ETF Prime: BlackRock on Liquid Alts & the Rise of AI-Managed Portfolios
On this week’s ETF Prime, host Nate Geraci spoke with BlackRock’s Head of Equity ETFs Jay Jacobs about a year of heavy product launches for the firm. The founder and CEO of AI Funds Tal Schwartz also appeared on the podcast to discuss an ETF for which the model, not a portfolio manager, makes the calls.Jacobs said that iShares ETFs took in almost $450 billion globally through the end of the third quarter. That put the firm on pace for a record. He noted that what he found interesting was the spreading out of that cash.Key Takeaways:
iShares pulled in nearly $450 billion globally through Q3. That was highlighted by the iShares Systematic Alternative Active ETF (IALT) reaching nearly $8 billion with hedge fund-style strategies.
BlackRock broadened its lineup with low-cost Nasdaq-100 funds like IQQ alongside ETFs covering the full AI value chain, from infrastructure and robotics (BAI, ARTY) to AI adopters (AIBF).
The AI Funds High Conviction U.S. Equity AI Managed ETF (HIAI) uses a Bayesian model (“BAILA”) to rebalance ~50 stocks weekly and shift to cash during high downside risk.
“If we look under the hood a little bit more, we see that over 40 different funds [each] have seen over $1 billion come in this year. There’s a tremendous amount of breadth in terms of interest across funds,” said Jacobs.
Out of the $450 billion total, $41 billion has gone into country, subsector, and thematic funds. This “reflects a market with wide gaps between winners and losers and little agreement on where things are headed,” he added.
This asset surge includes the iShares Systematic Alternative Active ETF (IALT), which has gathered nearly $8 billion and sits in the top five of the more than 2,200 ETFs launched industrywide since the beginning of 2025. The fund debuted last December.
IALT packs multiple hedge fund-style strategies into one wrapper, including equity market neutral, global macro, and trend following. Jacobs said it is up in the mid-teens this year, with a beta to U.S. equities of about 0.3 to 0.4.Nasdaq-100, Robotics & the AI Value ChainThe iShares Nasdaq 100 ETF (IQQ) launched in July and is closing in on $800 million. Jacobs says BlackRock leaned on price: a 12-basis point fee waived down to 10, plus a share price near $25 to make entry easier for smaller investors.
The firm has also built funds tracking variations on the Nasdaq-100 index. This includes a premium income version targeting a 9% yield. It also includes a pair of funds that split the index into its top 30 names and the next 70.
Regarding AI, Jacobs said BlackRock’s own analysis finds that about half the risk in the S&P 500 now comes from AI-related stocks. The firm’s lineup covers the full value chain through its AI Innovation and Tech Active ETF (BAI ) and its Future AI and Tech ETF (ARTY A-) . It also covers narrower funds for semiconductors, data centers, power infrastructure, minerals and metals vehicles, robots, and industrial automation.
The iShares offering also includes the iShares Future AI Beneficiaries ETF (AIBF). This fund holds companies adopting AI rather than building it, offering yet another angle on the space.AI Funds: Letting the Model DecideSchwartz launched the AI Funds High Conviction U.S. Equity AI Managed ETF (HIAI) in August. It runs on BAILA, a Bayesian model his firm has used in advisor portfolios since 2019. Clients asked for the strategy to be offered in an ETF wrapper to cut the short-term capital gains the strategy was producing.
The fund rebalances weekly and holds about 50 stocks. It can shift toward cash when the model sees a high risk of a sharp drop. It’s fully invested now, and Schwartz says the model changes its risk posture only once or twice a year.
Its top holdings include Apple, Cheesecake Factory, Coca-Cola, Marathon Petroleum, and Microsoft. Together, these companies amount to over 30% of assets. His team follows the model and steps in only to fix errors.
Schwartz argues most “AI-powered” funds are really AI-assisted, with a human making the final call. He expects alpha to shrink once AI manages trillions of dollars. But he says inherent human bias still leaves room for a model to add value today.For more ETF Prime podcast episodes, visit our ETF Prime Content Hub.
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