We begin by narrowing the investable universe with proprietary screening that allows our investment teams to focus their efforts on the stocks that seem most promising. Each investment style dictates the precise selection of factors that define the screens, and in turn, the investable universe of stocks that warrant further research. Portfolio managers with specific industry expertise conduct rigorous fundamental analyses of these stocks to select those securities that go into BlackRock portfolios. In order to outperform the benchmark, BlackRock actively pursues risk. We integrate risk analysis with the investment process and evaluate risk at both the stock and the portfolio level.
Analysis is geared towards understanding the risks inherent in our stock selection decisions.
We examine incremental risk versus the benchmark to determine if return potential will compensate for the increased risk. BlackRock's Equity Risk Management Group is responsible for analyzing and understanding the risks in all of our equity portfolios. Our primary risk measure is tracking error. Forecast and actual tracking error is monitored and targeted, subject to client guidelines and investment style. We also monitor geographic, industry and fundamental factor positions, both absolute and relative to the benchmark.