Displaying items by tag: Blackrock

Friday, 12 April 2024 04:58

BMO Bullish on Structured Outcome ETFs

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.   


Published in Alternatives
Thursday, 28 March 2024 06:21

Blackrock: Bitcoin A Good Portfolio Diversifier

Robert Mitchnick, Blackrock’s digital asset lead, believes that bitcoin is more like ‘digital gold’ rather than a ‘risk-on’ asset, despite its strong correlation to equities in recent years. Throughout bitcoin’s existence, there has been a constant debate about its true nature. Some argue that bitcoin is like gold given that there is a fixed supply, which means that it should provide protection against inflation. 

While this may be true in theory, in reality, bitcoin has largely moved in the same direction as equities, which undermines the argument that it offers diversification. In 2022, bitcoin tumbled as the world dealt with the highest levels of inflation in decades. Notably, equities were also down 25% in 2022. In the following year, as equity markets made new highs, bitcoin also followed and made new highs as well. 

Despite this relationship, Mitchnik believes that historically, bitcoin has demonstrated very little correlation to stocks. He attributes the recent rally to excitement around the launch of bitcoin ETFs in the US. In terms of allocation, he recommends between 1 and 3% for investors to provide diversification and differentiated returns. The argument about bitcoin’s nature is germane for investors who want to understand whether it will make their portfolio more risky or more diversified. 

Finsum: There are two camps when it comes to bitcoin. One sees bitcoin as an asset that is closely correlated to equities; while the other believes that bitcoin is more like gold and can help diversify portfolios.

Published in Alternatives
Tuesday, 19 March 2024 07:10

BlackRock Cornering Expanding SMA Offerings

BlackRock (BLK) has unveiled plans to acquire SpiderRock, a prominent provider of technological solutions tailored for financial institutions. This acquisition is set to bolster BlackRock's Aladdin platform, a key player in the world of separately managed accounts (SMAs). 


By integrating SpiderRock's state-of-the-art technology into Aladdin, BlackRock aims to enhance its SMA capabilities, particularly in risk management and trading strategies. According to Cerulli Associates, SMAs are projected to see their assets under management surge to $4 trillion by 2026 from $2.7 trillion, driven primarily by heightened client demand for personalized portfolios offering tax advantages. This strategic move underscores BlackRock's commitment to leveraging advanced analytics within the management sector, enabling clients to optimize operations and mitigate risks more effectively. 


Through this acquisition, BlackRock is poised to pioneer innovative SMA solutions, driving efficiency and productivity across operations and meeting the demand for tax optimization. This development signals a significant step forward in BlackRock's journey toward becoming a leader in SMA, offering tailored solutions to address the evolving needs of investors and wealth managers worldwide.

Finsum: SMAs are fighting atop the industry with model portfolios to be the customized solution. 

Published in Wealth Management

State Street Global Advisors is looking to grow its model portfolio business from $5 billion currently to over $25 billion by the end of this decade. Model portfolios are experiencing increasing popularity among financial advisors and clients. They enable advisors to bundle funds into specialized, off-the-shelf strategies, creating more time and resources for client engagement and financial planning.


At the moment, Blackrock is the clear leader with nearly $100 billion in assets tied to its model portfolios. Recently, the asset manager predicted that over the next 5 years, model portfolios’ total assets will exceed $10 trillion over the next 5 years from $4 trillion as of July 2023. State Street is aiming to capture a piece of this expanding market. 


Peter Hill, State Street’s head of model portfolios solutions, remarked, “We are fully committed to investing in our model portfolio business to meet the needs of our advisors and our platforms as their adoption rate of models continues to grow.” To achieve this, State Street is investing in the segment from an ‘infrastructure perspective’. This includes hiring employees in sales and marketing while also increasing outreach to advisors.  

Finsum: State Street is looking to grow its model portfolio segment by 5-folds over the next 5 years. Over the next 5 years, model portfolio assets are forecast to exceed $10 trillion from $4 trillion currently.


Published in Wealth Management
Wednesday, 21 February 2024 13:40

Model Portfolio AUM Reaches $420 Billion

Morningstar recently completed its annual review of the US Model Portfolio Landscape. It noted that assets under management (AUM) in model portfolios reached $424 billion, a nearly 50% increase over the last 2 years. 


Some of the drivers of growth include enabling an easier investment process, providing access to institutional investors’ insights, and increased fund selection. It allows advisors to outsource elements of the investment management process to the extent that they feel comfortable. The net benefit is that it allows for more time to be spent on client engagement, financial planning, and growing the business. 


Another factor is lower costs. On average, model portfolios are 19 basis points cheaper than comparable mutual funds. In terms of market share, Blackrock and Capital Group are the leaders with $84 billion and $75 billion, respectively representing 37.5% of total AUM. Launching of new model portfolios has slowed as there is saturation in many areas like income, ESG, passive, or active. Instead, new launches are predicted to focus on greater customization such as optimizing tax efficiency.


Finsum: Model portfolio AUM has risen by nearly 50% over the last two years. Reasons for growth include easing the investment process management process for advisors, lower costs, and a greater variety of options.

Published in Wealth Management
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