Michael Gates, Lead Portfolio Manager for BlackRock’s Target Allocation Model Portfolios, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss the growth of model portfolios and BlackRock’s approach to incorporating liquid alternatives.
Gates highlights how model portfolios can help advisors scale their businesses by creating a more consistent investment process across client accounts. He explains that this consistency can free up advisors’ time to focus on client interactions, further building client relationships and trust.
As model adoption continues to grow, Gates discusses BlackRock’s approach to incorporating liquid alternatives. Rather than funding these strategies from stock allocations, BlackRock funds liquid alternatives from bonds, an approach Gates views as favorable from a risk-and-return perspective.
While liquid alternatives can carry higher fees than traditional bond exposures, Gates notes that BlackRock’s models incorporating liquid alternatives have experienced stronger performance in recent years. He emphasizes that incorporating higher-cost strategies requires a strong case for how they are funded and a reasonable expectation that they can outperform.
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