The BlackRock® Dynamic Factor Index measures the performance of a combination of up to five equity ETFs, up to three fixed income ETFs, and a cash constituent, less a benchmark return of SOFR plus 0.26161% plus an additional 0.65% per annum fee. The equity ETF basket weights are determined by "economic regime", "value", and "momentum" factors, while the fixed income ETF basket weights are based on medium-term interest rate trends. The index's exposure among the equity, fixed income, and cash components is adjusted daily to limit volatility to no more than 5%, potentially resulting in limited exposure to ETFs and significant allocation to cash (up to 85.5% in recent history).
Index Performance vs. Benchmarks (Jan 1, 2020 - Sep 2, 2025):
- Compared to the iShares® Core S&P 500 ETF (IVV) and iShares® 7-10 Year Treasury Bond ETF (IEF), the index has underperformed the equity benchmark but outperformed the fixed income benchmark.
- Key metrics: Annualized performance (-2.12% vs. 14.69% for IVV, -0.36% vs. -0.36% for IEF); Annualized realized volatility (4.97% vs. 21.40% for IVV, 7.78% vs. 7.78% for IEF); Return over Risk (-0.43 vs. 0.69 for IVV, -0.05 vs. -0.05 for IEF); Maximum peak-to-trough drawdown (-19.10% vs. -33.90% for IVV, -23.93% vs. -23.93% for IEF).
Underlying Asset Weightings (as of Sep 2, 2025):
- Equity ETFs: iShares® MSCI USA Momentum Factor ETF (6.83%), iShares® MSCI USA Quality Factor ETF (3.28%), iShares® MSCI USA Size Factor ETF (5.79%), iShares® MSCI USA Min Vol Factor ETF (6.76%), iShares® MSCI USA Value Factor ETF (3.75%).
- Fixed Income ETFs: iShares® 1-3 Year Treasury Bond ETF (0.00%), iShares® 7-10 Year Treasury Bond ETF (17.11%), iShares® 20+ Year Treasury Bond ETF (17.11%).
- Cash Constituent: 39.36%.
- Historical average, highest, and inclusion frequency weights provided for each asset.
Key Risks:
- The index's return depends on outperforming the benchmark return (SOFR + 0.26161% + 0.65%).
- Significant cash allocation can limit returns.
- Limited historical data available post-discontinuation of 3-month USD LIBOR (Dec 28, 2021).
- Factor-based methodology and volatility constraints may impact performance.
- Concentration risks in specific sectors (e.g., information technology) and assets.
- Exposure to risks associated with ETFs, including passive management, liquidity, and pricing dislocations.
- Changes in index administrator policies or underlying assets can affect returns.
