Video: Making Sense of Absolute Return Investing by BlackRock

All investors take on risk with the hope of achieving a reasonable return on their investment. Since no one can know for certain the future value of a present investment, investors have traditionally sought diversification by investing a portion of their total assets across the traditional asset classes of stocks, bonds, and cash – BlackRock’s video, intended for the Australian market, includes real estate (“property”) as a traditional asset class, whereas it is often considered an alternative asset in the U.S. Aside from this one difference, BlackRock’s explanation of absolute return investing is equally valid for Australian and U.S. audiences, as well as other viewers in the English-speaking world.

The narrator details how correlations between traditional asset classes has grown in recent years, and this has made traditional diversification less effective. For this reason, many investors are exploring funds with an “absolute return” strategy, wherein experienced fund managers utilize investment techniques not used by traditional managers in pursuit of absolute positive returns, regardless of the stock and bond markets’ fluctuations. However, it’s important to choose the right absolute-return manager: He or she should have an established track record of delivering strong returns, excellent risk management, and sound operating procedures, according to BlackRock.

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