What You Need to Know
- BlackRock's series used active asset allocation; Vanguard's didn't, but both charged low fees.
- Morningstar is expanding its ratings on model portfolios as their numbers explode.
- More advisors are using model portfolios because they free up time to spend with clients and to grow their businesses.
BlackRock’s Target Allocation ETF and Vanguard CORE Model Portfolio received the top rating —Gold — in Morningstar’s newly expanded analyses of model portfolios.
Two American Funds models — Growth & Income and Tax Aware Growth and Income — came in second place with silver.
The BlackRock series “benefits from a dedicated model portfolio team, strong exchange-traded fund building blocks, a thoughtful and relatively active asset allocation approach and rock bottom fees,” according to a new Morningstar model portfolio report written by Leo Acheson, director of multi-asset ratings on the global manager research team, and Jason Kephart, a strategist on the multi-asset manager research team.
Vanguard’s gold-rated series also had “an extremely appealing price gag along with top notch, highly diversified underlying index funds,” but it rarely makes portfolio changes or uses tactical tilts, unlike BlackRock, according to the report.
Morningstar Expands Model Portfolio Analysis
Morningstar has expanded its coverage of model portfolios in response to their increasing number as asset managers react to the growing demand from financial advisors. It is now analyzing 139 unique portfolios that are part of 24 series of model portfolios, compared with 63 unique portfolios and 12 series a year ago. The 24 series were from 18 different asset managers.
“We’re trying to raise awareness of the trend and encouraging people to report to us,” Kephart said.