By Melissa Gallagher, Head of Investment Trusts, BlackRock

 “During tough economic conditions, the pie gets smaller. If customers don’t have a compelling reason to buy a product, they won’t.”

While the outlook for this year’s ISA season is less grim than it was 12 months ago, there are still headwinds for markets in the year ahead. The UK slipped into recession at the end of 2023[1], while growth across Europe is anaemic[2]. Only the US is bucking the trend, but interest rates are starting to dampen growth expectations there as well.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

In this environment, finding resilient companies is particularly important. While struggling businesses might be able to limp on in more robust economic conditions, their weaknesses will be exposed by a tougher climate. This will be reflected in sliding share prices. But there are plenty of companies that can, and do, transcend the economic environment – and may even get stronger. They tend to share a number of characteristics.

On the right side of interest rates

Interest rates have been a key factor in the economic slowdown experienced over the last 18 months. If interest rates are low, it allows companies with high debt to stay in business because the cost of repaying that debt is lower. As interest rates rise, that debt becomes more expensive and takes up a larger share of a company’s costs.

This is often one of the biggest risks factors for companies. Their profits drop, they cannot pay their debts and eventually, they go bankrupt. As Warren Buffett said: “only when the tide goes out do you discover who's been swimming naked”[3]. Official government figures in the UK showed the number of companies going bust hit a 30-year high in January 2024[4].

This is why across all the BlackRock investment trust portfolios, we are looking for companies with low debt and strong balance sheets. We want to ensure companies aren’t vulnerable to every central bank move.

Why pricing power is important

Pricing power is another priority for our fund managers. Pricing power is the ability for companies to raise the prices of their products and services. They may be able to do this because they have a strong brand, or their products are in high demand, or, as in the case of areas such as healthcare, their product is unique.

While inflation has been easing, input costs of all kinds continue to rise. If companies can’t pass those additional costs onto their customers, it will hurt their profitability. Equally, during tough economic conditions, the pie gets smaller. If customers don’t have a compelling reason to buy a product, they won’t. We want companies whose revenues are defensive and enduring.

A position of strength

Companies that go into a tough climate in a strong financial position can capitalise. Their indebted, weaker competitors may go bust, allowing agile companies to occupy the space they have left behind, buy their competitors or take over the strategic assets they leave behind, all at a cheaper price. Good companies will often emerge from difficult conditions in a stronger position than they went in.

This is also where a strong management team can be vitally important. A good, experienced management team will understand how to adapt the business to changing conditions, to make strategic acquisitions or sales. They will know which areas to prioritise and where to cut back. They will understand how to put the company in prime position for the recovery when it arrives.

Our approach

Fund managers with a depth of resources can look at a company from all sides, talk to its competitors, its suppliers and its management team. The fund managers across BlackRock’s range of investment trusts can call on a skilled global analyst team, with specialists across every sector and in every region. We believe this gives us a real edge in tougher conditions. We run high conviction portfolios and the portfolio will always reflect the fund managers’ best ideas.

Holding in an ISA can super-charge your investment, meaning your investment can compound faster. The recent changes to the UK ISA regime mean that investors will be able to get an additional £5,000 by investing in UK assets, allowing £25,000 a year to be sheltered from tax. At BlackRock, we have a breadth of investment trusts covering the UK, including growth and income options, but also a range of international markets.

Our view is that good companies can thrive in all conditions. The key is finding them. At BlackRock, we have built the infrastructure to find those opportunities wherever they may lie.

For more information on BlackRock’s range of investment trusts, please visit

Risk Warnings

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.

Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.

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[1] AP News – UK fell into recession at the end of 2023 – 15 February 2024

[2] Eurostat – GDP stable in both the Euro area and the EU -

[3] Brainy Quote – Warren Buffett

[4] Sky News – Number of companies going bust at 30-year high – 30 January 2024

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Issue Date: 15 May 2024