BlackRock forming an RIA advisory council

The largest money manager in the world is turning to registered investment advisers for help. BlackRock Inc., which manages close to $4 trillion in assets, plans to form an RIA advisory council in the next several months, according Sue Thompson, head of the RIA and institutional asset management channels. The council will help BlackRock better understand the needs of advisers and how to better serve those needs, Ms. Thompson said. The size of the council and which RIAs will be included are still being determined. BlackRock took the first step toward working more closely with advisers during the development of its newly launched enhanced exchange-traded funds. The iShares Enhanced U.S. Large-Cap ETF (IELG) and the iShares Enhanced U.S. Small-Cap ETF (IESM) both were developed in collaboration with a group of RIAs. They represent BlackRock's first foray into actively managed ETFs, although they aren't traditional actively managed funds. The funds won't be managed by stock pickers. Instead, the managers will tilt their portfolios toward stocks that have a combination of high earnings quality and attractive valuations, investment strategist Mark Carver said. To make sure the funds still offer a broad exposure to both large-caps and small-caps, individual stock holdings will be capped at around 2%. Being active, rather than tracking an index, allows the fund managers to be more opportunistic with trading and more flexible in adapting to changing market environments, he said. “In a stressed market, we're going to react to benefit clients,” Mr. Carver said. He doesn't expect the funds to have a high turnover. “The intent is to re-balance monthly,” he said. “We expect modest changes to the portfolio, not a high turnover fund. The process, by design, is modest to low turnover.”