BlackRock plans to add a small 1% to 2% bitcoin allocation to its target allocation portfolios that include alternatives for the first time through its iShares Bitcoin Trust ETF, according to a Feb. 27 investment commentary written by BlackRock’s target allocation team.
A spokesperson confirmed this is the first time BlackRock has added bitcoin to the alternative asset portfolios.
“We believe bitcoin has long-term investment merit and can potentially provide unique and additive sources of diversification to portfolios,” wrote Michael Gates, the head of model portfolio solutions in the Americas for BlackRock's multiasset strategies and solutions group and also lead portfolio manager for BlackRock's target allocation and target income series of managed portfolios, in the commentary.
Gates explained in the note that “target allocation with alternatives portfolios are designed for investors seeking to reduce risk by using liquid alternatives while maintaining their growth target.”
The iShares Bitcoin Trust ETF, which trades under the ticker symbol IBIT, has about $48 billion in assets under management and has declined 11.3% year-to-date through Feb. 27.
Gates further wrote in the commentary that bitcoin represents “an additional alternative asset with a fixed supply, with a potentially diversifying source of risk and return.”
The spokesperson said: “Target allocation with alternatives models invest across a full risk spectrum, and allocate to a core allocation of stocks and bonds plus liquid alternative investments. The addition of IBIT to these portfolios as a diversifier (is) in line with the investment objectives of this model, as target allocation with alternatives portfolios are designed for investors with a higher risk budget and growth target."
