BlackRock in talks with Tencent to explore China expansion

Pedestrians walk with umbrellas in front of BlackRock Inc. offices in New York, U.S., on Friday, April 12, 2013. Photographer: Scott Eells/Bloomberg

BlackRock Inc. has held preliminary discussions with Tencent Holdings Ltd. over the past year, as the world’s largest asset manager takes steps to expand its operations in China.

BlackRock is exploring ways to make its tools for investment portfolios available to the Chinese market. The talks between BlackRock and the Chinese Internet giant are at an early stage and no final decisions have been made, according to a person familiar with the matter.

The New York-based company has held discussions with major Chinese lenders about setting up a joint venture with one of the wealth management units they recently spun off into legally separate entities, Bloomberg previously reported. Chief Executive Officer Larry Fink is counting on China to help drive growth in an increasingly cutthroat global industry.

BlackRock and Tencent have also discussed co-developing a financial software system similar to BlackRock’s Aladdin business, which helps clients manage risk in their portfolios, said the person, who asked not to be named because the matter is private.

Melissa Garville, a spokeswoman for BlackRock, declined to comment. Tencent didn’t immediately respond to a request for comment.

Trump plans

One possible roadblock to the plans would be potential limits on U.S. portfolio flows into China, which Trump administration officials have discussed, Bloomberg reported last week. The options discussed by Trump officials have included forcing a delisting of Chinese companies from U.S. exchanges, imposing limits on investments in Chinese markets by U.S. government pension funds and putting caps on the value of Chinese companies included in indexes managed by U.S. firms.

In an email last week, a spokeswoman for U.S. Treasury Secretary Steven Mnuchin said there were no current plans to stop Chinese companies from listing on U.S. exchanges.

“China’s been a top strategic priority for BlackRock for many years,” said Kyle Sanders, an analyst at Edward Jones. “They haven’t seen a lot of progress there, though. It’s hard to get traction there with the regulatory hurdles.”

BlackRock currently has a license to sell funds to qualified institutions and high-net-worth individuals in China, which boasts an asset management industry worth about $14 trillion. With Chinese leaders pushing ahead with financial-market opening in the face of a trade war with the U.S., overseas fund managers, banks and insurers are making plans to significantly expand onshore operations.

Fink has said Asia is expected to drive 50% of the organic growth in assets under management for the industry over the next five years, largely driven by China. In his annual letter to shareholders earlier this year, he said China is one of the largest future growth opportunities for BlackRock.

The Wall Street Journal earlier reported the talks.