In recent weeks, Wall Street has been reeling under the apprehension of the Fed re-embarking on its path of accelerated interest rate hikes to bring down inflation. A grim outlook presented by the Fed in its last meeting has pushed investors into pricing in a 25 bps hike announcement when the central bank meets next in May.
The recent crisis in the regional banking sector has kept markets volatile. While investors were expecting a rate pause by the Fed to boost markets, an economic slowdown seems imminent now. Encouraging inflation numbers did little to improve the mood.
This continued market volatility has led to risk-off positioning, with many investors shifting from equity products to much safer fixed-income and money market mutual funds, which also have lower fees in comparison to equities. BlackRock Inc. BLK, one of the world’s largest asset managers, has been making and is poised to make the most of these opportunities.
BlackRock reported that it had $9.09 trillion worth of assets under management as of Mar 31, 2023, as it beat earnings estimates at the end of the year’s first quarter. This is significantly higher than the $8.59 trillion it had reported last quarter, and net inflow has been $110 billion in this period compared with $86 billion a year earlier.
Globally, there have been significant inflows in money market funds over the past few weeks, as investors have seen value in the relative safety they offer, especially in light of the recent regional banking crisis. “Recent market volatility and stress in the regional banking sector are the consequences of prolonged periods of aggressive fiscal and monetary policy coming to an end,” Larry Fink, chairman and chief executive at BlackRock has commented recently, “I look at the issues that we are seeing today, the market dislocations, as enormous opportunities for BlackRock.” Fink also added that the firm was looking to expand its product offerings and improve its technology usage.
Strong earnings numbers, an iron-clad reputation, and the opportunity arising out of a crisis in the traditional banking system have positioned BlackRock well to make hay while the sun shines. What has also helped the company is a steep decline in its costs compared with the quarter a year ago. Total expenses amounted to $2.81 billion, down 4.4% from the first quarter of 2022. The decline can be attributed to a fall in all cost components except for general and administrative expenses.
Investing in these mutual funds may provide the much-required stability and growth potential in a market that is expected to remain volatile for a while. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000 as well as carry a low expense ratio.
BlackRock International Dividend Fund BREAX seeks long-term capital appreciation by investing the majority of its net assets in dividend-paying equity securities issued by international emerging capitalization companies. BREAX also invests part of its net assets in stocks of issuers in emerging market countries and offers dividends on a quarterly basis.
Olivia Treharne has been the lead manager of BREAX since February 2020. The three top holdings for BREAX are 4.1% in T-Mobile Novo Nordisk, 4% in Reckitt Benckiser and 4% in Diageo.
BREAX’s 3-year and 5-year annualized returns are 13.8% and 6.4%, respectively, and its net expense ratio is 0.79% compared to the category average of 0.92%. BREAX has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
BlackRock Mid-Cap Value Fund MRRFX primarily invests in a diversified portfolio of dividend-paying equity securities of mid-cap companies. MRRFX seeks capital appreciation and intends to generate income by investing in securities that the fund manager believes are undervalued and therefore represent an investment value. Dividends and any net realized capital gains are distributed annually.
Tony DeSpirito has been the lead manager of MRRFX since June 2017. The three top holdings for MRRFX are 2.4% in First Citizen Bancshares, 2.1% in Zimmer Biomet, and 2% in Bayer.
MRRFX’s 3-year and 5-year annualized returns are 23.3% and 8.9%, respectively, and its net expense ratio is 0.69% compared to the category average of 1.01%. MRRFX has a Zacks Mutual Fund Rank #1.
BlackRock Floating Rate Income Fund BFRAX invests the majority of its assets in floating rate investments and other economically similar investments, which enable the fund to achieve a floating rate of income. BFRAX also invests in senior floating rate loans or second lien floating rate loans.
Mitchell Garfin has been the lead manager of BFRAX since August 2018. The three top holdings for BFRAX are 64.3% in Miscellaneous Bonds, 0.8% in Sunshine Luxembourg and 0.7% in Fertitta Entertainment.
BFRAX’s 3-year and 5-year annualized returns are 7.1% and 2.9%, respectively, and its net expense ratio is 0.61% compared to the category average of 1.03%. BFRAX has a Zacks Mutual Fund Rank #1.
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