BlackRock agreed to acquire the remaining equity interest in SpiderRock Advisors, a provider of customized option overlay strategies. The deal bolsters Blackrock’s separately-managed accounts business.
“By giving BlackRock more SMA capabilities, this acquisition will enable us to meet growing demand from wealth managers for personalized, tax-efficient portfolios,” Joe DeVico, co-head of BlackRock’s U.S. Wealth Advisory business, said in a statement. “We look forward to fully integrating SRA’s team and capabilities into our U.S. Wealth Advisory business and to further expanding our offerings in SMA solutions.”
The popularity of SMAs has continued to grow. Cerulli Associates predicted assets in SMA and unified managed account programs will surpass $2 trillion this year. In addition, a recent Escalent survey of 403 financial advisors found they expect to increase average SMA allocations from 18% to 26% between now and 2025. Advisors who serve high-net-worth investors expect to increase SMA allocations from 23% to 31% over the same period. Morningstar also added third-party SMAs from some asset management firms to its U.S. Wealth Platform last month.
"We see continued momentum in the use of SMAs fueled by client demand for customizing portfolios for tax efficiency, value and investment outcomes," said Eve Cout, Head of Portfolio Design & Solutions within BlackRock’s U.S. Wealth Advisory business. "Recent developments in technology have also driven growth, making SMAs more accessible at lower minimums. We believe now is the right time to build on this momentum."
BlackRock managed $186 billion in SMAs as of December 2023. The firm’s SMA franchise specializes in providing customized strategies, including Aperio’s direct indexing capability, and actively managed fixed income, equity and multi-asset strategies. BlackRock previously made a minority investment in SRA in 2021. It also acquired Aperio, a creator of tailored index strategies, in 2020.
"This is very complementary to our existing SMA platform," Cout said. "Adding in SpiderRock helps advisors with income generation, downside protection, tax efficiency and liquidations from concentrated positions. As the transaction closes, we will be able to position it alongside our broader SMA platform, which has been around 40 years. We will be able to help more advisors and more accounts by having it on that platform."
“We are thrilled to fully join the BlackRock team, and to broaden access to SpiderRock Advisors’ options management solutions for both 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 options in their portfolios to better manage risk as we navigate a challenging capital markets landscape. We look forward to benefiting from BlackRock’s global reach and deep industry relationships as we seek to help more advisors deliver tailored options strategies to empower their clients towards achieving their after-tax investment goals.”
SRA managed approximately $4.8 billion in client assets as of February 2024. The firm’s SMA strategies are focused on income and risk management for single securities as well as diversified portfolios using derivative overlay strategies, and are accessible through RIAs, family offices, national broker/dealers and institutional channels.
"Options are time consuming. They are tricky to implement and monitor and we know advisors' time is at capacity trying to grow their book of business," Cout said. "The ability to use SpiderRock in a SMA wrapper makes it a lot easier to do and can also be scaled across their book of business."
Financial terms of the deal were not disclosed.