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.