BlackRock Embraces Bitcoin: World's Largest Asset Manager Adds Crypto to Portfolio

BlackRock, the world's largest asset manager, has made a significant move in the cryptocurrency space by including the iShares Bitcoin Trust (IBIT) in one of its alternative asset model portfolios. This decision, announced by the company, signals a growing acceptance of Bitcoin as a viable investment option among traditional financial institutions.

The iShares Bitcoin Trust, which holds Bitcoin (BTC) on behalf of its investors, has been added to BlackRock's target allocation portfolio that allows for alternative assets. This portfolio is designed to suggest portfolios and rebalances, which are then followed by advisors and platforms. The allocation to IBIT in this portfolio is set at 1% to 2%.

Michael Gates, the lead portfolio manager for BlackRock’s Target Allocation ETF models, highlighted several reasons for the inclusion of Bitcoin in the portfolio. These include its novel store of value and global monetary alternative, hedge against U.S. dollar hegemony and political instability, and proxy play on the digital transition of goods and services. Gates noted that these features may provide unique and additive sources of risk premia and diversification to traditional multi-asset portfolios.

While the model portfolio that includes IBIT is one of the smaller portfolios managed by BlackRock, the decision to add Bitcoin is significant. James Seyffart, ETF analyst at Bloomberg Intelligence, commented that this is the first time BlackRock has made such a decision, and it may not be the last. However, Seyffart also noted that Bitcoin remains a controversial asset, and its inclusion in BlackRock's primary models, which manage a larger portion of assets, is uncertain.

BlackRock's model portfolios collectively manage around $130 billion in assets. The inclusion of Bitcoin in one of these portfolios indicates a growing interest in cryptocurrencies among institutional investors and a potential shift in the investment landscape.