Episode summary
The Long View: Michael Gates - Why More Advisors Are Migrating to Model Portfolios
The Long View
· · 47 min · Hosts: Ben Johnson, Christine Benz, Amy Arnott · Guests: Michael Gates
Summary
Michael Gates argues that model portfolios have become a major competitive tool for advisors because they package asset allocation, risk management, and implementation efficiency into one workflow. He says BlackRock’s target allocation models now span taxable and non-taxable accounts, alternatives, active funds, ETFs, SMAs, and option overlays, with the US opportunity set still far larger than current adoption. He emphasizes that advisors increasingly use models either turnkey, through custom versions, or by modifying published guidance themselves.
Gates says the team’s process starts with a whole-portfolio mindset centered on diversification, risk budgeting, and benchmark-relative risk targets. Recent portfolio changes were framed as “remaining risk on, but refining” risk: trimming the largest US stocks, cutting precious metals exposure, and reducing credit risk while keeping an equity overweight. He ties that posture to a macro view that favors productivity-led growth, a constructive stock outlook, and tight credit spreads that do not compensate investors well for the risk.
A major theme is AI. Gates thinks AI may lift productivity without necessarily destroying job creation, and he says BlackRock is adding AI exposure through specialist active managers and sector-specific selection rather than broad thematic bets. He also expects separately managed accounts and options overlays to become more common as portfolios get more tax-aware and cost sensitive.
Key takeaways
- Michael Gates says model portfolios are winning because they help advisors save time, improve consistency, and compete more effectively with a ready-made allocation process.
- He says BlackRock’s US model portfolio business has grown to more than $220 billion, while the broader US market tied to models is about $4.2 trillion out of an $11.5 trillion addressable market.
- Gates says the latest risk adjustments were to cut the biggest US stocks, reduce gold and silver, and go underweight credit while still staying overweight equities.
- He expects productivity-led growth and AI adoption to support stocks, but he also says tight credit spreads leave investors poorly compensated for credit risk.
- He says separately managed accounts and options overlays are likely to become much more common because of tax efficiency and account-size growth.
Notable quotes
“Models are actively managed multi-asset portfolios with strategic allocations and tactical tweaks, in this case by BlackRock's team”
“So advisors can appropriately select a model for a given client”
“We start with a whole portfolio mindset. So this means we're very focused on diversification and risk budgeting”
“We're entering into a period of sustained productivity growth in the US and especially in and globally”
“So our central scenario is for continued growth in the economy but if we look at history do a quantitative exercise of trying to predict the likelihood of a recession in the next 12 months”
How the episode opens
Please stay tuned for important disclosure information at the conclusion of this episode. Hi and welcome to Longview. I'm Ben Johnson, head of client solutions with Morningstar.
Today's guest on the Longview is Michael Gates. Michael is the managing director, head of model portfolio solutions for the Americas, and the lead portfolio manager for target allocation models at BlackRock. BlackRock's target allocation models have been adopted by a large and growing contingent of advisors in the US.
Four of the model families within BlackRock's target allocation suite have been awarded Morningstar medalist ratings of gold. In 2025, Morningstar's manager research team nominated Michael for a Morningstar Award for Investing Excellence in the Outstanding Allocation Portfolio Manager category.
Michael's time at BlackRock dates to 1999, including his years with Barclays Global Investors, which merged with BlackRock in 2009. Prior to founding the model portfolio solutions group, Michael conducted quantitative trading research for equities in BlackRock's global trading group. At Barclays Global Investors, Michael led in the development and implementation of the firm's quantitative approach in fixed income and alternative asset investing.
Michael earned his MS in economics from the University of California, Davis. He also earned a BS with honors from the University of California, Davis. Michael is a CFA charter holder.
Michael, welcome to the Longview. So glad you could join me. Pleasure to be here.
Thanks for having me. So Michael, while you and your team have been building model portfolios for quite some time now, I be remiss if I assumed familiarity with the space, the concept on behalf of our listeners. So I want to start with a very basic question.
What are model portfolios? Great question. Models are actively managed multi-asset portfolios with strategic allocations and tactical tweaks, in this case by BlackRock's team.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- model portfolios
- tax-loss harvesting
- ai market outlook
- risk-aware rebalancing
- equity thematic investing
Companies and tickers mentioned
- BLK
- BlackRock
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Long View, this episode and its artwork belong to Morningstar, Christine Benz - Director of Personal Finance and Retirement Planning, Ben Johnson - Head of Client Solutions, Amy Arnott - Portfolio Strategist. Octagon is not affiliated with the show; this page is an independent summary.
