Investing in iShares ETFs or BlackRock Funds? Here Are 4 Key Things to Know

BlackRock, the world’s largest asset manager, is raising the bar when it comes to providing investors and advisors the tools they need to construct well-diversified portfolios. Morningstar senior principal for multi-asset strategy ratings Jason Kephart, who oversees BlackRock’s Parent rating, recently updated our assessment of the firm’s stewardship practices. Here he discusses what BlackRock does well, what could be improved, and how investors and advisors can harness the best of what the firm has to offer.

Susan Dziubinski: Talk broadly about Morningstar’s Parent ratings, Jason. What are they? And what do they tell investors?

Jason Kephart: Our Parent rating represents how good of a steward an asset manager is for its investors. That means doing things like keeping fees low or reasonable, being smart about product launches, and being able to attract and retain great investment talent. The Parent ratings are also an input into how we calculate our Morningstar Medalist Ratings at the fund level, along with our view of the fund’s People and Process Pillars.

Dziubinski: How does Morningstar evaluate a money manager when assigning Parent ratings? What are the types of things you and the team are looking at?

Kephart: For a firm as large as BlackRock, we turn over a lot of stones, as you might imagine. Some of the most important things we look for are stability, both at the fund manager and senior leadership positions, how well the funds are delivering for investors, what types of products they’re launching or closing, and how well the firm is doing financially. If a company is dealing with consistent outflows from its funds, it may be hard to reinvest in the business and keep talent, and it could mean forced layoffs.

Dziubinski: What’s the rating scale for Morningstar’s Parent ratings?

Kephart: The best asset managers get a High Parent rating, and the worst get a Low Parent rating. Most fall in the Average Parent rating bucket.

How Does BlackRock Rate on Stewardship?

Dziubinski: You recently issued your new Parent rating report on BlackRock. In it, you say that BlackRock has raised the bar for what it means to be a truly diversified asset manager. What did you mean by that?

Kephart: When you look at what BlackRock has done recently—particularly its acquisitions on the private investing side in 2024—there’s really no other firm that can match its breadth of active offerings, passive offerings, liquid vehicles, and semiliquid vehicles. And now, illiquid vehicles with the purchases of Global Infrastructure Partners and HPS Investment Partners. There’s no other asset manager on the planet that can really match BlackRock’s breadth of offerings.

Dziubinski: Is there a risk that the acquisitions won’t add value for investors? What’s BlackRock’s record on the acquisition front?

Kephart: There’s always a risk. Acquisitions can be difficult, particularly when you’re dealing with successful cultures that you’re trying to merge together. BlackRock has had a lot of experience with acquisitions, and it has learned from things that happened in the past. I think BlackRock would be the first to tell you that the acquisition of Barclays Global Investors, which included iShares, back in 2008, probably could have gone more smoothly.

Now, for example, BlackRock is letting the acquired private-infrastructure and private-credit firms keep their own branding. It’ll be “Global Infrastructure Partners, a part of BlackRock” rather than forcing Global Infrastructure Partners under the BlackRock banner. That could help keep the people who are joining the firm motivated because they get to keep some of their own culture. Ultimately, how all those acquired cultures mesh and how well people work together drive successful mergers that help investors in the end.

Which of BlackRock’s Hands-Off Solutions Are Best?

Dziubinski: BlackRock offers investment solutions for both hands-off and hands-on investors. How do the company’s hands-off products rate when compared with the hands-off products that other firms offer?

Kephart: We have a very high degree of confidence in BlackRock’s hands-off products. In that bucket, I would include its target-date funds, asset allocation funds, and model portfolios, which are doing a great job of helping financial advisors take some investment management work off their plates while also driving successful outcomes for investors. The performance we’ve seen from the model portfolio team is topnotch. We have a lot of confidence there.

We also think BlackRock’s target-date series has some of the best offerings in the industry. If your 401(k) plan offers a target-date managed by BlackRock, you’re in a…