BlackRock Embraces Bitcoin: 1-2% Allocation in Model Portfolios

BlackRock, the world's largest asset manager, has incorporated Bitcoin (BTC) into its model portfolio offerings through the iShares Bitcoin Trust ETF (IBIT). The move, announced on Feb. 28, allocates 1% to 2% of its target allocation portfolios to the cryptocurrency, according to a Bloomberg News report.

The asset manager's decision comes as the IBIT has registered over $36 billion in net flows since its launch, making it the most successful ETF launch since 2014. BlackRock's Investment Institute has defined a 1% to 2% allocation to Bitcoin as a "reasonable range," acknowledging the cryptocurrency's inherent volatility. Exceeding a 2% allocation could disproportionately increase the cryptocurrency's impact on overall portfolio risk.

Michael Gates, lead portfolio manager for BlackRock's Target Allocation ETF model portfolio suite, stated, "We believe Bitcoin has long-term investment merit and can potentially provide unique and additive sources of diversification to portfolios." Eve Cout, head of portfolio design and solutions for US Wealth at BlackRock, noted that investors want to allocate more to alternatives but need guidance on the position's size, scale, and rebalance.

The decision comes amid recent market turmoil, with IBIT registering $930 million in outflows over the past four days. On Feb. 26, BlackRock's Bitcoin ETF experienced its largest daily outflow, with $418 million in capital leaving the fund. Despite these recent challenges, IBIT currently holds over $48 billion in assets and displays nearly $40 billion in net flows.

Notably, BlackRock doubled its Bitcoin exposure in its Global Allocation Fund last year, reporting 430,770 shares of IBIT in its third-quarter 13F Form, an increase of 117% from the second quarter. BlackRock's addition of Bitcoin to its model portfolio is a positive development that could boost market sentiment amid falling prices.