MutualFundWire.com: BlackRock Accelerates its ETF Push into New Areas

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Monday, May 6, 2013

BlackRock Accelerates its ETF Push into New Areas

The BlackRock's iShares empire is growing into new territories.

During a breakfast with roughly twenty members of the financial press, iShares executives Daniel Gamba, head of iShares Americas institutional business; Sue Thompson, BlackRock head of RIA and institutional asset management channels, and Matthew Tucker, head of iShares Fixed Income investment strategy, outlined the results of an ETF usage report conducted by Greenwich Associates, as well as some recent initiatives by iShares.

The study, titled Institutional Investors' Relationship with ETFs Deepens, was sponsored by BlackRock.

The report outlined a number of growing trends regarding ETF usage by institutional investors.

People Like ETFs, They Really Do

For example, according to Gamba, the study shows that more than half of institutional investors plan to increase their use of ETFs. Drilling down, he said that 55 percent of insurance companies plan to increase their use of ETFs, as well as 55 percent of pension consultants and 65 percent of RIAs.

In April, the global ETF industry has gathered $80 billion of additional inflows, 20 percent higher than a year ago. iShares in particular saw nearly $29 billion in inflows that month, a 90 percent increase over the same period a year ago.

Looking at the study, Gamba said that there were three themes to be noted.

Theme 1: Investors are using ETFs both tactically and strategically. He said this is news for the industry because two or three years ago, ETF usage was almost entirely tactical, which he defined as investing for less than a year. According to the Greenwich study, investors using ETFs for more than year is up to 61 percent, compared to 51 percent a year ago and just 36 percent two years ago.

Theme 2: More investors are using ETFs as a core in their portfolios. According to the study, 67 percent of pensions, foundations and endowments are using ETFs at their core, while 90 percent of investment consultants are doing the same. Further, 72 percent of insurers used ETFs in this way, while 80 percent of RIAs and 50 percent of asset managers.

Theme 3: More and more investors are using fixed income ETFs, because they lack other means for accessing liquidity in fixed income assets, particularly corporate, high yield, and emerging market debt.

Fixed-Income Investing

Matthew Tucker, head of iShares fixed income investment strategy said that fixed income ETFs are gaining grown with investors because of growing fear over interest rates, as well as liquidity. Tucker said that investors are having a hard time conducting transactions in fixed income securities because brokers and banks can't hold as much inventory anymore due to increased capital requirements due to new regulations such as Dodd-Frank and Basel. ETFs, which invest in baskets of fixed income securities that are exchanged, allow investors with a more efficient means for maintaining their fixed-income exposure. iShares continues to unveil more products to tap into this demand.

BlackRock Is Aggressively Courting "Investment Strategists" like RIAs

Sue Thompson. head of RIA and institutional asset management channels, said that BlackRock is working more with RIAs to develop ETFs and other solutions they can pitch to their clients.

For example, BlackRock has operated, since 2008, a consortium of RIAs, asset managers and other "investment strategists" which the fund giant consults with to develop new products. When the consortium was founded, it had roughly 25 members. Now it is up to 110 members who manage together roughly $64 billion in ETFs, a 1000 percent increase from the $5.8 billion managed by the group in its infancy.

The consortium is also holding a two-day event, called the iShares "iGNITE" Client Conference. More on the event can be found below.

BlackRock's iShares “iGNITE” Client Conference

According to a company spokesperson the May 7-8th iShares “iGNITE” client conference will be held at the Conrad in downtown NY.

"This is the second annual conference for firms across the ETF Investment Strategist industry," she told MFWire.

The spokesperson provided the folioing information on the attendees:

Here is some background on ETF Investment Strategists:

The proliferation of ETFs has given rise to a new niche of asset managers: ETF Investment Strategists. These managers bring a special expertise and deep knowledge of ETF portfolio construction and trading to the marketplace. Advisors are increasingly partnering with ETF Investment Strategists to offer institutional-like portfolios and innovations once unavailable to their end clients. As the global leader with almost 40% of all ETF assets worldwide, iShares has been actively involved with this emerging market since 2008 when it first published The ETF Managed Solutions Guide and launched the iShares Connect program.

iShares Connect is an program that connects ETF Investment Strategists with advisors and other resources needed to grow their businesses. Beyond traditional practice management, iShares Connect understands that there is not a “one size fits all” approach to growth and success. This custom-tailored program delivers direct access—to the leadership, insights and resources available jointly through iShares and BlackRock— to help clients set goals, focus their efforts and drive business results.

iShares Connect is committed to partnering with clients to help them grow their businesses. The goals of the program are to:

Help shape the industry

Grow distribution for ETF Investment Strategists

Connect the resources, knowledge and insights of the iShares and BlackRock organization and leverage them on behalf of our clients’ businesses.

Here are the approximate numbers related to membership and AUM:

1)     Total ETF assets: $64B
a.     ETF Assets have increased by nearly 1000% (995%) since 12/31/2008 ($5.8B)
b.    ETF Assets have increased in last 12 months by 41% since 3/31/2012 ($45.5B)
2)     Total managers: 110
a.     vs. 33 at 12/31/2008
b.    vs. 105 at 3/31/2012
3)     Total portfolios*: 240
a.     vs. 116 at 12/31/2008
b.    vs 223 at 3/31/2012
*Firms may have additional ETF managed portfolios, but this # represents just those with full details listed in the Guide