A2 Acc USD" against an investible PIPS tracker.
Here's the 10-Year Comparison
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The Blackrock fund underperformed a 60/40 portfolio by 35%, for equivalent volatility over the period (BR 9.7 vs PIPS 9.4).
Here's the 5-Year Comparison
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The Blackrock fund underperformed a 60/40 portfolio by 7%, for equivalent volatility over the period (BR 12.1 vs PIPS 11.9).
Here's the 3-Year Comparison
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The Blackrock fund underperformed a 60/40 portfolio by 5%, for equivalent volatility over the period (BR 12.3 vs PIPS 12.3).
COVID-Crisis Drawdown
The drawdowns of the Blackrock fund and the PIPS tracker were almost identical:
Click to enlarge
Conclusion
1. A passive index portfolio of 60% global equity (MSCI World USD) and 40% global bonds (Bloomberg Global Aggregate H-USD) ('Walkers PIPS-USD-60E') makes a suitable comparison benchmark for the Blackrock Global Allocation Fund A2 Acc USD.
2. The Blackrock fund has not outperformed an investible tracker of 60% iShares Core MSCI World USD and 40% Vanguard Global Bond H-USD, over 1, 3, 5, ..10 years or indeed as far back as data exists*.
* 25/9/2009 to 7/7/2023: performance BRGA 84.20%, PIPS-USD-60E Tracker 140.49%.
All performances stated on total return basis, i.e. dividends reinvested. Data from FEfundinfo.
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