From shifting markets and evolving client needs to an ever-expanding implementation toolkit, portfolio construction has become more nuanced than ever. In this conversation, BlackRock's Portfolio Construction team shares the latest insights drawn from hundreds of advisor consultations and BlackRock’s advisor-focused research.
1. What were the key advisor portfolio construction trends in your latest survey?
Our analysis of portfolios from hundreds of Canadian advisors shows several consistent patterns1 . Canadian equities remain about one third of equity allocations, while exposure to developed international markets has increased modestly. In fixed income, advisors are extending duration to lock in higher yields, with income still driven primarily by North American investment grade credit. More than half of advisors now allocate to alternatives, averaging roughly thirteen percent.
Compared to our research a year ago, the overall changes in advisors’ portfolios have been incremental rather than dramatic, with a strong preference for scalable solutions such as ETFs, mutual funds, and separately managed accounts.
2. How should advisors think about home country bias from a risk and return perspective?
Canadian investors continue to significantly overweight domestic equities relative to global benchmarks, a pattern that is often mirrored in advisor portfolios. Although Canadian stocks have performed well recently, this performance has been driven by a high degree of concentration in sectors such as Materials and Financials. Advisors who overweight Canada but underweight these sectors may not have captured the market’s upside. Broad based core ETFs, such as iShares Core S&P/TSX Capped Composite Index ETF (XIC), can help gain broad market exposure, complementing advisor’s individual stock selections.
3. How can advisors navigate concentration risks in U.S. equities?
In our survey, we find that U.S. equities often represent a slightly larger portion of portfolios than Canadian equities, yet they have contributed significantly more to overall portfolio risk since 2025. This is largely attributable to elevated U.S. equity market volatility, particularly driven by large technology companies. Advisors can manage this risk through weight‑capped strategies, factor‑based ETFs, or active management. Shifts in currency dynamics since 2025 have also increased the relevance of selective currency hedging.
The iShares S&P 500 3% Capped Index ETF maintains broad exposure to the U.S. equity market while limiting each stock to a 3% weight, helping reduce issuer and sector concentration risk. The ETF is available in non‑hedged (XUSC), CAD‑hedged (XSPC), and USD‑denominated units (XUSC.U).
4. How should advisors balance developed international and emerging market allocations?
Although advisors’ allocations to developed international equities increased after strong performance in 2025, they generally remain underweight in most advisor portfolios. We believe the exposure to regions such as Japan and Europe can meaningfully reduce portfolio risk because these markets often move differently than North America.
Emerging markets remain underutilized, largely because of their relative underperformance in recent years, but interest has grown as valuations improve. In particular, Asian emerging markets appear compelling due to their direct exposure to the global buildout of artificial intelligence infrastructure and their strong earnings growth potential.
The iShares Core MSCI EAFE IMI Index ETF (XEF) and iShares Core MSCI Emerging Markets IMI Index ETF (XEC) offer low‑cost access to a broadly diversified basket of international equities, making them foundational building blocks for globally diversified portfolios.
Figure 1 – Average advisor equity portfolio vs. a global benchmark portfolio
Source: BlackRock as of December 31, 2025. iShares Core Equity ETF Portfolio (XEQT) was used as a reference for the global equity market exposures.
5. What guidance would you offer on constructing resilient fixed income portfolios?
As cash and maturing GICs are redeployed, advisors have extended duration into mid‑range bonds to capture higher income. While the 2022 stock‑bond correlation spike created lingering skepticism, recent experience reaffirmed bonds’ diversification role.
Although investment‑grade credit remains core, tight spreads suggest opportunities across a broader range of credit sectors, such as high yield, securitized credit, agency mortgages and emerging market debt. Active strategies can help navigate dispersion and identify relative value.
The iShares Flexible Monthly Income ETF (CAD‑Hedged) (XFLX) is an actively managed fund that provides exposure to harder‑to‑access fixed income sectors, including mortgage‑backed securities, emerging market debt, and collateralized loan obligations, with the objective of maximizing income while managing risk across different market environments.
Figure 2 – Average advisor fixed income portfolio vs. Canadian Bond Universe
Source: BlackRock as of December 31, 2025.
6. What is driving the increased adoption of alternative investments?
Alternative investments continue to gain traction among advisors, with average allocations of approximately thirteen percent and expectations for further growth. Our survey indicates that diversification is the primary motivation for allocating to alternatives, although each category serves a distinct purpose. We caution that alternative allocations should be implemented intentionally and monitored closely to help achieve the desired exposures and outcomes.
7. How should advisors approach gold and commodities in today’s environment?
The role of gold depends on portfolio objectives. While it may not suit income‑focused clients, gold has historically shown low correlation with both stocks and bonds, making it a useful diversifier during periods of uncertainty. Even for Canadian investors who already have natural exposure to gold miners, adding a modest allocation to physical bullion has historically reduced overall portfolio risk. Structural forces such as central bank demand, retail interest and geopolitical tensions continue to support the investment case for gold. The iShares Gold Bullion ETF (CGL.C) provides a cost efficient way to access physical gold.
8. How is your team helping advisors build stronger and more intentional portfolios?
BlackRock’s Portfolio Consulting team applies a total portfolio approach focused on client outcomes and practice efficiency. Using the Aladdin risk platform, we help advisors gain deeper insight into portfolio risks, enabling them to adjust exposures more intentionally, particularly during periods of transition or change.
Three best practices for constructing portfolios in 2026:
Blend active and index strategies to balance alpha potential and cost efficiency
Anchor portfolios to benchmarks to maintain long‑term focus and alignment with client objectives
Use disciplined, threshold‑based rebalancing to manage costs and reinforce buy‑low, sell‑high behaviour