[00:00:06.28] KEVIN STAUB: Welcome. Thanks for joining us. I'm Kevin Staub. And I lead our SMA commercial strategy for BlackRock's US Wealth business. I'm joined today by Duane Liedl, head fixed-income portfolio manager in the Northeast. Today, we're going to take you through BlackRock's SMA platform. And we're going to spend some time talking about the benefits of the fixed-income SMA wrapper, as well as some of the use cases that advisors and clients are partnering with us in us Wealth. Duane, thanks for joining us today.
[00:00:36.20] DUANE LIEDL: Happy to be here, Kevin. Thanks for having me.
[00:00:38.60] KEVIN STAUB: So Duane, it's clear the current UN environment is presenting vast opportunities in fixed income, and particularly against prior years. When I tend to think about the SMA structure, I typically think about the security ownership. But can you share why that's important and any other attributes about the SMA structure that make an attractive vehicle for the clients that you're working with?
[00:01:02.20] DUANE LIEDL: I think when you boil it down, Kevin, it really comes down to having more control, right? Control over the portfolio construction and client experience, control over tax efficiency, and the control over the cost of ownership, right? Both explicit and implicit. I think we would all agree that there's a societal shift at hand by consumers towards more unique and customized experiences.
[00:01:26.81] Specifically, regarding SMAs, the fact that, A, the clients funds are not commingled with other investors can help limit the impact that other investors may have on your performance. And B, you're dealing with the underlying securities, which provides increased flexibility to personalize the portfolio, and in turn, better control for a more positive client experience.
[00:01:50.10] Another area that advisors and clients want more control over is taxes, or tax efficiency, which is a very popular topic today. The SMA vehicle can provide a number of advantages for clients, from how the portfolio is initially funded and the ability to incorporate that into the strategy, to the taxation of the income that is generated, to the ability to tax lost harvest individual bonds, which was in very high demand from our clients last year, given the challenging year for fixed-income investors.
[00:02:20.52] Last but not least, owning the individual bonds is very important to many of our clients. We call it having permanence and definition-- in other words, a set of fixed features, whether it's the bond's maturity, the coupon, the underlying credit quality of the issuer, that can be counted on to deliver for our clients, especially during periods of high market uncertainty. That's an important feature of SMAs.
[00:02:45.46] KEVIN STAUB: Duane, I really like that-- the control for investors, the tax efficiency in several different ways, and really, that permanence in definition for clients to hold those bonds in their portfolio. I've also seen that some of the benefits compound through the advisor lens. And we like to refer to this as practice management. We still see many advisors managing bonds on their own. And more often than not, they're doing it well.
[00:03:10.72] But those advisors are reaching out and looking for differentiated and more efficient ways of doing bonds. Some that we've worked with have found that partnering with BlackRock may alleviate the risk of sourcing individual bonds, may offer enhanced capabilities to compete for some of those complex client situations. And most importantly, it frees up the time to focus on other areas, such as business building, wealth management, or retirement planning.
[00:03:39.59] So bringing it all together, SMAs can add value across the portfolio. And they can do so at costs that are comparable to ETFs, making them an attractive option for both advisors and their client. So thank you for joining us. If you'd like to learn more about BlackRock's fixed-income business or BlackRock's SMA platform, please contact your local representative. Thank you.
