Sunday Spotlight:
CAN ABSOLUTE RETURNS GO RETAIL?
Hedge funds oversee about $5.2 trillion globally, yet most individual investors still access markets through traditional stock and bond funds.
BlackRock $BLK ( ▲ 1.14% ) is trying to narrow that gap with the launch of the iShares Systematic Alternatives Active ETF, designed to deliver positive returns in both rising and falling markets.
The new ETF targets annualized volatility of 7% to 9%, lower than the S&P 500’s 15% but higher than BlackRock’s $9 billion Global Equity Market Neutral mutual fund, which has produced a 10.8% five-year annualized return with minimal correlation to US stocks.
When the S&P 500 fell 18% in 2022, that mutual fund gained 1.6%.
Unlike a traditional 60/40 portfolio, the ETF allocates by risk rather than asset class:
Roughly one-third of its risk budget goes to market-neutral strategies, buying high-quality equities while shorting weaker ones.
Another third goes to dynamic macro trades across interest rates, commodities, currencies, and equity indexes using derivatives.
The final portion targets “strategic premia,” or long-only allocations based on relative valuations and macro conditions.
The structure borrows from BlackRock’s decades of systematic investing. The expense ratio is 0.99%, high for a plain-vanilla ETF but lower than many alternative funds.
For investors, the pitch is clear. Hedge-fund style diversification, daily liquidity, and ETF access.
But whether that formula delivers true “absolute returns” across cycles will be the real test.
