How does the risk management or added safeguard work for Retiready Solutions 2 to 5?
Updated 03 October 2016
Each Retiready Solution targets a different level of risk. It controls risk in two ways. Firstly, each solution invests in a mix of investment types (also called a diversified portfolio), which is a mix of company shares, government and company bonds and property from the UK and overseas to match the risk level it's targeting. The higher risk solutions have more invested in shares. When volatility (risk) stays within a predetermined range (which is different for each solution) the fund will be fully invested in this portfolio.
Secondly, risk is further controlled by a risk model designed by BlackRock. In simple terms, it works by triggering a 'de-risking' event when the funds’ volatility breaches a certain pre-defined limit. This limit is higher for the higher risk Retiready Solutions. The de-risking involves moving the fund out of the diversified portfolio and into safer investments. This removes 20%* of investment from the diversified portfolio and puts it into safer investments like cash.
When market volatility comes down to within the acceptable level for that solution the fund will gradually start 're-risking' which means it will start to move out of safer investments and into the diversified portfolio again until it's fully invested. It does this more gradually in steps of 5%* at a time.
* BlackRock may choose to use its discretion to de-risk or re-risk by amounts other than those stated.
Please be aware that the added safeguard doesn’t apply to Retiready Stability.