BlackRock has released their Autumn Investment Directions, setting out how investors can consider portfolio positioning as AI concentration risk rises, traditional sources of diversification become less dependable, and selectivity becomes key for sourcing income.
Below are the three investment themes that stand out to BlackRock, alongside select strategies that can help investors put them into practice:
Theme 1 – Managing AI concentration
With AI exposure growing across asset-class indices, BlackRock believes investors need to be more deliberate about where they take it.
- Invest in AI selectively: With S&P 500 semiconductor earnings expected to grow 151% YoY in Q2, up from 126% forecast in mid-June, active strategies can help distinguish the key winners.
- Invest around the AI buildout: The iShares Europe Infrastructure Builders UCITS ETF (BLDR) provides targeted exposure to Europe’s infrastructure buildout, with EU electricity consumption projected to rise 60% from 2023 to 2030, requiring an estimated €584bn of grid investment and creating opportunities across construction, materials and transport.
- Diversify beyond AI: Flexible active strategies can add a different return stream and avoid over-concentration in AI large caps. For the BlackRock US Flexible Equity Fund, alpha is driven predominantly by differentiated security selection, with its alpha return correlation to a high-conviction AI thematic strategy just 0.12 over the past five years.
Theme 2 – Resilience: Managing beta
As traditional sources of resilience turn less reliable, BlackRock sees three ways to reduce dependence on broad market beta without unnecessarily sacrificing return opportunities:
- Reduce overall beta with liquid alternatives: Greater cross-country dispersion is creating opportunities for market-neutral macro strategies. The BlackRock Tactical Opportunities Fund seeks to capture these dislocations through discretionary macro insights and systematic signals across asset classes and regions, with minimal correlation to broad markets.
- Reduce equity beta: With equity risk contribution in the average European portfolio rising from 80% to 83% in Q2, systematic strategies can introduce less-correlated sources of alpha, while buffer strategies can reshape equity exposure to help manage episodic drawdowns while retaining upside participation.
- Reduce multi-asset beta: Diversified private markets can introduce more idiosyncratic return drivers. BlackRock’s modelling suggests adding a 20% allocation to the BlackRock Multi-Alternative Growth Fund to a traditional 60/40 portfolio can significantly enhance potential risk-adjusted returns.
Theme 3 – Income with intent
More than 80% of the global fixed income universe now yields above 4%, versus less than 20% on average between 2010 and 2021. But not all yields offer the same compensation for risk, making where investors harvest income increasingly important.
- Look beyond traditional credit: The iShares € Flexible Income Bond Active UCITS ETF (IFLX) offers a 5.4% yield at an average BBB rating, delivering a 1.7ppt premium over EUR IG with lower volatility through diversified exposure across corporates, securitised credit, high yield and select EMD.
- Look beyond developed market bonds: EMD offers differentiated return drivers, with 2026 tracking as the strongest year for EMD ETP inflows since 2021, at c.$27.7bn.
- Look beyond bonds: The BGF Systematic Global Equity High Income Fund combines diversified equity exposure with dividend and option income, seeking additional income while retaining growth exposure and avoiding large style biases.
Alex Brazier, Global Head of Investment & Portfolio Solutions at BlackRock, said: “Investors are putting money to work, but deliberately. As AI exposure broadens across asset classes, it pays to be precise. With competition for capital driving long rates up, investors are looking to diversify their diversifiers and source income from a wider opportunity set.”
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