BlackRock is broadening its equity holdings while maintaining a firm conviction in artificial intelligence, as it rebalances a suite of model portfolios valued at roughly $300 billion. According to an investment outlook report, the asset manager is channeling capital into large-cap US stocks, while simultaneously shifting a portion of its AI exposure from early pioneers toward companies that are either poised to benefit from or actively adopting the technology. On the international front, BlackRock is narrowing the spread of its regional tilts across the US, developed markets, and emerging markets.

Data compiled from fund flows shows this rebalancing has already pushed billions of dollars into several of BlackRock's exchange-traded funds. The iShares Large Cap Core Active ETF has absorbed nearly $2 billion in inflows this week, its highest level since March, while the iShares International Country Rotation Active ETF has seen over $4 billion in new money. Michael Gates, chief portfolio manager for the BlackRock Target Allocation ETF model portfolio series, noted that the firm maintains a 1% equity overweight and continues to hold its highest-conviction directional views. He added that while some of the strongest-performing assets this year have grown in portfolio weight, their active risk has also increased accordingly.

These adjustments offer a rare glimpse into how BlackRock recalibrates its model portfolios, which package multiple funds into ready-made investment strategies for financial advisors, as more investors delegate asset allocation decisions to these tools. The popularity of model portfolios has surged in recent years, with an estimated several trillion dollars now parked in such strategies. BlackRock's own lineup of these models has expanded to over $300 billion, up from $150 billion just a year ago.

The shift arrives amid a more complex policy landscape, where persistent inflation continues to pressure the economic outlook. In this environment, Gates argues that the appropriate stance is to remain invested while trimming exposures whose risk profiles have exceeded initial expectations. On the international side, the rebalancing signals that BlackRock's bets on which regions will outperform have become less pronounced, with allocation differences among markets narrowing. Gates noted that recent revisions to earnings expectations have eroded the advantage that previously supported an overweight to the US, while performance dispersion across countries has widened, creating more attractive opportunities for country rotation strategies.

The changes are not confined to equities. BlackRock is keeping a modest duration underweight, reducing allocations to credit assets, and increasing exposure to core bonds and global sovereign debt. In portfolios with higher bond weightings, the firm is selectively adding to active mortgage-backed securities, convertibles, and liquid alternative assets. As part of this overhaul, nearly $3 billion has flowed into the iShares Core Universal USD Bond ETF, while $1.2 billion has exited the iShares MBS ETF. BlackRock has also trimmed its standalone momentum strategy exposure, despite the approach remaining in favor, with over $4 billion flowing out of the iShares MSCI USA Momentum Factor ETF.