BlackRock to Allocate Up to 2% of Model Portfolio to IBIT Bitcoin ETF

BlackRock, the world’s largest asset manager with over $10 trillion in assets under management, is making a significant move by incorporating Bitcoin into its model portfolio. According to a Bloomberg report on February 28, BlackRock plans to allocate between 1% and 2% of its model portfolios to Bitcoin through its Bitcoin exchange-traded fund (ETF), the BlackRock iShares Bitcoin Trust ETF (IBIT). This move highlights the growing interest in digital assets, especially Bitcoin, as part of traditional investment strategies.

The model portfolios in question are pre-structured funds designed to offer investors ready-made strategies. These portfolios are marketed to financial advisors, offering them managed investment strategies that invest in fund shares, and are growing in popularity. BlackRock’s decision to include Bitcoin in these portfolios underscores the increasing demand for exposure to digital assets and crypto-based exchange-traded products.

The IBIT ETF, currently valued at $48 billion, holds 576,046 bitcoins, accounting for approximately 2.9% of the total Bitcoin market share. By allocating up to 2% of its $150 billion model portfolio into Bitcoin through IBIT, BlackRock is signaling its confidence in the long-term potential of Bitcoin as a diversifying asset. While this $150 billion represents only a fraction of BlackRock’s overall model portfolio business, the inclusion of Bitcoin could lead to an increase in demand for the IBIT Bitcoin ETF.

Michael Gates, the lead portfolio manager for target allocation ETF models at BlackRock, expressed the company’s belief in Bitcoin’s long-term investment merit. In a note to investors on February 27, Gates highlighted that Bitcoin could potentially offer unique diversification opportunities for traditional investment portfolios.

The approval of several spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) in January 2024, including BlackRock’s IBIT, marked a significant milestone in the legitimization of Bitcoin as a mainstream investment vehicle. Other major financial institutions such as Fidelity Investments, WisdomTree, and VanEck also received regulatory approval for their Bitcoin ETFs.

The launch of these spot Bitcoin ETFs has had a notable impact on Bitcoin’s price, helping to push it above $69,000 in March 2024. Investor enthusiasm, particularly around the U.S. election cycle, propelled Bitcoin to an all-time high above $109,000. However, in recent weeks, Bitcoin has experienced a pullback, with its price dropping to $79,000. This decline has been accompanied by significant outflows from spot ETFs, including IBIT.

Despite the recent sell-off, BlackRock’s continued focus on Bitcoin as part of its broader investment strategy indicates that the asset manager remains bullish on the long-term potential of digital assets. The move to include Bitcoin in its model portfolios could contribute to further mainstream adoption of Bitcoin, as institutional investors seek to diversify their portfolios with exposure to crypto assets.