BlackRock Inc. (NYSE: BLK) is the world’s largest asset manager with $4.6 trillion in assets under management (AUM), as of Dec. 31, 2015. BlackRock sponsors many popular mutual funds and exchange-traded funds (ETFs). Morningstar gives a five-star rating to 16 of BlackRock’s mutual funds, 14 of which only received the rating for Institutional Class shares. Institutional Class shares are only available on investments of more than $1 million or to investors in certain pension plans.

BlackRock Event Driven Equity Fund Investor A Shares (BALPX)

The BlackRock Event Driven Equity Fund seeks long-term growth of capital. It is a market neutral fund that provides a return based on a benchmark rate. The benchmark is usually based on a short-term T-bill rate, and funds invest to beat a multiple of the benchmark. This fund benchmarks itself against the market index rate of the Russell 1000 average. Using a different benchmark could throw off Morningstar’s category designation and result in an inaccurate rating.

The fund invests in companies not based on the general market conditions. The primary criteria is to invest in companies that have the potential to move stock price based on a specific event. These events include mergers, management changes, corporate restructurings or spinoffs. The fund may use a range of securities including common stock, preferred stock and convertible securities to achieve its objectives. Portfolio managers may invest long or short depending on how they believe share prices will move.

There are a few reasons why this fund might not be appropriate for many investors. First, it has a high 1.69% expense ratio. Second, while it soundly outperforms T-bill rates, it underperforms the Russell 1000 benchmark. The fund has annualized total returns of 12.6% over three years and 11.09% over five years, while the Russell 1000 Index has returned 15.01% and 12.44% over the same time period. Investors can also face a sales charge of up to 5.25%, which further erodes returns. Institutional investors pay slightly lower fees and no sales load.

BlackRock 40/60 Target Allocation Fund Investor C Shares (BCMPX)

The BlackRock 40/60 Target Allocation Fund is a conservative allocation fund that has a combination of current income and capital appreciation with a bias toward income. The fund invests 60% of net assets in fixed income and 40% in equities. It does not actually buy securities; instead, it is a fund of funds. Portfolio managers invest in other BlackRock-affiliated ETFs or mutual funds.

The returns are good, but the expense ratio is a high 1.7%, which includes a 1% 12b-1 fee that pays for fund marketing. The fund has annualized total returns of 7.26% over three years and 6.34% over five years. The Institutional shares have no 12b-1 fee and returned 8.45% and 7.54%. The Institutional shares are a good choice for an investor’s pension plan, but potential C share purchasers need to do comparisons with other funds to avoid the drag the 12b-1 fee puts on returns.

BlackRock Balanced Capital Fund Institutional Shares (MACPX)

The BlackRock Balanced Capital Fund is a moderate allocation fund that seeks total return. The fund has at least 25% of assets in equity securities and 25% in fixed-income securities, with the remaining 50% balanced by the fund’s four portfolio managers in the most advantageous way to achieve the fund’s objective. The balance is 60% equities and 40% fixed income, as of January 2016.

The fund may invest in a range of securities such as common stock, preferred stock, mortgage-backed securities (MBS) and corporate debt. However, as of Dec. 31, 2015, 59.86% of net assets were invested in the BlackRock Large Cap Core Fund and 36.41% were invested in the BlackRock Total Return Fund. The fund has a 0.66% expense ratio and annualized total returns of 10.27% over three years and 9.24% over five years. The fund also offers Class A and Class C shares, which have lower returns due to sales charges or 12b-1 fees.

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