This venture builds on BlackRock’s position in the field of personalized separately managed accounts. SMAs are growing and slated to expand rapidly in coming years.

BlackRock has entered a strategic pact with Chicago-based SpiderRock Advisors in order to widen access to options-based separately-managed account strategies. 

This venture builds on BlackRock’s position in the field of personalized SMAs, including the recent acquisition of Aperio. (An SMA is a privately managed investment account that has been opened through a brokerage or financial advisor. In these accounts, pooled money is used to buy individual assets. As this portfolio is private, the assets it contains are not commingled with those of other investors.)

The terms of the transaction were not disclosed.

As part of the strategic venture, BlackRock will make a minority investment in SpiderRock Advisors. The latter firm provides customized options strategies in the US wealth market and manages about $2.5 billion in client assets (as of March 31, 2021). 

The US retail and wealth SMA market totals about $2.1 trillion in assets and is growing at around 15 per cent annually and 35 per cent among registered investment advisors. 

“The use of option overlay strategies in the SMA market has grown with the markets reaching new highs in the past few years and investors accumulating concentrated stock positions. This is expected to further increase as investors continue to look for better ways to tackle the suppressed yield and volatile market environment,” BlackRock said.

(The term “overlay” refers to a management style that harmonizes an investor's separately managed accounts. Overlay management uses software to track an investor's combined position from separate accounts. The overlay system analyzes any portfolio adjustments to ensure that the overall portfolio remains in balance and to prevent any inefficient transactions from occurring.)

The SMA area is growing. In March, Fidelity Investments launched two new Fidelity Advisor SMAs - FA Health Care SMA and FA International Growth SMA. The Fidelity Advisor SMAs are available through broker-dealer firms, registered investment advisors, and managed account platform providers. Fidelity said last year that continued demand for packaged investment solutions drove managed account assets to $247 billion at year-end 2020, rising 10 per cent from 2019. (This publication interviewed the US firm Vestmark about this sector earlier this year.)

Cerulli Associates, the research and analytics firm, has predicted that assets in managed accounts will grow by 43 per cent from 2020 to 2023. At the end of the second quarter of 2020, model-delivered SMA assets made up nearly one-third of the $1.7 trillion in the asset manager-controlled managed accounts industry. Cerulli anticipates that growth in model-delivered SMA assets will continue, driven primarily by equity strategies.