BlackRock’s Target Allocation ETF series’ is executed by a high-caliber team with top notch resources and has an attractive price tag. A proficient and distinguished approach to portfolio construction leads to an upgrade of the series Process rating to High, from Above Average. As a result, the series’ Morningstar Analyst Rating has been upgraded to Gold, from Silver.
This target-risk series represents model portfolios made available to advisors, who may retain discretion over the asset allocation and underlying fund selection. It consists of 11 portfolios spanning across the risk spectrum.
The team builds each portfolio around its stated equity allocation and uses a 70% U.S. equity and 30% non-U.S. equity split as a starting point. Management utilizes best-in class building blocks to construct each portfolio independently; distinguishing it from peers who design a single portfolio that is scaled based on the desired risk level. Each portfolio is reviewed quarterly, at least, for potential rebalancing or tactical tilts. Well-tested quantitative and fundamental signals guide tactical tilts such as the inclusion of iShares Fallen Angels USD Bond ETF FALN, which owns high yield bonds that were previously rated investment-grade, in the more conservative portfolios. This move adds targeted exposure to higher-quality credit versus broader high yield bond funds. A move reflecting the team’s optimism for an economic rebound as businesses reopen.
BlackRock’s dedicated model portfolio solutions team manages the series. Lisa O’Connor, a 27-year industry veteran, oversees the team and chairs the investment council. Michael Gates, the series’ lead manager since their 2014 inception, makes the final decisions on the model portfolios. He oversees a team of nine analysts, most of whom joined the team since 2017. Most analysts focus on developing quantitative tools to help guide the deviations from the strategic allocation.
The series’ low costs give it another advantage versus other options. The asset weighted-average fees range from 12 to 20 basis points as of January 2021. Investors should be well-served by these portfolios going forward.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.