The industry has come out of a period following the financial crisis when no matter what you did everything worked out, according to BlackRock’s Michael Gruener.
“Markets went one way, but now everyone senses that this is close to over,” says BlackRock’s head of retail for EMEA.
While Mr Gruener says BlackRock does not expect a recession in the next 24 months, he suggests the industry needs captains to help steer the big moves in the markets.
“Our clients come to us because they are looking for a solution to a problem, because they know we have many different capabilities,” he says.
Indeed, many advisers and their clients are looking for answers to market uncertainty in single products, such as asset allocation products, or, they want it in the form of advice.
Manoeuvring market uncertainty
Prior to joining BlackRock, Mr Gruener spent 10 years at Goldman Sachs in Chicago, London and Frankfurt, where he built up their fund distribution business.
“Technology was all the hype during the 1990s and I wanted to get involved because I was interested in implementing systems, such as trading systems, valuations for derivative portfolios and risk management,” he says.
“It was a fascinating time,” he continues.
“But of course when the dotcom bubble burst I knew I needed to get back to asset management and so I started working with Goldman Sachs and have been in distribution ever since.”
He notes: “I am currently in my eighth year at BlackRock, and as you usually do at BlackRock, I have done many different things.”
When asked how he plans to manoeuvre around market uncertainty over the next couple of years, he reiterates that BlackRock’s view is there will not be a recession any time soon.
He says: “However, we do think that a lot of the returns in 2019 have already happened, so what you need to be doing is building diversified portfolios, working with fund managers who are giving you more than just market direction and adding alternatives.
For example, he suggests one can do this by building a low volatility multi-asset product via an alternative product or by utilising passive instruments like exchange-traded funds to get the fee level at a client portfolio at a lower level blended base.
“But because everything starts with a client portfolio, return characteristics, risk rates and the positive impact of technology must also be a key focus of portfolio construction,” he adds.
“We know that markets are definitely becoming less one-directional,” he says.
“So to navigate this you can tilt your existing portfolio around more flexibly and for that you need input, macro opinions etc, and you need a partner like BlackRock.
“But if you don’t want to do that, you need to buy a product which is less one-directional that brings you very quickly into the alternatives conversation.”
Mr Gruener predicts alternatives will in the future become a much bigger part of portfolios than they are today.