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Value Assessment As of June 2020 Contents Chairman’S Letter 3 Value Assessment As of June 2020 Contents Chairman’s Letter 3 BlackRock’s Commitment to Delivering Value 6 Section 1 Our Approach to Assessing Value 7 Section 2 Value Assessment Criteria 10 Section 3 Value Assessment Results 21 Section 4 Fund Pages 25 Glossary of Terms 98 Value Assessment | As of June 2020 | 2 Chairman’s Letter Dear Investors, As Chairman of BlackRock Fund Managers Limited (BFM), and on behalf of my fellow Board members, I welcome you to our first Value Assessment report. We understand how important it is to plan your financial future and that, as investors, you want the peace of mind that every pound of pension, savings and retirement investment you entrust to BlackRock Graham Bamping delivers value. We have had your best interests at heart throughout Non-Executive our evaluation of the 121 funds covered in this report. In conjunction Director and Chairman of the with BlackRock, we take seriously the responsibility of helping more Board of BlackRock Fund Managers people achieve financial well-being. Limited The BFM Board takes an active role in overseeing the launch of new funds and managing existing ones. We seek to ensure that the investment objectives, performance and associated fees of our funds remain relevant and competitive. The Value Assessment is an extension of this responsibility. It is also an important way to achieve further transparency and help you determine whether the funds you have invested in are providing value for money. The funds assessed in this report span actively managed and index investment strategies across a variety of asset classes including equity, fixed income, multi-asset and cash. They encompass a range of outcomes, such as generating income, controlling volatility or targeting a retirement date. We focus on delivering sustainable returns and providing greater transparency to help investors understand what they are buying. For more than two years, we have worked with BlackRock to define a way to determine value and create a robust, multi-staged assessment process. To validate our approach, the BFM Board also engaged Broadridge Financial Solutions and Fitz Partners to provide independent analysis. We have had extensive dialogue with BlackRock throughout on the methodology of our assessment, its Value Assessment | As of June 2020 | 3 findings and the areas identified for improvement. The key findings include: Chairman’s Letter 1. The very large majority of funds assessed, representing 99% of assets under management within our UK authorised funds, deliver value. 2. 73% of unit classes in our UK authorised funds are priced at the median, or are cheaper than their respective peers.1 3. This year, we delivered savings of £3 million to investors by moving approximately 14,000 who were eligible to lower charging unit classes of the same fund. Most of these conversions were experienced by direct investors and were not explicitly required under our interpretation of Financial Conduct Authority (FCA) requirements. Furthermore, over the past 12 months, we passed on savings of £1 million to investors through fee caps across 38 funds. While our results demonstrate that the very large majority of our funds are delivering value, we are not complacent. We continually aim to enhance the value we provide to investors. The following pages detail our approach, findings and actions. We look forward to providing this assessment for you annually. Graham Bamping Non-Executive Director and Chairman of the Board of BlackRock Fund Managers Limited Board of Directors of BlackRock Fund Managers Limited (BFM) Graham Bamping Adrian Lawrence Non-Executive Director & Board Chairman Executive Director Martin Cook Helga Mepham Executive Director Executive Director Iain Cullen Louise Watkins Non-Executive Director Executive Director Robert Hayes Theodora Zemek Executive Director Non-Executive Director 1 Comparison of ongoing charges relative to comparable unit class of direct peers in their assigned Investment Association or Morningstar fund sector Value Assessment | As of June 2020 | 4 Helping our UK clients meet their investment objectives is a huge “responsibility. My colleagues and I are immensely proud to help individuals, pension schemes and charities invest for the future. The assets we are entrusted to manage impact the lives of millions of British citizens. Maintaining their trust demands that we continue delivering value to them.” Sarah Melvin BlackRock Head of UK Value Assessment | As of June 2020 | 5 BlackRock’s Commitment to Delivering Value BlackRock’s purpose is to help more and more people experience financial well-being. We are dedicated to serving our clients in the UK which include BlackRock financial advisers helping individuals invest for the future, pension schemes leverages its securing retirement for their workers and charities trying to make the world better. We have a strong sense of duty to deliver long-term value to UK broad-based investors. platform, Our principles provide a shared understanding of who we are, what we stand diverse for and how we conduct ourselves. These principles are deeply embedded in our culture and how we evaluate our performance and service: investment capabilities, We are a fiduciary: because we are stewards of our fund investors’ money, your goals are our goals. best-in-class 01 technology, and We are passionate about performance: because our rigorous risk fund investors expect the best from us, we demand the management 02 best of ourselves. practices to We are One BlackRock: everything we offer fund deliver value. investors results from collaboration among diverse teams 03 spanning a global platform. We are innovators: because our fund investors’ needs evolve, we strive to anticipate change and challenge the 04 status quo. BlackRock leverages its broad-based platform, pairing diverse investment capabilities with best-in-class technology, data-driven insights and rigorous risk management practices to deliver value to investors. We believe that portfolios integrating environmental, social and governance (ESG) factors can provide better long-term, risk-adjusted returns. Our research tells us that these factors can affect economic growth, asset values and financial markets. Sustainability is integral to the way BlackRock manages risk, constructs portfolios and designs products. Our Investment Stewardship team engages with companies to advocate the sound governance and business practices that drive sustainable, long-term financial returns. This year, in particular, has shown us that these characteristics bring increased resilience amid uncertainty and market volatility. Our purpose statement, our principles and our focus on sustainability and investment stewardship play a fundamental role in how BlackRock continually strives to provide value for investors. Value Assessment | As of June 2020 | 6 Section 1 Our Approach to Assessing Value Value Assessment | As of June 2020 | 7 Overview The FCA requires fund managers like BFM to make an annual assessment Of our 121 funds of whether their UK authorised funds provide value for investors. Our 109 delivered value assessment considers fund performance, costs and charges, and service quality, concluding with an evaluation of whether investors receive value. The FCA regulations set out seven criteria against which we must measure and report the value achieved: 1. Performance: are funds performing against their investment objectives? 2. Comparable Market Rates: are funds priced similarly to competitors? 3. Comparable Services: are funds priced reasonably compared to BlackRock products with similar investment strategies? 4. Authorised Fund Manager (AFM) Costs: are fees charged to investors reasonable and appropriate? 7 delivered value plus action 5. Economies of Scale: are economies of scale generated and passed on to investors? 1 did not deliver value 6. Quality of Service: does the range and quality of service offer value? 7. Classes of Units: are investors in the cheapest available unit class based 4 too new to rate on their characteristics? For many years, BFM has had processes for reviewing our funds’ performance, pricing and services to ensure they remain relevant and in line with investors’ expectations. The FCA requirements on value assessment reporting have reinforced this discipline. Our Process for Determining Value We understand that, for investors, the most important factors when choosing to invest in funds are performance, costs and services. To determine whether funds delivered value, we put greatest emphasis on investment performance, while also considering costs and service quality. Our final assessment for each fund derives from analysis that takes into account quantitative and qualitative factors. Throughout the process, we worked closely with Broadridge Financial Solutions and Fitz Partners to provide independent analysis. We engaged BlackRock’s Global Product Group (GPG) to prepare this Value Assessment report and BlackRock’s Risk & Quantitative Analysis (RQA) group to review and refine our methodology. GPG oversees BlackRock’s product development and governance, while RQA oversees the investment risk of portfolios managed by BlackRock and develops analytics and standards to measure performance. Value Assessment | As of June 2020 | 8 Summary of Results We have determined that BFM provides value to investors in our UK “While our authorised funds. Across the 121 funds assessed, we concluded that: results 109 funds deliver value with no action required demonstrate 7 funds deliver value with action initiated
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