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BlackRock Investment Institute, the research division of BlackRock, have announced they are distancing themselves from the traditional 60/40 portfolio model. Here’s what you need to know.


Historically, the 60/40 model where 60% of investment is in stocks, and the remaining 40% is in bonds, has been a solid principal of investing due to a negative correlation which has held for decades. It works on the premise that when one asset class falls the other rises, keeping investor returns steady and volatility low.

Now that interest rates are increasing and inflation is creeping higher, BlackRock Global Chief Investment Strategist Wei Li suggests “being more nimble” is important in the current climate. They have also suggested “breaking up traditional asset allocation buckets, moving away from broad allocations to public equities and bonds”.

On the flip side, BlackRock rival Vanguard gives the opposite advice. Their stance is that the outlook for the 60/40 model for the next decade has greatly improved. According to their data, “Over the last 46 years, investors have never encountered a three-year span of losses in both asset classes”, and that patience will triumph when it comes to your investment portfolio.

“Like the phoenix, the immortal bird of Greek mythology that regenerates from the ashes of its predecessor, the balanced portfolio will be reborn from the ashes of this market and continue rewarding those investors with the patience and discipline to stick with it.” – Roger Aliaga-Diaz, Vanguard Chief Economist, Americas, and Head of Portfolio Construction.


So, what next?

Regardless of your view of the 60/40 model, we believe the RAW Mortgage Fund is deserving of a place in your portfolio - it offers investors attractive and consistent risk-adjusted returns, a high level of capital security, and low correlation with other asset classes.

The Fund has delivered target gross returns of 4.00% above Bank of England Base Rate for the past eight years and has done so while shielding investors from losses. Current target returns for larger investors are 8% net after fees and expenses.

The Fund’s investment strategy and structure deliver remarkably consistent returns - it has recorded positive performance every month since inception in May 2015 – which deliver excellent risk-adjusted returns at both a Fund and portfolio level.

“Market risk is mitigated through its private fund structure duration (i.e. interest rate) risk is mitigated through investment in variable rate “tracker” mortgages. As such, the Fund has little to no sensitivity to interest rates, unlike its publicly traded peers.” says James Travers, director of RAW Capital Partners and member of its investment committee.

Whether you’re looking to diversify like BlackRock, or stick to the classic 60/40 model, the RAW Mortgage Fund has a place in your portfolio. But don’t take our word for it – our directors and shareholders are invested on the same terms as you, our clients.


For more information on the Funds' performance, click here.