Forgotten BlackRock ETF posts mystery $3.7 billion inflow in day

A lifeless BlackRock Inc. ETF with barely any day-to-day inflows over the past 15 years just got a $3.7 billion allocation in one go.

Launched in 2007, the iShares MSCI Kokusai exchange-traded fund (TOK) has until now failed to generate much investor interest in its mission to bid up large and midcap companies around the globe excluding Japan.

Yet on Tuesday, it brought in billions — quite the game-changer given the ETF’s usual habit of posting virtually zero flows in either direction. TOK started the week managing less than $200 million, and assets haven’t been above $500 million since 2014.

Exactly who is behind the flow is unclear. A spokesperson for BlackRock declined to comment.

“It’s extremely rare for an ETF to be way below the radar and have no underlying or limited trading and then gather $3 billion in one day,” said Todd Rosenbluth, head of ETF research at CFRA. He speculated the inflow might be a Japanese investor seeking to diversify outside of the country, although there are more liquid, cheaper, and larger products to execute such a strategy.

The sudden influx of cash also has all the hallmarks of a so-called model portfolio allocation. Large asset managers like BlackRock, Vanguard Group and Charles Schwab Corp. increasingly bundle funds into ready-made portfolios for financial advisers to offer clients. Investors have poured in trillions, and if a tweak is made to a strategy — substituting one ETF for another, for example — billions can move at a time.

Model portfolios have been suspected in a series of other mega flows, including for several BlackRock products.

“The $3.7 billion into a fund on one day when the fund previously had just $184 million in AUM is a strange move and definitely an outlier,” said James Seyffart, ETF analyst at Bloomberg Intelligence. “It seems like it may be a model portfolio move because it’s so large and so specific.”

Seyffart noted that there were similar moves in TOK in July, when the fund received $279 million and then several weeks later saw the same amount leave. 

“I’ll be watching going forward into early February to see if there is a corresponding outflow like we saw on a smaller scale this summer,” he said.

TOK has returned about 162% since inception, according to data compiled by Bloomberg, compared with 145% for the MSCI All-Country World Index.

[MORE: BlackRock partners with tech vendor to help advisers embrace model portfolios]