BlackRock Shifts Toward Value in Portfolio Allocations

BlackRock Shifts Toward Value in Portfolio Allocations

The firm added nearly $5 billion to two value ETFs last week.

LucyBrewster310x310
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Finance Reporter
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Reviewed by: etf.com Staff
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Edited by: James Rubin

BlackRock Inc. inflows into value ETFs reached nearly $5 billion last week as the firm’s model portfolios shifted to value stocks following positive economic growth signals.  

Inflows to the iShares S&P 500 Value ETF (IVE) hit $2.9 billion on Jan. 25, while the BlackRock US Equity Factor Rotation ETF (DYNF) saw $1.9 billion enter the fund, Bloomberg first reported. The investment team behind the firm’s Target Allocation ETF model portfolio suite opted to buy the two value funds while selling the iShares MSCI USA Quality Factor ETF (QUAL) and the iShares S&P 100 ETF (OEF).  

“Our view on value is because we see that value stocks have historically outperformed their growth counterparts when we’ve seen the Fed shift to easing, the 10yr yield fall from its peak and the curve re-steepen towards positive territory,” wrote lead portfolio manager for BlackRock’s Target Allocation ETF model portfolio suite Michael Gates in an investment commentary note reviewed by etf.com. “We are selling factor and factor-like exposures down to add to DYNF,” he added.  

BlackRock rebalances target allocation model portfolios approximately four times a year, according to a company spokesperson.  

S&P Recovery

Amid cooling inflation and positive GDP growth in the last quarter of 2023, the S&P 500 has recovered from its 2022 lows. The index is up 22% over the past year, largely due to high-flying tech stocks. The Nasdaq 100 index grew 47% over the same time period.  

When the market improves, investors often see opportunities in value, which includes undervalued stocks with solid fundamentals, such as utilities and financial services companies. The largest holdings in the iShares S&P 500 Value ETF (IVE) are Berkshire Hathaway, JPMorgan Chase, and Exxon Mobil.  

Yet Gates emphasized that the firm remains upbeat about the tech stocks that have fueled the current bull market. “The picture for forward earnings remains brightest in the U.S. and in the tech sector, where we keep our highest conviction bets, especially relative to developed markets ex-U.S. and [emerging markets],” Gates wrote in the note.  

Model portfolios offered by firms such as BlackRock, Vanguard, and Charles Schwab offer investors a range of products that address investors’ different tolerance for risk and investment philosophies.  

The Target Allocation suite includes BlackRock’s Target Allocation ETF, the Target Allocation Tax Aware ETF, and the Target Allocation ESG ETF, among other SMAs and ETFs. 

Contact Lucy Brewster at [email protected].  

Lucy Brewster is a finance reporter at etf.com covering asset managers, emerging technologies, and regulation. She hosts etf.com webinars and appears on Exchange Traded Fridays, etf.com’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.