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Press release from Business Wire

“Barometer” Investor/Advisor Survey from BlackRock: Investors Are Stuck in Place, Despite Concerns about Meeting Investment Goals, as Uncertainty Battles Optimism

<p class='bwalignc'> <i>Volatility and Knowledge Gaps Hold Investors Back From Pursuing New Opportunities and Responding to Inflation Risks</i> </p> <p class='bwalignc'> </p>

Wednesday, June 13, 2012

“Barometer” Investor/Advisor Survey from BlackRock: Investors Are Stuck in Place, Despite Concerns about Meeting Investment Goals, as Uncertainty Battles Optimism10:00 EDT Wednesday, June 13, 2012 NEW YORK (Business Wire) -- Despite rising concerns about meeting investment goals, most investors are “stuck in place” with current portfolio allocations, according to findings released today from the latest “Barometer” survey of investors and advisors conducted by BlackRock (NYSE: BLK). Only around one in 10 investors is making portfolio adjustments, as the results suggest uncertainty in the face of volatility is battling optimism about the future direction of the market. Retirement: Reshaping Expectations, Understanding Longevity While trying to manage the challenges of uncertain and volatile markets, many of the investors surveyed are also grappling with the profound financial management challenges of retirement planning. Nearly half of investors – 46 percent – say they are considering a later retirement than they initially planned, up from 30 percent a year ago. Their advisors, polled in a separate survey, point to concerns about longevity of savings, severe loss of portfolio, and market volatility as the top three factors affecting retirement timing. Six of 10 advisors agree that clients are lowering their expectations for the lifestyle they will have when retired, and 83 percent indicate that clients are generally planning on working longer and retiring later. “Living longer is a wonderful prospect, but for many investors the notion only heightens concern about whether their money will last,” said Frank Porcelli, head of BlackRock's U.S. Retail Business. “But in fact, longevity gives investors greater ability to ride out market cycles, use a broader range of investments, and keep their money working hard for them over time.” In addition to achieving their retirement goals, only around half of respondents felt prepared when it comes to planning for the education of a child or other dependent, considerably below their confidence level for other investment objectives. Investors Are Optimistic, Yet Cautious in Face of Market Uncertainty While concerns about meeting these investment goals and optimism about the future direction of the market would suggest a more active posture in adjusting allocations, the survey results suggest that many investors are unclear about what specific investment directions make most sense in an uncertain and volatile market environment. Of those surveyed, 62 percent of investors said they were optimistic about the market's performance over the next six months. Yet when asked to describe today's environment, investors are most likely (57 percent) to characterize conditions as “uncertain,” and only 15 percent described the markets as full of opportunity. As a result, investors are holding fast with their current portfolio allocations, with nearly half– 46 percent –are making no changes. The percentage of investors adjusting portfolios has dipped from 21 six months ago to 11 percent today. Investors also indicate that they are unwilling to take on risk, with just 11 percent doing so in the face of concern about market fundamentals and the potential impact on investment performance. Nearly nine of 10 – 91 percent – of investors said that market conditions are among the three biggest risks investors now face, up from 79 percent in 2011's third quarter. Similarly, 59 percent pointed to the “impact of unforeseen global or domestic economic events,” and 69 percent to “market volatility.” “Uncertainty About Where to Invest” Ranks as #1 Reason For Sitting on Cash Investors are uncertain not just about the markets generally, but also about how specifically to deploy their money. The number one reason investors are holding onto cash, according to the survey, is “uncertainty about where to invest” followed by a belief that it's a poor investing environment and fear of losing money. “Uncertainty is often a crippling factor when it comes to investing and all too often, when uncertain, investors do nothing at all,” Mr. Porcelli commented. “However, many investors don't realize that when you factor in inflation, staying in cash can lead to a deccumulation of assets rather than accumulation of assets over time.” Volatility, Knowledge Gaps Hold Back Pursuit of Opportunities In Income and Alternatives The poll results suggest that specifically this uncertainty, compounded by knowledge gaps, is holding investors back from specific opportunities in income and alternatives that could help them achieve their investment goals even in difficult markets. Just over 60% of respondents said that investing for income has become “riskier” than it was five years ago and that they have difficultly evaluating non-domestic income sources. Most (83%) financial advisors with whom investors work agreed that “investing for income” makes clients think “bonds,” and about six in 10 indicated that “clients understand very little about investing for income.” Sixty-one percent of investors agreed that they need to strengthen their understanding of investing for income. About four in 10 – 42 percent – of investors who actually are making portfolio changes are moving to equity income investments, up from 34 percent six months ago. However, equal numbers of investors are moving into and out of equities overall (30% vs. 36% respectively), emerging markets (38% vs. 36%) and alternative investments (20% vs. 24%). “Traditional income sources are falling short in today's environment and investors seeking income need to look beyond traditional income sources,” said Mr. Porcelli. “By looking for opportunities across asset classes and geographies, investors can actually provide a more balanced approach to income while reducing overall portfolio volatility.” Meanwhile, with the exercise of generating portfolio return becoming generally more challenging over the past several years, investors have also been encouraged to consider a broader spectrum of alternative asset classes that can provide enhanced portfolio diversification opportunities. Yet here too, a combination of concerns about risk and knowledge gaps is holding investors back. About six of 10 investors say that market volatility has made them reluctant to consider “nontraditional” asset classes, and about half say they consider alternatives too “risky,” with nearly half (45%) believing they are more suitable for sophisticated investors. Sixty-five percent agree that more education is needed about alternatives. Additionally, while a third say their advisor “has never shown me how alternatives can fit in my portfolio,” of those surveyed with assets of $2mm or more, 43% indicate receiving introductions to alternative investments. As a result, 65 percent of investors without alternative investments don't plan to add them over the next 12 months, and 68 percent of those who do hold the investments don't plan to change their allocation over that time. Of those moving into alternatives, 47 percent noted that there were more opportunities available/easier access. “Historically, alternative investments have not been a significant component of a core retail investor's portfolio, however, growth in capital markets and financial innovation has changed the traditional alternative investment paradigm,” said Mr. Porcelli. “As advisors and investors grow to understand the benefits of portfolio protection and risk control alternative investments can provide, we anticipate this asset class to increase in interest over time.” “The old ways of investing no longer work – and our poll tells us that investors still need plenty of fundamental support and direction in adjusting to a new world,” said Mr. Porcelli. “The good news is that help is available, and new insights and tools are emerging all the time that offer tangible advantage for investors seeking income, inflation-combating growth, and solid investment return in a low-yield, slow-growth world.” Investors Recognize but Are Not Responding to Inflation Risk Fifty six percent of advisors and 67 percent of investors said that while they consider the impact of inflation on their savings, they are not focused on it. However, most advisors (87 percent) anticipate inflation will increase over time. “Inflation risk is the danger that an investor's portfolio returns will not keep pace with inflation, eroding the purchasing power of income over time,” added Mr. Porcelli. “Inflation is harder to notice on a one-, two-, or three-year basis, but our research has shown that inflation of just 3 percent can reduce the purchasing power of a portfolio by 50 percent over a 25-year time frame.” *BlackRock's “Barometer” research is conducted over the Internet biannually, in the fall and the spring, with support from research firm Market Strategies International. For the latest wave of the research, conducted from April 23 to May 7, 353 investors and 377 financial advisors were polled. All of the investors surveyed work with financial advisors, and 93 percent are age 56 or above, reflecting a general focus on investors in their peak wealth accumulation phase and dealing with the potential or actual financial management implications of retirement. All those surveyed had $250K or more in investable assets. About BlackRock BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At March 31, 2012, BlackRock's AUM was $3.684 trillion. BlackRock offers products that span the risk spectrum to meet clients' needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds, iShares®(exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of March 31, 2012, the firm has approximately 9,900 employees in 27 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia, and the Middle East and Africa. For additional information, please visit the Company's website at www.blackrock.com. BlackRockJessica Greaney, 1-212-810-5498Jessica.greaney@blackrock.com