Displaying items by tag: Blackrock

Blackrock is the leading company in the $7 trillion ETF market in terms of assets and new issues. According to Dominik Rohe, the head of BlackRock’s Americas ETF and Index Investments business, active ETFs are a category with significant growth potential.

He notes that the boundary between active and passive ETFs is becoming ambiguous as all types of strategies are now being offered with an ETF wrapper. This is leading to more complex and innovative offerings. In 2023, the firm launched 18 active ETFs with more planned for 2024. According to Rohe, active ETFs currently make up 38% of all US-based ETFs with a total of $101 billion in assets under management. And, they are changing the concept of what an ETF can be from a passive vehicle to a ‘technology that will generate active return’ for investors. To that end, it’s launched active ETFs for alpha, specific goals, and strategies.

Another boost for active ETFs is due to the increase in fee-based financial planning and fiduciary wealth management which is leading to the ascendance of model portfolios. These are typically constructed with ETFs with the category growing at a 15% annual rate. Blackrock is forecasting that total assets in model portfolios will exceed $10 trillion by 2027, more than doubling its current level of $4.5 trillion, leading to more demand for these types of products. 

Finsum: Blackrock had an eventful 2023 with a bevy of active ETF launches. It sees continued growth for the category with the continued adoption of model portfolios as a key factor.

The cryptocurrency industry stands on the precipice of a potentially pivotal moment, with several applications for crypto-based ETFs awaiting approval by the US Securities and Exchange Commission (SEC). Recent activities suggest the SEC is actively preparing to issue its decisions, potentially within the next few months.

The world's largest asset manager, including BlackRock, has expressed increasing confidence in the SEC's approval of their spot Bitcoin ETF applications, possibly as early as January 2024. While the outcome remains uncertain, the SEC's recent engagements with applicants and its compressed 21-day public comment window indicate a focused and potentially accelerated decision-making process.

These developments have fueled speculation in the market, with some attributing the recent rise in Bitcoin prices to the anticipated SEC decision. Others cite the upcoming Bitcoin halving event in 2024 as a contributing factor.

Regardless of the specific drivers, the next few months will likely greatly impact the cryptocurrency landscape. The SEC's decisions on these ETF applications could have significant implications for investor access, market liquidity, and the overall development of the crypto asset class.

Finsum: Anticipation for SEC's decision on crypto ETFs grows, hinting at major shifts in market access to crypto-based investment vehicles.

In a CNBC interview, Blackrock COI Rick Rieder shared some thoughts on Blackrock’s newest active fixed income fund, and why he believes that active fixed income offers several advantages for investors. 

Active fixed income managers have the latitude to seek opportunities that are beyond what’s represented in the indices. As an example, he cites the Blackrock Flexible Income ETF (BINC) which has outperformed its peers since its inception in late May. Over this period, BINC is up 0.3%, while the iShares Core US Aggregate Bond ETF (AGG) is off by 4% and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is down 0.2%. 

BINC’s biggest allocation is to bonds outside of the US at 22% with US high yield debt and US investment grade debt accounting for 17% and 14%, respectively. According to Rieder, the stronger US dollar is leading to more attractive opportunities overseas. 

Passive funds are unable to take advantage of these opportunities. Another advantage for active fixed income is that certain pockets of risk can be avoided as well. He cites this combination as why active fixed income has outperformed, since it leads to more yield and reduced volatility.  

Finsum: Blackrock CIO Rick Rieder explained some of the structural advantages of active fixed income to identify opportunities and avoid pockets of weakness. 

In an interview with Bloomberg, Salim Ramji, Blackrock’s global head of iShares and index investments, spoke about the growth of model portfolios, and why he believes that assets under management (AUM) are projected to more than double over the next 5 years from $4.2 trillion to over $10 trillion.

Ramji commented that “It’s going to be massive. It’s the way in which more and more fiduciary advisers are doing business, and, as a result, that’s the way in which we’re doing business with them. It’s really just changed from being a cottage industry to being something that’s a real force for every fiduciary wealth adviser in the United States.” 

Model portfolios are typically composed of ETFs and other funds that are bundled into pre-built strategies. An indication of the growth of model portfolios is that changes in allocations can be seen in trading volumes and fund flows data. For iShares, model portfolios comprise more than half of flows, while they accounted for a third of flows 2 years ago. The company expects similar traction for model portfolios in its international markets as well.

Blackrock’s bullishness on model portfolios is noteworthy as it is the largest asset manager in the world with $9 trillion in AUM and also the largest ETF issuer. 

Finsum: Blackrock is forecasting that assets under management for model portfolios will exceed $10 trillion over the next 5 years. 

The strong demand for bonds this year has led to a windfall for BlackRock’s fixed-income exchange-traded funds. The fund giant has attracted more investor cash since U.S. rates started rising than all of its competitors combined. The inflows to fixed-income funds are being driven by regulatory changes and creative uses by wealth managers and other bond funds. Deborah Fuhr, the founder of the ETFGI consultancy, told FinancialTimes that “There have been significant changes about the way people think about fixed-income ETFs in the past year. We have seen large funds and asset managers put their portfolios in ETFs . . . rather than buying bonds and trying to manage them themselves.” Salim Ramji, BlackRock’s global head of ETF and index investments added, “We’re finding and expanding into all parts of the bond market in multiple different slices . . . Any part of the bond market that can be accessed through an ETF, we’re capturing that.” This includes ETFs such as IBTG, which only holds U.S. Treasury bonds maturing in 2026. Another fund is LQDB, which purely contains BBB-rated corporate bonds. These ETFs allow active fund managers to use them in different ways. For instance, some use a specific slice to tilt their portfolio either to longer or shorter-duration bonds, which depends on their view of the economy. Ramji also noted that BlackRock ETF users include nine of the ten largest active managers and eight of the ten largest U.S. insurance companies.

Finsum:As demand for fixed income increases, Blackrock has created ETFs that track a small slice of the bond market that active managers can use in a variety of ways.