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Suddenly, some sleepless nights for BlackRock’s Dennis Stattman

Global allocation expert extremely worried about the destabilization of the U.S. dollar; no true safe havens

It’s been a very long time since Dennis Stattman lost sleep worrying about the markets. That pattern has changed of late.
“For many years, there was not an investment concern that kept me up at night,” the BlackRock Inc. global allocation guru told InvestmentNews. “What worries me [now] is that because of the Fed’s extremely aggressive effort to increase its balance sheet … they have destabilized the purchasing power of the U.S. dollar.”
With Treasury bills no longer a good choice, it has become extremely difficult to find safe investments and reduce risks, he said. “The answer is a diversified portfolio, but that will come with some volatility,” Mr. Stattman said.
As of May 31, BlackRock’s Global Allocation Fund was 65% in stocks, 28% in fixed income and 7% in cash. “I like to say that the best game in town is stocks,” Mr. Stattman said. “But the problem is that it’s not a very good game.”
Still, Mr. Stattman said equities — particularly shares of companies domiciled in developing countries — provide good value today. He also said he likes health care stocks, telecom shares and dividend-paying stocks in general. The portfolio also has 5% in gold.
And although the fund is currently underweighted in financials, Mr. Stattman said that might change soon. “I am worried about ongoing trouble in the U.S. real estate market and its implications.” He doesn’t think the worst is over in this market. “It won’t be as bad as before but it won’t be a leg up.”
Noting that a number of stocks in the financial sector have seen their values tumble recently, Mr. Stattman said that the fund’s low allocation to financial stocks may be adjusted soon. “We have been underweight a long time, but there could be a buying opportunity,” he said. The fund has 9% in financials.
BlackRock has no plans to close its $53.7 billion Global Allocation Fund Ticker:(MDLOX), despite its massive size. “We do not have any number in mind,” by which the firm would close the fund, Mr. Stattman said.
As the fund has grown, BlackRock has had to evolve. For example, the firm now has a 41-person team working on the fund. BlackRock also has a transaction center that processes orders, which helps eliminate some of the complexity of running the fund, he said. “Of course it’s harder to manage today than it was when it was a $10 billion fund, but we also have the resources and we have evolved what we do.”