BlackRock, the world’s largest asset manager overseeing more than $US13.5 trillion in funds, has decreased its holdings in Australia’s largest listed companies while increasing its investment in small-cap stocks. This strategic shift reflects more appealing valuations and growing positive sentiment surrounding smaller companies. BlackRock is an investment management firm that provides a range of investment and technology services to institutional and retail clients. Established in 1988, its funds are closely monitored by investors and finance professionals globally.
The firm’s multi-asset division has initiated a position in Australian small-cap equities as part of its latest portfolio rebalancing. Specifically, BlackRock’s Balanced Enhanced Strategic Model Portfolio has allocated 1 per cent to the iShares S&P/ASX Small Ordinaries exchange-traded fund. Its moderate, growth, and aggressive portfolios have also incorporated the small-caps strategy, marking a new investment for these portfolios. According to Uwe Helmes, BlackRock lead strategist, this decision was driven by more attractive valuations of small caps relative to their larger counterparts, improving sentiment indicators, and differentiated sector exposure.
Simultaneously, BlackRock has reduced its exposure to Australian large-cap stocks. The firm lowered its position in the iShares Core S&P/ASX 200 ETF by 2.2 percentage points in its balanced portfolio and 2.7 percentage points in its conservative fund. This adjustment comes as the smaller end of the Australian sharemarket experiences a resurgence, with investors shifting away from blue-chip companies such as Commonwealth Bank and CSL. Shares in CBA, which comprise nearly 12 per cent of the ASX 200, have dropped 11 per cent over the past month.
While maintaining an overweight position in equities, BlackRock favours US and emerging market shares over Australian and European stocks, citing a more favourable outlook for corporate profits. The firm also took profits on its gold exposure, redirecting that capital to increase its cash holdings. Despite the sale, BlackRock retains an investment in gold to diversify its portfolio and mitigate risk.
