BlackRock, the world’s largest asset manager, has set a major milestone for BTC adoption within traditional finance by including Bitcoin in its $150 billion model portfolio ecosystem for the first time.
BlackRock has set aside 1% to 2% of its $48 billion iShares Bitcoin Trust ETF (ticker: IBIT) in target allocation portfolios that allow for alternative investments, according to an investment outlook obtained by Bloomberg. While that’s a small portion of BlackRock’s overall model portfolio business, the move could pave the way for new demand for IBIT at a time when overall crypto sentiment is weakening.
Model portfolios, which combine various funds into structured investment strategies for financial advisors, have grown in popularity in recent years. Changes to these portfolios can trigger significant capital flows in both directions.
“We believe Bitcoin has long-term investment value and can potentially provide unique and additional sources of diversification to portfolios,” Michael Gates, chief portfolio manager for BlackRock’s Target Allocation ETF model portfolio suite, said in an investment commentary.
The timing of BlackRock’s decision coincides with Bitcoin’s recent price decline. Market uncertainty and economic concerns have weighed on risk appetite, with BTC currently trading around $83,000, a sharp drop from last month’s peak of $110,000.
Citing Bitcoin’s known volatility, the BlackRock Investment Institute set a “reasonable range” of 1% to 2% in a December report. The report warned that exceeding a 2% allocation could disproportionately increase a portfolio’s overall risk exposure.
Launched in January 2024, IBIT has quickly become one of the most successful ETF launches in history, bringing in over $37 billion in inflows last year alone. But appetite has weakened recently, with investors pulling out nearly $900 million last week. Despite this, BlackRock noted continued demand from financial advisors looking for structured exposure to Bitcoin within model portfolios.
“They all want to allocate more to alternatives, but they need guidance on how to size, scale and rebalance the position,” said Eve Cout, head of portfolio design and solutions at BlackRock US Wealth.
A model portfolio is a pre-built investment strategy tool that financial advisors use for their clients. It combines different assets (stocks, bonds, ETFs, etc.) in a structured way to fit specific risk and return objectives. That is, BlackRock does not directly purchase Bitcoin like MicroStrategy does, but it does offer exposure to BTC through IBIT in its investment strategies.
*This is not investment advice.
