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Thursday, January 23, 2014

BlackRock ETFs Are Like Peanut Butter

Reported by GI

Following a year of record ETF inflows, an increasing number of institutional money managers are going to start drinking more of the ETF Kool-Aid, bigwigs in BlackRock's iShares division touted at a media summit this morning overviewing the firm's institutional outlook for the coming year.

At the New York City headquarters of the world's largest asset manager, three execs within iShares, the firm's ETF business, addressed a roundtable of around 10 journalists representing media outlets including Reuters, Dow Jones, Money, and Financial News over a light continental breakfast.

Daniel Gamba, head of the iShares Americas institutional business; Mark Miller, manager of the U.S. pension, foundation and endowment iShares team; and Hilary Corman, co-manager of the asset manager/hedge fund/TPM/family office channel within iShares, were all, as could be expected, bullish on ETFs in 2014.

The way to think about ETFs is "as a new technology," Gamba said. "They're changing the way of managing money," whereby money managers are selecting ETFs and choosing to do asset allocation instead of trading equity securities, which Gamba says investors will do less of in the future. "They're picking categories instead of picking stocks."

There will be more ETF uptake by hedge funds "around the edges" in order to increase liquidity and to gain "another tool in the tool belt," Corman said. "We're selling peanut butter to people with peanut butter allergies. They're stock pickers at heart."

Gamba furthered the assessment in saying "people are moving into much more long-term uses," and more large institutions will begin adopting ETFs as a core tool. According to regulatory filing data cited by BlackRock, the use of ETFs among global asset managers bulked up 32 percent year-over-year in Q3 2013.

The trio also described ETFs as an attractive way for hedge fund asset managers exposure to certain asset classes like emerging markets that may be more difficult to introduce into asset pools otherwise. Indeed, Gamba said emerging market exposure is "a big category of usage" in the iShares product, making up about 15-20 percent of the ETFs' allocation.

Conversation also touched on growing popularity of fixed income ETFs, as investors have looked for alternatives to bond markets offering lower yields and with a likely period of rising interest rates in the future. 

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