BlackRock Inc.’s target allocation model team is increasing its exposure to growth stocks in developed markets by investing billions in exchange-traded funds (ETFs) that track the sector. The team’s model rebalancing led to a $2.9 billion inflow into the iShares S&P 500 Growth ETF (IVW) and $1.4 billion into the iShares MSCI EAFE Growth ETF (EFG).
IVW has seen a nearly 19% increase year-to-date, outperforming the S&P 500’s 12% rise. The growth fund has a significant weight in Nvidia Corp., which has been a major driver of this year’s stock market rally. BlackRock and JPMorgan Chase & Co. are among the asset managers that bundle funds into portfolios for financial advisers to offer to clients, allowing for large movements of funds with strategy tweaks.
BlackRock’s lead portfolio manager, Michael Gates, mentioned that they are increasing their exposure to growth stocks in the US and developed markets due to their role in driving earnings growth. Gates also expressed a bullish outlook on stocks more broadly, attributing it to a supportive macro environment that is boosting risk appetite.
On the other hand, BlackRock’s S&P 500 fund (IVV) experienced its largest single-day outflow ever, with nearly $12.9 billion exiting the fund. However, a BlackRock spokesperson clarified that the model rebalancing was not the main cause of the outflow. Despite the withdrawal, it is not seen as a bearish trading signal, as short-term ETF flows are influenced by various factors, including large managers rotating their portfolios.
Overall, BlackRock’s target allocation model team is optimistic about the future performance of growth stocks and the broader stock market, given the current market conditions.