(Bloomberg) — Assets in model portfolios likely reached $5.1 trillion at the end of 2023 as financial advisers increasingly embrace these off-the-shelf investment strategies, according to Broadridge Financial Solutions.
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The financial technology company expects such portfolios — created by asset managers and investment platforms by bundling funds into ready-made packages for advisers — to grow to $11.3 trillion by the end of 2028. That’s more bullish than the projections by BlackRock Inc., which anticipates the niche will become a $10-trillion business by that year.
Exchange-traded funds are seen as a key driver of that growth, according to Broadridge’s Andrew Guillette. ETFs comprised 51% of model assets at the end of 2023, fueled by an annual growth rate that was nearly twice that of mutual funds. For ETF issuers, model portfolios are a way to drum up flows into their products as competition in the industry intensifies, with firms such as State Street Global Advisors attempting to carve out a larger slice of a growing pie that is so far dominated by the likes of BlackRock.
“We expect ETFs to continue to take share from mutual funds inside model portfolios, driven primarily by their attributes as low-cost and tax-efficient portfolio-building blocks,” Guillette, Broadridge’s vice president of global insights, said in an email.
The popularity of model portfolios among the adviser community means that asset allocation shifts are sometimes suspected to be behind dramatic flows of money. Broadridge found that as of the end of 2023, 63% of model assets were invested in equities, while roughly 32% were in fixed income.
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