BlackRock Incorporates Its Record-Breaking Bitcoin Fund into Model Portfolios

BlackRock has announced the inclusion of the iShares Bitcoin Trust (IBIT) in its model portfolio selections, confirming this to Decrypt on Friday.

As the largest asset manager globally, BlackRock is introducing a 1% to 2% allocation of IBIT in its Target Allocation with Alternatives and Target Allocation with Alternatives Tax-Aware portfolios, designed for investors who are open to taking higher risks.

“The Target Allocation with Alternatives models invest across a complete risk spectrum, combining a core allocation of stocks and bonds with liquid alternative investments,” a BlackRock representative stated in an email to Decrypt. “The introduction of IBIT into these portfolios serves as a diversifier, aligning with the investment goals of this model, which targets investors with a higher risk appetite and growth objectives.”

The changes impact a minor segment of BlackRock’s Target Allocation with Alternatives portfolios, according to the spokesperson.

Nevertheless, this addition could enhance demand for the ETF and highlights the growing acceptance of crypto assets in traditional finance, fueled by an increasing market appetite for such products. In recent years, model portfolios providing preset strategies for financial advisors have seen significant growth. BlackRock’s CEO Larry Fink, previously skeptical about crypto, has recently adopted a more positive view on Bitcoin.

“This is another move toward integrating Bitcoin into mainstream investing,” stated ETF.com analyst Sumit Roy in a message to Decrypt. “IBIT has already been a tremendous success—this addition could further amplify demand for the fund.”

Launched in January 2024 alongside nine other Bitcoin-tracking funds (with an additional fund starting later in the year), IBIT amassed $60 million in assets under management faster than any other ETF in the history of the industry, which spans 32 years.

However, it has lost over $1 billion in assets in the past week due to a downturn in the crypto markets, influenced by market instability caused by rising inflation and other macroeconomic concerns. Despite this, the fund still retains about three times the assets compared to its nearest competitors.

Currently, spot Bitcoin funds collectively manage around $90 billion, even after a drop exceeding $2.4 billion over the past week.

Bitcoin recently traded above $84,000, showing an approximately 8% recovery from an overnight low beneath $79,000, but remains far from its all-time peak of over $108,000 reached in mid-January. Over the past month, it has decreased by 13%.

Roy from ETF.com mentioned that the potential demand for IBIT from the model portfolio adjustments was uncertain: “The additional inflows for IBIT may be in the millions rather than billions,” he indicated.

This suggests that, at least in the short term, this decision might carry more symbolic weight than a significant impact on inflows.

Edited by Andrew Hayward