BlackRock Puts Investment Portfolios on Blockchain

BlackRock-designed investment portfolios are officially moving onto blockchain rails.

Three investment portfolios designed by BlackRock, the world’s largest asset manager, are now being packaged as blockchain-based tokens by Ondo Finance, the Wall Street Journal reports.

Earlier today, Ondo launched the first three products based on portfolio strategies developed specifically by BlackRock.

Eligible investors can now hold a single token that provides them with exposure to an entire professionally constructed portfolio.

BlackRock is now beyond simply offering cryptocurrency exchange-traded products or putting Treasury securities on-chain. The latest arrangement effectively brings portfolio construction itself onto blockchain rails.

The three products are Ondo High Income Powered by BlackRock (BLKHIon), Ondo Diversified Growth Powered by BlackRock (BLKDIGon) and Ondo High Growth Powered by BlackRock (BLKGRWon). They are available to eligible investors outside the United States in permitted jurisdictions.

BlackRock is not, however, issuing the blockchain tokens itself. The distinction is important. BlackRock developed the underlying portfolio strategies for Ondo, while Ondo Global Markets issues the portfolio tokens and Ondo Finance handles the tokenization and implementation. Ondo also manages, sponsors and administers the products and executes their rebalancing rules.

The new structure essentially takes the logic of an ETF one step further.

An ETF already allows an investor to buy a basket of assets through one security. Ondo’s model takes portfolios composed of multiple tokenized securities and then packages the entire allocation into another blockchain token.

The underlying positions consist of Ondo Stocks. Ondo says the underlying instruments are backed 1:1, while dividends are automatically reinvested. The portfolio’s allocation, fee structure and scheduled rebalancing can then be implemented programmatically through smart contracts.

An investor therefore does not have to individually buy nine or 10 different securities, calculate the appropriate portfolio weights and periodically rebalance them. The holder instead mints or purchases a single portfolio token, while the underlying basket follows the predefined allocation.

Its model allocation is roughly 32% aggregate bonds, 30% high yield, 24% credit and 14% other fixed-income exposure. At the individual-product level, the two largest allocations are 18% each to the iShares High Yield Systematic Bond ETF and iShares Investment Grade Systematic Bond ETF.