Displaying items by tag: Blackrock

BlackRock has announced a $12 billion acquisition of HPS Investment Partners, a private credit firm led by former Goldman Sachs and JPMorgan executives. The deal highlights BlackRock’s push into private credit, a rapidly expanding $1.6 trillion market that has grown as banks retreat from leveraged lending. 

CEO Larry Fink emphasized the blending of public and private markets as a core feature of modern investing. The move aligns with BlackRock’s broader strategy to deepen its presence in alternative assets, following acquisitions of Preqin and Global Infrastructure Partners earlier this year. 

While some industry leaders, including JPMorgan’s Jamie Dimon, have raised concerns about risks in private credit, BlackRock sees significant opportunities for growth. 

Finsum: This acquisition could boost BlackRock’s effort to position itself as a leader in alternative asset management.

Assets in model portfolios grew by nearly 50% over the last 2 years. By fully or partially outsourcing the investment management function, it frees up more time for advisors to focus on building their practice, client service, financial planning, and prospecting. According to a recent survey from Cerulli, 12% of advisors are using model portfolios primarily, with 22% using a hybrid approach. 

In addition to benefiting advisors, model portfolios have become a major distribution channel for asset managers such as Blackrock. Among asset managers, Blackrock has the most assets in model portfolios at $84 billion. Blackrock anticipates model portfolio assets exceeding $10 trillion within the next 5 years, more than doubling from $4.2 trillion currently. Model portfolios comprised 50% of flows from US investors into iShares ETFs last year.

WisdomTree is another major beneficiary of the boom in model portfolios. Last year, the company saw a 100% increase in the number of advisors using its model and had asset growth of 40%. It sees model portfolios as a ‘key growth driver’ for the firm in the coming years.

As model portfolios become a larger presence in wealth management, there will be large shifts of flows in and out of various ETFs depending on decisions made by asset managers. For instance, JPMorgan found that ETFs that were held in its model portfolios had significantly more inflows than ETFs not in model portfolios, at $80 billion vs. $30 billion. 

Finsum: Model portfolios are forecast to exceed $10 trillion in assets within the next 5 years. They are becoming increasingly integral for advisors and asset managers. 

Stocks and bonds have been weaker since Wednesday’s stronger than expected inflation report. While some on Wall Street are now questioning whether the Fed will be able to cut rates at all, Rick Rieder, Blackrock’s head of fixed income, continues to see rate cuts later in the year.

He notes that Thursday’s PPI report was softer than expected and an indication that most inflation is contained in the services sector. He doesn’t believe that monetary policy could have too much impact on this type of inflation and that it would have damaging effects on other parts of the economy. Overall, he sees recent data consistent with core PCE at 2.6-2.7%.

He believes the current data justifies between one and two rate cuts before year-end. However, he believes that the data could still evolve in a way that justifies more. With rates above 5% and core PCE below 3%, monetary policy is very restrictive, so he believes the Fed will lower rates regardless.

In terms of fixed income, Rieder is bullish on short-duration notes, as investors can get yields between 6% and 7%. He sees the 10-year Treasury yield modestly declining into year-end due to softer economic data and the Fed cutting rates. However, longer-term, he believes that it is range-bound between 4% and 5%.

Finsum: Many on Wall Street are starting to turn more pessimistic about the Fed’s ability to cut rates given recent inflation data. Blackrock’s Rick Rieder still sees cuts later in the year, even if the data doesn’t significantly improve.

Goldman Sachs Asset Management (GSAM) is aiming to become one of the top 5 providers of model portfolios. Currently, GSAM is the ninth largest in terms of asset managers, with model portfolio assets of $14.5 billion. Over the next decade, model portfolios are projected to have more than $11 trillion in assets in total.

According to Alexandra Wilson-Elizondo, the co-CIO of GSAM’s multi-asset solutions group, the firm’s strategy is to outgrow its competitors rather than take existing market share as model portfolio assets are projected to grow 20% annually. Model portfolios consist of off-the-shelf strategies and custom models. Demand for the latter has been robust among wealthy clients.

Increasing adoption by financial advisors is the primary growth driver for the category. By decreasing time and resources spent on investment management, advisors can add more value in areas like client service, tax planning, and estate management. 

Currently, the leading provider of model portfolios among asset managers is Blackrock, followed by Wilshire Associates, Capital Group, and Vanguard. In 2019, GSAM bought S&P Global Market Intelligence, and it acquired NextCapital Group in 2022 to build the foundations of its model portfolio business.

Finsum: Goldman Sachs is aiming to grow its model portfolio segment and become a top-five provider among asset managers. Forecasts are for the category to grow 20% annually and exceed $11 trillion by 2030. 

The ETF market continues to grow and mature by providing new funds for investors to reach their financial goals. BMO Global Asset Management sees more growth in the coming year, driven by more targeted funds that appeal to more sophisticated investors.

It sees the ETF market continuing to evolve and innovate in order to meet the growing demand for more sophisticated products in an ETF wrapper. It sees ETFs becoming the primary way for investors to get exposure to themes, trends, and investment opportunities. Further, there is intense competition among issuers to continue bringing new products onto the market, especially given first-mover advantages.

BMO is particularly bullish on structured outcome ETFs, which were created to help investors manage risk. It believes that investors in equity funds and short-term bond funds are exposed to volatility given the outperformance of megacap, technology stocks over the past year and uncertainty around the Fed’s rate cuts.

Structured outcome ETFs are one way that clients can remain invested while capping downside risk. Among these, buffer ETFs, which use options that protect against downside risk and cap upside potential, are becoming increasingly popular among advisors and investors. Notably, this type of protection was at one time only available to high net worth investors.

Finsum: BMO Asset Management conducted an overview of the ETF industry. It notes the constant innovation in the space, with the latest growth area being structured outcome ETFs, which are particularly useful in terms of reducing portfolio risk.