Crypto ETFs to hit ‘model portfolios’ toward year end: BlackRock

Digital currency-backed exchange-traded funds will likely make their way into “model portfolios” toward the end of 2024, according to BlackRock’s chief investment officer for ETFs. 

In a Bloomberg interview on July 29, BlackRock’s investment chief for ETF and Index Investments, Samara Cohen, was asked about where big wirehouses such as Morgan Stanley, Wells Fargo, and UBS were with onboarding and promoting crypto ETFs.

Cohen noted that the wirehouses are now conducting risk analytics, due diligence, and looking at the roles of Bitoinc ( BTC ) and Ether ( ETH ) in their portfolios.

“What will happen toward the end of this year and into next year is we will see allocations into model portfolios which will give us much more of a steer into how investors are using them.”

Model portfolios offered by large, full-service brokerage firms generally take a diversified approach to investing, targeting a balance of risk and return based on a transparent strategy.

They can be considered as pre-designed investment strategies that act like ready-made templates or “recipes” for investing.

BlackRock expects model portfolio management to grow from $4.2 trillion currently to $10 trillion in the next five years.

Earlier this month, Salim Ramji, global head of iShares and index investments at the asset manager said “It’s going to be massive,” before adding “It’s the way in which more and more fiduciary advisers are doing business, and, as a result, that’s the way in which we’re doing business with them.”

Cohen added that Bitcoin and Ether are two very different asset classes with different use cases, but they are useful as “portfolio diversifiers.”

Commenting on spot Ether ETFs net outflows since launch, Cohen said she wasn’t concerned because it was a strong launch, and they provide an “access point” for investors who want ETH in their portfolios.

She said there have been a lot of outflows from higher priced funds, in likely reference to Grayscale’s ETHE, but also from “proxy vehicles” because:

“Investors really want to get their ETH exposure, especially if they're going to use it in the context of an overall portfolio in an ecosystem they have confidence in.”

Related: BlackRock foresees 'very little interest' in crypto ETFs beyond Bitcoin, Ethereum

The Grayscale Ethereum Trust (ETHE) has shed a total of $1.7 billion since its spot ETF conversion, which includes the latest $210 million outflow on July 29. However, around 10% of that has gone into its zero-fee Ethereum Mini Trust (ETH).

Ether spot ETFs have now registered four consecutive days of outflows and only one inflow day since the launch on July 23, according to preliminary data from Farside Investors.

Cohen also confirmed there is unlikely to be a spot ETF for altcoins such as Solana ( SOL ) in the near term. Robert Mitchnick, BlackRock’s head of digital assets, echoed the sentiment stating at the Bitcoin 2024 Conference, “I don’t think we're gonna see a long list of crypto ETFs,”

Magazine: Trump’s Bitcoin push, spot Ether ETF debut, and more: Hodlers Digest, July 21-27