ETFs
BlackRock model shakeup spurs $4 billion surge in growth stock ETFs
(Bloomberg) — One of BlackRock Inc.’s target allocation model teams is increasing its exposure to growth stocks in developed markets, investing billions in exchange-traded funds that track the sector.
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The rebalancing of the asset manager’s model was responsible for an inflow of $2.9 billion into the iShares S&P 500 Growth ETF (ticker IVW) and $1.4 billion into the ETF iShares MSCI EAFE Growth (ticker EFG), according to a person familiar with the matter.
IVW has gained nearly 19% year to date, outperforming the S&P 500’s roughly 12% rise. The growth fund has a nearly 12% weighting in Nvidia Corp., which has been on the rise. origin of much of this year’s stock market rally. IVV, which tracks the S&P 500, has a less than 7% weighting in the chip stock, according to data compiled by Bloomberg.
Asset managers like BlackRock and JPMorgan Chase & Co. package funds into ready-made portfolios that financial advisors can offer to their clients. If a strategy is changed, billions of people can move at the same time.
“We are increasing our exposure to growth stocks in the U.S. and developed markets, recognizing their central role in driving earnings growth,” said Michael Gates, lead portfolio manager for the allocation ETF model portfolio suite. target of BlackRock, in a note shared with Bloomberg.
Gates also said the team was reinforcing its bullish outlook on stocks more broadly as a “favorable macroeconomic environment” drives risk appetite.
Meanwhile, BlackRock’s S&P 500 fund (IVV) saw its largest single-day outflow ever, with an outflow of nearly $12.9 billion from the fund. A BlackRock spokesperson said rebalancing its model was not the immediate cause of the scale of IVV’s outflows.
This pullback, however, is unlikely to trigger bearish trading signals, given that noisy short-term ETF flows are increasingly driven these days by a growing number of large managers rotating their portfolios, between other technical factors.
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