BlackRock has opted to reduce exposure to Australian equities in its model portfolios, taking profits after strong ASX performance year-to-date.
In a market note, the wealth management giant said it has adjusted its Enhanced Strategic Model Portfolio positioning by “taking profits” on European and Australian equities following their rally year-to-date and adding to emerging market equities amid a more favourable earnings outlook and attractive valuations.
BlackRock’s decision to cut its ASX exposure comes after the ASX 200 hit a fresh record, briefly entering bull market territory last week and reversing from the Trump “Liberation Day” lows.
During April, Australian equities were the main positive contributors to total returns recorded by its Enhanced Strategic Model Portfolio, it said.
The portfolio rebalance reflects its latest tactical views in response to sharp market swings and ongoing policy-driven uncertainty.
Elaborating on the decision, Uwe Helmes, lead strategist for the Model Portfolio Solutions business in Australia, said despite significant volatility in the first half of 2025 – driven largely by US government tariff announcements and resulting fears of stagflation – BlackRock’s Enhanced Strategic Model Portfolio has continued to deliver strong performance across its six distinct strategies.
This is because, prior to April, BlackRock had already adopted more defensive positions, he said, incorporating inflation-linked bonds, gold, listed infrastructure, and the minimum volatility factor into the portfolio – all of which served as effective diversifiers during market turmoil.
“Markets don’t like uncertainty and recent events have widened the range of potential outcomes. While this uncertainty is uncomfortable for many investors, it also creates opportunities,” Helmes said.
“We believe our granular, diversified and dynamic approach to portfolio construction is well-suited for this environment.”
Since the early April market instability, BlackRock has made further portfolio changes, he said, increasing the portfolio’s allocations to European and emerging market equities.
While the firm is “pleased” with the strong track record, Helmes said: “We want to continuously evolve the portfolios and stay ahead of market developments.
“As such, we conducted a portfolio rebalance on the 16th of June to reflect our latest tactical views.”
While it maintains a “fairly neutral growth/defensive split”, as it awaits further clarity on policy, geopolitics and macro developments, Helmes said the wealth management giant has recalibrated the portfolio’s regional exposures.
“We take profits on European and Australian equities following their strong year-to-date performance. We use this capital to further increase the portfolio’s exposure to emerging market equities, where we are seeing a more favourable earnings outlook and attractive valuations,” he said.
Moreover, the firm has also increased the portfolio’s currency hedge ratio in order to be less exposed to adverse currency moves and to better protect the value of the portfolio in case of a weaker US dollar.
Within fixed income, he said, the portfolio maintains a granular and active approach to selecting the desired exposures.
“We prefer Australian government bonds over global bonds, given an expectation for further rate cuts by the RBA and a preference for non-US dollar denominated assets,” Helmes said.
“Meanwhile, we slightly increase the portfolio’s exposure to emerging market debt and global high yield credit.”
