BlackRock has agreed to acquire the remaining stake in SpiderRock Advisors, a provider of customized option overlay strategies. The deal strengthens BlackRock’s independently managed accounts business.
Joe DeVico, co-head of BlackRock’s U.S. wealth advisory business, said in a statement: “By providing BlackRock with additional SMA capabilities, this acquisition will enable us to meet the growing demand among wealth managers for personalized, tax-efficient investment portfolios. needs.” “We look forward to fully integrating SRA’s team and capabilities into our U.S. Wealth Advisory business and further expanding our offering in SMA solutions.”
The popularity of SMA continues to grow. Cerulli Associates predicts assets in SMA and unified managed account plans will exceed $2 trillion this year. Additionally, a recent Escalent survey of 403 financial advisors found that they expect average SMA allocations to increase from 18% to 26% between now and 2025. Advisors serving high-net-worth investors expect to increase SMA allocations from 23% to 31% over the same period. Morningstar also added some of the asset managers’ third-party SMAs to its U.S. Wealth platform last month.
“We see continued growth in the use of SMA driven by client demand for customized investment portfolios to improve tax efficiency, value and investment outcomes,” said Eve Cout, head of portfolio design and solutions for BlackRock’s U.S. Wealth Advisory business. “Growth has also been fueled by recent technological developments, making SMA more accessible and at lower minimum prices. We believe now is the perfect time to build on this momentum. “
As of December 2023, BlackRock managed $186 billion in SMA. The firm’s SMA franchise specializes in delivering customized strategies, including Aperio’s direct indexing capabilities, as well as actively managed fixed income, equity and multi-asset strategies. BlackRock previously made a minority investment in SRA in 2021. The company also acquired Aperio, a creator of customized index strategies, in 2020.
“This is very complementary to our existing SMA platform,” Cout said. “Joining SpiderRock helps advisors achieve revenue generation, downside protection, tax efficiency and centralized position liquidation. As the transaction closes, we will be able to position it alongside our broader SMA platform, which has been around for approximately 40 years. We will be able to help more advisors and more clients by being available on the platform.”
“We are excited to fully join the BlackRock team and expand access to SpiderRock Advisors option management solutions for taxable and tax-exempt investors,” Eric Metz, president and chief investment officer of SpiderRock Advisors, said in a statement. “Innovative Advisors and Investors understand the value of the options in their portfolios to better manage risk as we navigate a challenging capital markets environment. We look forward to benefiting from BlackRock’s global reach and deep industry relationships as we seek to help more Multi-Advisers provide tailored options strategies to help their clients achieve their after-tax investment goals.”
As of February 2024, SRA managed approximately $4.8 billion in client assets. The firm’s SMA strategies focus on income and risk management in single securities and diversified portfolios using derivatives overlay strategies, and are accessible through RIAs, family offices, national broker/dealers and institutional channels.
“Selection is time-consuming. It’s tricky to implement and monitor, and we know advisors have enough time on their hands trying to grow their practice,” Coote said. “The ability to use SpiderRock in SMA wrappers makes it even easier and scalable across their business lines.”
Financial terms of the deal were not disclosed.
