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BlackRock’s $185 Billion Model Makers Are Amping Up Stock Bets

(Bloomberg) -- The world’s biggest asset manager is “turning up the risk dial” by doubling down on US equities and artificial intelligence exposure across its $185 billion model-portfolio platform, according to an investment outlook viewed by Bloomberg.

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Best-in-class US earnings performance has BlackRock Inc. upping its exposure to US stocks at the expense of international developed stocks in its model suite, the outlook showed. After the changes, the portfolios are now 2% overweight equities. Billions of dollars flowed between corresponding BlackRock exchange-traded funds on Tuesday as the asset manager adjusted its allocations, data compiled by Bloomberg shows.

BlackRock’s model reshuffling is a vote of confidence in an equity rally that has taken the S&P 500 to all-time highs this year, buoyed by enthusiasm over AI spending and building bets on a Federal Reserve interest-rate-cutting cycle, which is expected to kick off on Wednesday. Corporate America’s relative earnings strength should propel the US stock market, according to BlackRock’s investment letter, which points out that the US has produced 11% earnings growth since the third quarter of 2024 versus less than 2% for its developed-market peers.

“The US equity market continues to stand alone in terms of earnings delivery, sales growth and sustainable trends in analyst estimates and revisions,” Michael Gates, lead portfolio manager for BlackRock’s Target Allocation ETF model portfolio suite wrote in the letter. “Developed markets ex-US lack competitiveness in terms of earnings and sales delivery, especially trends in sales growth.”

Model portfolios, which package together funds into ready-made strategies to sell to financial advisers, have ballooned in size in recent years. BlackRock alone commands about $185 billion in model assets, up from roughly $150 billion earlier this year. Tweaks to allocations can spur massive inflows and outflows among products.

Roughly $3.4 billion flowed into the iShares S&P 100 ETF (ticker OEF) on Tuesday — the fund’s biggest one-day influx ever — while the iShares Core S&P 500 ETF (IVV) and the iShares US Equity Factor Rotation Active ETF (DYNF) absorbed $2.3 billion and nearly $2 billion, respectively, according to data compiled by Bloomberg.

A BlackRock spokesperson confirmed that the firm adjusted its model-portfolio allocations.

BlackRock’s model team is also “leaning in” to the AI build-out, and is shifting from offering exposure to its broad-based US tech ETF to an AI-focused fund, according to the commentary. Nearly $1.4 billion flowed into the iShares AI Innovation and Tech Active ETF (BAI) on Tuesday, while the iShares US Technology ETF (IYW) lost $2.7 billion.

“We view AI as both a defensive hedge and a growth catalyst,” Gates wrote.