BlackRock pours billions into this active ETF | Wilnesh News
A small tweak to BlackRock’s model portfolio turned a sleeper fund into one of the fastest-growing active ETFs on the market overnight. BlackRock added the U.S. Equity Factor Rotation ETF (DYNF) to its target allocation model portfolio in January. The fund, which has less than $1 billion in assets and little trading volume, saw sudden inflows of more than $2 billion in the final days of January, and then netted another $3 billion in less than a week in March. The fund has since been steadily attracting more cash and now has nearly $7.7 billion under management, according to FactSet. DYNF’s growth is at the center of two broader trends – the rapid growth of model portfolios and the proliferation of active exchange-traded funds. Model portfolios are strategies offered by asset management companies to investors and financial advisors. These products divide a portfolio into different asset classes and then invest the money into funds that fit those categories. These funds are usually managed by the same asset manager. Michael Gates, lead portfolio manager for BlackRock’s Target Allocation ETF model portfolio suite, said: “Including active ETFs into our toolkit gives our models access to single security selection expertise and exposure not available with existing tools. Part of the market. So far, the move is working for investors. The fund is up about 1.6% since March 15, while the iShares Core S&P Total US Stock Market ETF (ITOT) is up about 1.2%. The Core S&P 500 ETF (IVV) is up about 1.3%. The fund has also performed well over the past 12 months, with a total return of 36%, while the BlackRock DYNF 1Y Mountain Index Fund has a total return of about 27%. This active factor rotation fund has outperformed some of BlackRock’s cheaper index ETFs over the past year, but most active strategies underperform the market in any given year, and their costs tend to be higher than their passive counterparts. The use of model portfolios creates more aggressive choices in terms of asset allocation and the fund itself. About DYNF DYNF’s stated goal is to identify companies that score high on historical investment factors, including quality, size and momentum. Shift investments between these factors based on the management team’s expectations for future performance growth. For example, the fund reduced its exposure to expensive stocks in April to be more balanced with value investments as of May 7, according to the product brief. Its top holdings include some of the largest technology companies such as Microsoft and Nvidia, as well as financial companies such as Visa and Berkshire Hathaway, a mixed active fund and model portfolio that has been active in U.S. ETFs since 2019, according to Morningstar. Share has more than quadrupled and is now close to 10%, in part due to regulatory changes. Model Portfolios have followed a similar trajectory, Morningstar said in a report earlier this year, as of June 2023. Funding is $424 billion, up $286 billion from two years ago, and as the two grow together, it may be harder for investors to see where they’re investing from the model at a glance, said Elisabeth Kashner, director of exchange-traded fund research and analysis at FactSet. What is gained in the combination. “The end user, whether it’s a financial advisor or the investor himself, needs to do more due diligence to really figure out why the model is put together the way it is,” Kashner said. ” Costs and Risk Active strategies typically have higher fees than passive funds. DYNF is no exception, with an expense ratio of 0.30%, compared to IVV and ITOT’s 0.03% expense ratio. Stock picking can also lead to wild swings and underperformance. According to According to FactSet, DYNF has a one-year beta of 1.1, meaning the fund has tended to outperform the market in either direction, although the fund has been a winner recently, in 2020, 2021 and 2021, according to Morningstar. It does underperform many peers in 2022. At the same time, a model portfolio that wants to add active management may not be able to add the best-performing stocks in a category, and the top fund managers may be working for competitors. , choosing among proprietary funds is limited in its range of options. It’s not necessarily choosing the best ETF for each use case, but choosing among the offerings of an asset manager,” Cashner said. Correction: BlackRock added the U.S. Equity Factor Rotation ETF (DYNF) to its Target Allocation Model Portfolio in January. The fund brought in more than $2 billion in assets in the final days of January. An earlier version of this story misstated the time. Elisabeth Kashner, director of exchange-traded fund research and analysis at FactSet. An earlier version misspelled her name.
