BlackRock CEO Fink forecasts consolidation in asset management industry

File photo of a BlackRock building in New York June 12, 2009. REUTERS/Eric Thayer

BlackRock Inc Chief Executive Officer Larry Fink, who runs the world’s largest asset manager, on Wednesday forecast a wave of mergers and acquisitions in asset management, but said his company may be limited for now to small deals.

“I believe you’re going to see a consolidation in our industry,” Fink told Reuters in a telephone interview, citing previous waves in industries such as banking.

Even so, he said, “We’re not going to be a big participant” in M&A. He did say BlackRock is considering three or four small acquisitions that would be focused on shoring up the company’s technology and its investment expertise in different assets and geographic regions.

Started as a bond-focused fund manager in 1988, BlackRock later used acquisitions to add index-tracking exchange-traded funds and equities to its menu of offerings. Yet its traditionalist stock-picking unit has remained a source of frustration.

BlackRock’s earnings reported on Wednesday showed it attracted nearly $65 billion in new cash from clients in the first quarter, while many of its peers have been trying to stanch outflows. BlackRock oversees $5.4 trillion in assets.

The massive inflows at BlackRock raise the prospect that an industry that has nurtured dozens of brand names from Fidelity Investments to Pacific Investment Management Co is increasingly turning into a winner-take-all game.

BlackRock, Vanguard Group and State Street Corp captured nearly 72 percent of the net cash collected globally last year by mutual funds, money market funds and exchange-traded funds, according to Morningstar Inc.

“Asset managers historically benefited – in most cases, they benefited – from rising beta so you didn’t have this need for consolidation,” said Fink, referring to how rising markets boosted asset managers’ earnings.

The next leg of growth may be harder, including M&A and developing new business lines.

Fink has placed an unusual emphasis on technology for an asset manager.

BlackRock added revenue by licensing its Aladdin operating system for money managers to its rivals. The company is also exploring how computer models can improve stock picking while reducing costs.

Last month, BlackRock announced plans to transfer some responsibilities from more traditionalist fund managers to an internal team known for data-driven approaches to picking stocks.

In the interview, Fink said he has “100 percent confidence” that approach will help performance.

The company’s overhaul of its active equities franchise includes doubling-down on niche geographic specialties, such as Asia, where it may have a greater chance to beat the market.

Also Read:

People: BlackRock’s APAC real estate research head to leave; PE Riverside promotes Steven Spiteri as AUS Partner

BlackRock says India its biggest Asia opportunity as private credit expands

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.