BlackRock Multi-Asset Income ModelsA framework for portfolio construction

FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTIONMASH0120U-1071046-1/9

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Why income? Simply put, income helps drive the majority of returns in the long run.

Dividends and Coupon Reinvestment Account for the Lion’s Share of Stock and Bond Returns Over Time…

Chart 1: Source: Barclays Live, Bloomberg. 1994-Q4 2019. Investment grade bonds represented by the Bloomberg Barclays US Investment Grade Index. High yield represented by the Bloomberg Barclays US Corporate High Yield Index. Global stocks represented by the MSCI World Index. Returns are cumulative. Chart 2: Source: Morningstar, of 12/30/19. U.S. stocks represented by the S&P 500 Index, U.S. bonds represented by the BbgBarc Us Agg Bond Index. Income Portfolio represented by 33.33% BbgBarc Us Agg Bond Index, 33.33% MSCI High Dividend Yield Stocks Index and 33.33% BbgBarc US Corporate High Yield Bond Index. For illustration purposes only. Indicies are unmanaged and account for fees. You cannot directly invest in an index. Past performance is not indicative of future results.

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For retirees, income portfolios may provide relief from “dollar cost ravaging”…

4% annual withdrawal (calculated off starting amount) & adjusted 3% per year for inflationIncome Portfolio consists of 33% U.S. bonds, 33% high yield, and 33% dividend stocks

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100% U.S. stocks 40% U.S. stocks / 60% U.S. bonds Income portfolio

Growth of $100,000 during withdrawal mode

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Its no secret that the universe for yield has shrunk over the past decade in the era of ultra-low interest rates. The BlackRock Multi-Asset Income models are much-needed solutions that solve for two key investor challenges:

Why now?

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With 10,000 Americans retiring each day, the portfolios offer attractive income levels for cash flow starved investors. As we embark on a new decade, one in which the developed world will witness more people entering retirement than entering the workplace, investors’ nest eggs will have to provide the necessary income to meet their needs.

The portfolios also offer a risk conscious growth solution for investors in the accumulation phase. As anyone who has lived through a downturn can attest, prices can be quite unpredictable – particularly ten plus years into an economic cycle. Rather than relying on price appreciation alone, these portfolios drive the majority of returns through steady, predictable fixed income coupons and stock dividends – which, in combination with prudent risk management, may lead to a more resilient return stream when markets take a turn for the worse. Many clients reinvest the regular income distributions, thus growing their savings over time.

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So how does it all work? That’s what this paper will explain….

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1. BenchmarkWe believe we can deliver a better client outcome by using a “risk benchmarking”approach rather than a traditional “strategic asset allocation” benchmark relativeapproach. Income strategies historically tend to focus too much attention on deliveringthe highest yield possible at the expense of prudent risk management. We believe aclient’s maximum risk tolerance should come first and foremost, with income and returngoals a crucial secondary consideration. We have designed the portfolios such that eachmodel can take up to but not exceed the volatility of its benchmark, which range from30/70 to 70/30 stock/bond splits. We find utilizing a broad metric of stock/bond riskresonates most with the end investor. This approach allows us to build truly diversifiedportfolios irrespective of asset class while enforcing discipline around not over-reachingfrom a risk perspective in the pursuit of a high yield target. We focus on delivering onclient outcomes, i.e. attractive risk-adjusted income and return, as opposed toperformance chasing or anchoring around a strategic asset allocation.

Risk Benchmarks for BlackRock Multi-Asset Income Model Portfolios

MSCI World Index Bloomberg Barclays US Aggregate Bond Index

Conservative30% Equity /

70% Fixed Income

Moderate50% Equity /

50% Fixed Income

Growth 70% Equity /

30% Fixed Income

BlackRock’s portfolio construction frameworkOur belief in a disciplined portfolio construction process allows us to use a simple 4-step approach across a variety of investor goals and objectives.*

1. Benchmark – Focus on client outcomes

2. Budget – Evaluate opportunities and risks

3. Invest – Identify the best expression of our investment views

4. Monitor – Keep “two hands on the wheel”

•Building Multi-Asset Income Portfolios

4*Subject to change.MASH0120U-1071046-4/9

2. BudgetWith risk benchmarks in place, we then have a two-step budgeting process. First, we determine the desired total portfolio risk level relative to budget. This level is based upon our evaluation of the top-down macroeconomic and bottom-up asset class opportunity set. For instance, if the team is optimistic on the fundamental backdrop but has some concerns around valuations in specific sectors, we may only “spend” 80% of our risk budget in each respective model. The percent of risk budget spent will vary over time as the teams views evolve.

Second, we evaluate the opportunity set and allocate our risk budget across asset classes. Throughout this step of the process, we keep a number of key client considerations in mind such as remaining well diversified and risk-conscious while simultaneously expressing our high conviction views.

The culmination of this step involves tactically adjusting the portfolio on a quarterly basis to take advantage of an evolving opportunity set. Additionally, should a market dislocation occur intra-quarter that materially changes our views, we will act on an ad hoc basis as necessary to ensure the portfolio reflects our latest thinking.

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Sample Historical Asset Allocation

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3. InvestHaving set the risk benchmark and budgeted to various asset classes, we then implementthese views with investment vehicles that accurately express the targeted exposures. ETFs,many of which were specifically designed to serve as building blocks for market betas, arenatural candidates. Likewise, mutual funds, which are able to tap into asset classesunavailable or unattractive in ETF format, are also crucial buildings blocks. The end result is aportfolio of roughly 10-15 holdings, including both proprietary and third-party strategies.

In building the models, we tap into the insights of over a dozen teams across the globe who areasset class specialists in their respective fields. In a way, the final model portfolios are a way toaccess the best of BlackRock thought leadership in one single, scalable solution.

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ETF Selection Criteria

Mutual Fund Selection Criteria

Our ETF evaluation process involves 3 key elements. Exposure is the mostimportant of the three decision criteria as it drives the investment risk weare taking. When we are constructing portfolios, one of our primary goalsis to express our investment views as precisely as possible and mitigateexposure to risk factors that are not consistent with our investment views.In most situations, there is a single ETF that best expresses ourinvestment view from an exposure perspective which makes the decisionto use that particular ETF (whether an affiliated iShares ETF or a third-party ETF) straightforward.

Liquidity and fees are both important additional criteria which can bepivotal inputs when there are multiple ETFs which have very similarexposure and risks. When considering liquidity we evaluate recent tradingvolume, bid/ask spreads, and consider the underlying liquidity of theassets in which the ETF is invested. We also speak regularly to our tradingdesk to get the perspective of those actually trading ETFs. When choosingbetween ETFs, larger AUM and average trading volumes, lower bid/askspreads, and lower management fees are preferred.

Access AlphaRisk

We utilize mutual fund strategies for threecore reasons. First, we may use a mutualfund to unlock access to exposuresunavailable via ETFs, such as single stockcovered call writing or certain parts of thereal estate market. Second, the decision maybe driven by a desire to more activelymanage specific risks, such as duration orintra-asset class exposures like specifictranches of credit quality. Finally, we may usea mutual fund to pursue alpha, i.e. theopportunity to beat a broad index throughsecurity selection expertise.

*Mutual fund and ETF selection criteria are subject to change.MASH0120U-1071046-6/9

Human insightis a critical input and helps avoid unintended exposures – something we refer to as keeping “two hands on the wheel”. We work closely with BlackRock’s Risk and Quantitative Analysis (“RQA”) group in conjunction with Aladdin® technology to help fully understand the portfolio risks.

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Bottoms-up factor analysisis regularly assessed across four major underlying risk factors – equity, credit spread, interest rate and currency risk. Within these four broad factors, we also pay close attention to the more nuanced risk factors such as style, region, sub-sector, and more.

Risk modelsare evaluated on a daily basis across three varying time horizons, from short to long-term. Each model incorporates different volatility and correlations assumptions to help us understand how the portfolios may behave in a variety of market conditions.

Stress and scenario testsare used extensively. Both historical examples as well as forward looking hypothetical scenarios are evaluated to assess potential performance in different economic environments.

Risk Factor Allocation

Historical Risk vs. Benchmark

4. MonitorThe final critical step in the portfolio construction process is checking back in on the portfolios on a regular basis. This phase involves multiple interconnected types of analyses.

Source: BlackRock as of 12/31/19. For illustrative purposes only. Risk composition reflects month-end ex-ante risk using 252 days of data with a 40-day half life.

As of 12/31/19. 50% stock/50% bond portfolio represented by 50% MSCI World Index/50% Bloomberg Barclays U.S. Aggregate Bond Index. It is not possible to invest directly in an index. Volatility based on Aladdin ex-ante risk, an estimate of a portfolios’ annualized standard deviation based on its exposure to 2,200 risk factors in BlackRock’s proprietary risk model. Risk factors are objective, measurable characteristics of a security that historically have had explanatory power of volatility. Exposures to these risk factors are aggregated, with correlations taken into account, to arrive at an estimate of total standard deviation at the portfolio level. Standard deviation measures the volatility of returns. Higher deviation represents higher volatility.

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SummaryWe believe a risk-first approach to portfolio management that leverages BlackRock’s global capabilities across asset classes will ultimately lead to better outcomes for our clients , particularly during times of market stress.

Visit blackrock.com/models to learn more about the Multi-Asset Income model portfolios.

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Not FDIC Insured • May Lose Value • No Bank Guarantee

BlackRock Model Portfolios: blackrock.com/models

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T his information should not be relied upon as investment advice, research, or a recommendation by BlackRock regarding (i) the Funds, (ii) the use or suitability of the model po r tf olios or (iii) any security in particular. Only an investor and their f inancial advisor know enough about their circumstances to make an investment decision. This inf o rmat ion should not be relied upon as investment ad vice, research, or a recommendation by BlackRock regarding (i) the Fund s, (ii ) the use or s uitabil ity of the model po r tf olios or (iii) any security in particular. Only an investor and their f inancial advisor know enough about their circumstances to make an investment decision.

C a r efully consider t he BlackRock and iShares Funds within t he model port folios' investment objectives, risk factors, and charges and expenses bef ore investing. This and o t her information can be found in t he Funds' prospectuses or, if available, the summary prospect uses which may be obtained by visiting w ww.iShares.com or w w w . blackrock.com. Read the pros pectus caref ully before inves ting.

Inve sting involves ris k, includ ing possible loss of principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatili ty of returns.

The BlackRock Model Portfolios are provided for illustrative and educational purposes only, do not constitute research, investment advice or a fiduciary investment recommendation from BlackRock to any client of a third party financial advisor (each, a “Financial Advisor”), and are intended for use only by such Financial Advisor as a resource to help build a portfolio or as an input in the development of investment advice from such Financial Advisor to its own clients and shall not be the sole or primary basis for such Financial Advisor’s recommendation and/or decision. Such Financial Advisors are responsible for making their own independent fiduciary judgment as to how to use the BlackRock Model Portfolios and/or whether to implement any trades for their clients. BlackRock does not have investment discretion over, or place trade orders for, any portfolios or accounts derived from the BlackRock Model Portfolios. BlackRock is not responsible for determining the appropriateness or suitability of the BlackRock Model Portfolios or any of the securities included therein for any client of a Financial Advisor. Information and other marketing materials provided by BlackRock concerning the BlackRock Model Portfolios – including holdings, performance, and other characteristics – may vary materially from any portfolios or accounts derived from the BlackRock Model Portfolios. Any performance shown for the BlackRock Model Portfolios does not include brokerage fees, commissions, or any overlay fee for portfolio management, which would further reduce returns. There is no guarantee that any investment strategy will be successful or achieve any particular level of results. The BlackRock Model Portfolios themselves are not funds. The BlackRock Model Portfolios, allocations, and data are subject to change.

A fund's environmental, social and governance (“ESG”) investment strategy limits the types and number of investment opportunities available to the fund and, as a result, the fund may underperform other funds that do not have an ESG focus. A fund's ESG investment strategy may result in the fund investing in securities or industry sectors that underperform the market as a whole or underperform other funds screened for ESG standards.

International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets and in concentrations of single countries. Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities. Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and than the general securities market.

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Barclays, Bloomberg Finance L.P., Cohen & Steers Capital Management, Inc., European Public Real Estate Association (“EPRA® ”), FTSE International Limited (“FTSE”), ICE Data Services, LLC, India Index Services & Products Limited, JPMorgan Chase & Co., Japan Exchange Group, MSCI Inc., Markit Indices Limited, Morningstar, Inc., The NASDAQ OMX Group, Inc., National Association of Real Estate Investment Trusts (“NAREIT”), New York Stock Exchange, Inc., Russell or S&P Dow Jones Indices LLC. None of these companies make any representation regarding the advisability of investing in the Funds. BlackRock Investments, LLC is not affiliated with the companies listed above.

The BlackRock and iShares Funds within the model portfolios are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”). BlackRock Fund Advisors and BlackRock Investment Management, LLC, affiliates of BlackRock Investments, LLC, are registered investment advisers.

Certain information ©2020 MSCI ESG Research LLC. Reproduced by permission; no further distribution. Certain information contained herein (the “Information”) has been provided by MSCI ESG Research LLC, a RIA under the Investment Advisers Act of 1940, and may include data from its affiliates (including MSCI Inc. and its subsidiaries (“MSCI”)), or third party suppliers (each an “Information Provider”), and it may not be reproduced or redisseminated in whole or in part without prior written permission. The Information has not been submitted to, nor received approval from, the US SEC or any other regulatory body. The Information may not be used to create any derivative works, or in connection with, nor does it constitute, an offer to buy or sell, or a promotion or recommendation of, any security, financial instrument or product or trading strategy, nor should it be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. Some funds may be based on or linked to MSCI indexes, and MSCI may be compensated based on the fund’s assets under management or other measures. MSCI has established an information barrier between equity index research and certain Information. None of the Information in and of itself can be used to determine which securities to buy or sell or when to buy or sell them. The Information is provided “as is” and the user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. Neither MSCI ESG Research nor any Information Party makes any representations or express or implied warranties (which are expressly disclaimed), nor shall they incur liability for any errors or omissions in the Information, or for any damages related thereto. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited.

©2020 B L A CKROCK, ALADDIN, and iSHARES are registered trademarks of BlackRock, Inc. All other marks are the property of their respective owners.

9FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

Page 3 source: Chart 1: BlackRock Investment Institute, Barclays and Thomson Reuters, 12/31/2019. The bars show market capitalization weights of assets with an average annual yield over 4% in a select universe that represent s about 70% of the Barclays Multiverse Bond Index. US Treasury represented by the Barclays US Treasury index. Euro core is based on the Barclays French and German government debt indexes. US Agencies represented by Barclays US Aggregate Agencies index. US Municipal represented by Barclay Municipal Bond index. Euro periphery is an average of the Barclays government debt indexes for Italy, Spain and Ireland. US MBS represented by the Barclays US Mortgage Backed Securities index. Global Credit represented by the Barclays Global Aggregate Corporate index. US CMBS represented by the Barclays Investment Grade CMBS index. Emerging Market combines the Barclays EM hard and local currency debt indexes. Global High Yield represented by the Barclays Global High Yield index. Chart 2: Source: United Nations, Department of Economic and Social Affairs, Population Division (2017). World Population Prospects: The 2017 Revision, DVD Edition.

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