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All for One and One for All: Model Portfolios

for Every Investor
July 6, 2023

Sponsored by BlackRock

Model Portfolios For Every Investor

Model portfolios are ready-to-go baskets of investments that may be a powerful tool in a
manager’s arsenal. They can cut down on the amount of time managers need to allocate a
portfolio appropriately and can open capacity for advisors to spend on practice management.

Model portfolios are nothing new, but have gained popularity in recent years. According to a

Morningstar study , over the nine months ending in March 2022, assets in model portfolios
grew by an estimated 22%. Institutional investors began to take notice, and as of May 2022,
over 2,400 model portfolios were reported to the Morningstar database – with 30% of them
launched in the three years prior.

Model portfolios can also allow for higher client touch-points, ultimately giving managers a

competitive advantage.

“We did a survey 1 on this in Q1 2022 and found that 92% of model users said a models-based
practice improved their ability to interact with clients during COVID – and the uptake in assets
gained during that period was about 18%. Demand for model portfolios is here and it’s being
driven by the ability for the advisor to spend more time with clients and the ability for the
advisor to adjust clients’ risk tolerance during periods of market volatility,” says Alyson Paul,
CFA, director at BlackRock and Head of Asset Manager Portfolio Consulting.

Turbulent markets saw clients reaching out to managers for guidance, and model portfolios
can be a crucial mechanism to help clients transcend traditional investment methods. “Market
changes are making model portfolios more attractive for end users. Investment propositions
can now move well beyond a plain 60/40 portfolio and can help manage risks and client
objectives more effectively. The model portfolio toolbox is there to build solutions that may
drive attractive outcomes for financial advisors and their clients,” says Bruce Picard, portfolio
manager and head of model portfolios for Manulife Investment Management, which is the sub-
advisor for John Hancock Model Portfolios. “Model portfolios have evolved to offer a wider
spectrum of strategies and levels of customization.”

Customization for both active and passive strategies

Perhaps one of the more profound abilities model portfolios offer is the transformative power
of customization. Model portfolios are by definition somewhat pre-made, but can also be
customized for specific client needs.

“Models are bringing in a wide range of passive based strategies, certainly elements that can
frame and potentially solve for core exposures in equity or fixed income classes, domestic and
foreign exposures, as well as casting a wide net for more niche-oriented solutions depending
on the needs of that investor. The ability to customize and tailor these solutions and the
popularity of index-based investments are driving the growth of the model marketplace,” says
Ryan Sullivan, head of the Americas buy-side team in the index investment group for FTSE
Russell.

Model portfolios have evolved to provide a wider spectrum available for customized plans.
Picard adds, “There’s mass customization and then there’s individual customization. At this
point in the model portfolio space, there’s a broad range of categories. You can identify a range
of risks and customize portfolios to help mitigate those risks.”

He also adds that model portfolios can even be utilized as part of a comprehensive retirement
plan. “An area of focus, which is growing rapidly is income-focused model portfolios. There’s
the ability to build model portfolios focused on income generation, which can be customized
for different risk levels. For clients where tax is a key focus, tax aware investing practices can be
utilized through a model portfolio structure, too.”

Model portfolios can be used to marry the best of active and passive investment management.
Institutions wade through thousands of available ETFs and mutual funds figuring out how
much to allocate to each asset class. Those baskets of investment are then available for
investors to choose their level of customization – with the knowledge that an investment
professional was the one to make the allocation.

All for One and One for All

Innovations in fintech have given a springboard to the model portfolio trajectory. Portfolio
allocation and aggregation tools give advisors, institutions, and managers enhanced ability to
service their clients, but they also open the investing space for new investors.

“I think the theme of personalization can exist for the more sophisticated and high net worth
investors, but it also helps democratize it for lower balance or newer investors in the
marketplace when they can use these tools,” says Sullivan of FTSE Russell. Working with an
advisor, such investors are “able to enter models early on in their investment life cycle, with
the options of personalizing that a bit, and tailoring it to where they want to see exposures or
where their values may exist. So that technology aspect really underpins a lot of these
solutions,” says Sullivan.

Indeed, model portfolios may well offer retirement plans in particular a stepping stone to
institutional-grade investment expertise. Paul notes that “this is a business model that was
reserved for the largest sovereign wealth funds and the largest pension funds in the world, and
now it’s being made available to individual investors. My hope is that this goes a long way in
helping them save for retirement and helps solve for the retirement crisis.”

1
Source: BlackRock, “Which advisors had a smoother ride during COVID-19?”, 2021.

Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses
before investing. This and other information can be found in the Funds’ prospectuses or, if
available, the summary prospectuses which may be obtained by visiting www.iShares.com or
www.BlackRock.com . Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

Diversification and asset allocation may not protect against market risk or loss of principal.

Transactions in shares of ETFs may result in brokerage commissions and may generate tax
consequences. All regulated investment companies are obliged to distribute portfolio gains to
shareholders.

The BlackRock model portfolios are provided for illustrative and educational purposes only.
The BlackRock model portfolios do not constitute research, are not personalized investment
advice or an investment recommendation from BlackRock to any client of a third party
financial professional, and are intended for use only by a third party financial professional,
with other information, as a resource to help build a portfolio or as an input in the
development of investment advice for its own clients. The BlackRock model portfolios
themselves are not funds.

BlackRock intends to allocate all or a significant percentage of the BlackRock model portfolios
to funds for which it and/or its affiliates serve as investment manager and/or are compensated
for services provided to the funds (“BlackRock Affiliated Funds”). Clients will indirectly bear
fund expenses relating to assets allocated to funds, including BlackRock Affiliated Funds.
BlackRock has an incentive to (a) select BlackRock Affiliated Funds and (b) select BlackRock
Affiliated Funds with higher fees over BlackRock Affiliated Funds with lower fees.

This information should not be relied upon as research, investment advice, or a

recommendation regarding any products, strategies, or any security in particular. This
material is strictly for illustrative, educational, or informational purposes and is subject to
change.

The information included in this material has been taken from trade and other sources
considered to be reliable. We do not represent that this information is accurate and complete,
and it should not be relied upon as such. Any opinions expressed in this material reflect our
analysis at this date and are subject to change. The information and opinions contained in this
material are derived from proprietary and nonproprietary sources deemed by BlackRock to be
reliable, but are not guaranteed as to accuracy.

The model portfolios are made available to financial professionals by BlackRock Fund Advisors
(“BFA”) or BlackRock Investment Management, LLC (“BIM”), which are registered investment
advisers, or by BlackRock Investments, LLC (“BRIL”), which is the distributor of the BlackRock
and iShares funds within the model portfolios. BFA, BIM and BRIL (collectively, “BlackRock”)
are affiliates.

BlackRock is not affiliated with Institutional Investor or any of their affiliates, nor John
Hancock or FTSE Russell.

©2023 BlackRock, Inc. or its affiliates. All Rights Reserved. BLACKROCK and iSHARES are
trademarks of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective
owners.

This commentary is provided for informational purposes only and is not an endorsement of
any security, mutual fund, sector, or index. The commentary reflects the views of the author(s)
and is subject to change as market and other conditions warrant. Any economic or market
performance is historical and is not indicative of future results. The information contained
here is based on sources believed to be reliable, but it is neither all-inclusive nor is its accuracy
guaranteed. Diversification and/or asset allocation does not guarantee a profit or eliminate the
risk of a loss.

John Hancock Investment Management LLC and Manulife Investment Management (US) LLC
are affiliated SEC-registered investment advisors using the brand name John Hancock
Investment Management. John Hancock Investment Management is not affiliated with
BlackRock or FTSE Russell.

John Hancock is not responsible for the comments by or views of anyone not affiliated with
John Hancock or its affiliates.

Model Portfolios

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