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Fink Wants 800 Pound BlackRock to Get Bigger

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By Jeff W. Jarrett @ Shutterstock.com

As you know from here, here, and here, BlackRock, the enormous index fund provider, needs another stream of income. What that means is moving into private markets where it can charge juicy fees. BlackRock wants to push into private equity, private credit, real estate, and infrastructure, competing with firms like Blackstone, Apollo, and KKR. Jack Pitcher reports:

BlackRock’s clients are pouring money into its core stock and bond offerings. To keep the momentum going, chief Larry Fink wants to push the world’s largest asset manager into the more lucrative world of private markets.

Managing more assets such as private equity, private credit, real estate and infrastructure would allow BlackRock to compete with the biggest alternative asset managers. It could also make BlackRock more valuable.

Firms such as Blackstone, Apollo Global Management and KKR manage just a fraction of BlackRock’s $11.5 trillion in assets. Yet those rivals command market values that are in the ballpark of BlackRock’s, which is around $150 billion.

The reason: Private-market funds can charge more than BlackRock gets for much of its plain-vanilla, index-based funds. And the market rewards that.

Over the past one, three and five years, shares of Blackstone, Apollo and KKR have handily outperformed those of BlackRock. To change that, Fink is taking an “if you can’t beat ’em, join ’em” approach, largely through acquisitions.

The 72-year-old, who has led BlackRock since its 1988 founding, isn’t a stranger to transforming the business through deals. Building BlackRock into a formidable private-markets manager would help him solidify its status as King of Wall Street.

Demand for private investments from institutional investors like pensions and insurance companies has soared over the past decade. As its clients increase their private market allocations, BlackRock is hoping to keep more of their business.

BlackRock’s two major acquisitions this year were both aimed at boosting its private-market capabilities. It agreed to buy Preqin, which provides data on private assets, for $3.2 billion in June. And in October, BlackRock closed its $12.5 billion acquisition of Global Infrastructure Partners, an alternative asset manager focused on infrastructure that marks BlackRock’s most significant foray into private markets yet.

Action Line: Just how big do you want your asset manager to be? The bigger it is, the less you mean to it as a portion of its business. If, instead, you want the feel of a boutique family-run investment advisor, let’s talk. Email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.
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