The 10 biggest takeaways from BlackRock’s investor day, where the firm laid out how it’s becoming a one-stop investments shop (BLK)

Summary List PlacementBlackRock detailed its plans to grow in Asian markets, build up its alternative investments business, and expand its already massive iShares exchange-traded fund business in its first investor day since 2018 on Thursday. The asset manager's top executives appeared live from headquarters in New York and other BlackRock...

blackrock larry fink

Summary List Placement

BlackRock detailed its plans to grow in Asian markets, build up its alternative investments business, and expand its already massive iShares exchange-traded fund business in its first investor day since 2018 on Thursday.

The asset manager’s top executives appeared live from headquarters in New York and other BlackRock offices to run through a 149-slide presentation going over the most important facets of the business. 

During the three-hour investor day presentation, the firm emphasized that clients are increasingly looking to work with fewer asset managers.

“Clients want to work with a smaller number of players, of vendors, sometimes even just one,” said Mark Wiedman, head of international and of corporate strategy. “And while there is price pressure, the evidence is that the best firms can meet these trends and grow share and revenues.”

Enter: The “whole portfolio,” or the ways BlackRock is looking to advise clients on all facets of portfolios, like incorporating sustainability considerations or pinpointing risk through Aladdin. 

“The whole portfolio wraps up everything else in our strategy,” Wiedman said. “It’s a spirit, not a product.” 

Here are selected slides and other key points from BlackRock’s investor day.

BlackRock is expanding into China more aggressively than it has in the past.

BlackRock is the largest asset manager in the Asia-Pacific region, said Rachel Lord, who runs the firm’s operations there. 

Still, as China’s population is likely to become the world’s largest economy by the end of the decade, eclipsing the US, the firm sees upping its offerings there as a significant opportunity for the firm, Lord said. 

BlackRock is betting on more investors demanding access to the private markets.

“Private enterprises are staying private for longer, and in many cases, they’re staying private forever,” Edwin Conway, who runs BlackRock’s alternative investments business, said.

Investors in recent years have searched for greater yield in private investments over public ones, and the firm has invested in its private offerings. 

Private markets are the fastest-growing area within the alternatives business, Conway said, with $100 billion raised in the last five years.

That has meant generally shifting portfolios away from the traditional 60% stocks, 40% bonds construction, and adding private investments into the mix.

It’s not just private markets. The firm is investing in its alternative investments unit more broadly.

“If you look at the institutional community alone, 80%-plus of them are telling us they’re increasing their alternatives allocations, but particularly to private markets,” Conway said.

Conway added that clients are “actively consolidating their managers,” and choosing to do “more with far fewer” because it’s easier work with one asset manager offering the same information and services at once. He said he sees that as an advantage for BlackRock, a “multi-wealth manager.” 

Pricing pressure is very real, Wiedman said.

“Price competition and price cautiousness are much more important than we were before,” Wiedman said in prepared remarks. 

In the past, clients would ask BlackRock about a product’s performance, he said. “Now, clients everywhere start by asking, ‘What’s the price?'”  

BlackRock and its competitors have cut fees on products like ETFs as clients’ tastes have shifted.

Earlier this year, the firm cut the expense ratio to 0.15% from 0.30% on a new ETF that tracks US-based companies it sees as best-positioned to transition to a low-carbon economy and made a similar move to a fund that tracks such companies outside the US.

Chief Executive Larry Fink says he is staying put.

Fink, 68, has long been rumored as a contender for public office.

CNBC reported in April 2020 that then-President-elect Joe Biden’s donors privately described Fink as one person they would like to see in the Biden administration. Before then, he was reportedly under consideration for a spot in Hillary Clinton’s administration, if she won the US presidential race in 2016.

But he has said he plans to stay at BlackRock, and on Thursday he nodded to his tenure at the firm in prepared remarks.

“I am not planning to leave anytime soon,” he said.

BlackRock has grown its Aladdin-focused employee population by 67% since 2016, and continues to invest in the business.

“Our vision is to build a comprehensive system for asset management, allowing all people to speak the same language and collaborate seamlessly across the investment lifecycle,” Sudhir Nair, global head of the Aladdin business, said.  

He said Aladdin has some 950 clients with approximately 82,000 users. 

BlackRock’s ETF business is the world’s largest, and it is seeing more firms investing in funds that track bond markets.

Salim Ramji, the global head of iShares and index investments, said he expects the global ETF market to reach $15 trillion by 2025, from some $8 trillion today.

“We’re in the midst of generational shifts,” Ramji said.

Paul Bodnar, BlackRock’s new head of sustainable investing, said sustainability is becoming an “increasingly important” component of the firm’s overall growth.

Bodnar, who joined the firm in April from the Rocky Mountain Institute, said BlackRock has integrated sustainability considerations into 100% of its active and advisory portfolios. 

“While climate modeling is a sophisticated science, linking that data to investment returns is a newer project, understanding the link between returns and the incipient transformation is newer still,” he said.

The firm has integrated environmental, social, and corporate governance (ESG) considerations into “everything we do, from product and portfolio construction to technology to investment stewardship,” noting BlackRock’s sustainability approach sets it apart from rivals.

Bodnar was previously a special assistant to former President Barack Obama and senior director for energy and climate change on the National Security Council. Like former sustainability head Brian Deese, Bodnar helped shape Obama’s climate policy.

BlackRock sees room to do business with more wealth managers. A lot more.

BlackRock is looking to distribute its products and services more aggressively through wealth management firms.

Within the alternatives business, Conway described the push into wealth as one of that unit’s core drivers of growth.

Nair, who runs Aladdin, said it is expanding the work that the portfolio management and risk analytics business does with wealth managers. 

As the independent wealth management industry grows and trillions of dollars in global wealth is set to transfer between generations, linking with more firms who can use BlackRock’s products, like separately managed accounts, and teams is becoming more important to the asset manager. 

Nair said Aladdin continued to “invest heavily” in its wealth management capabilities as more clients are looking for tailored financial advice — and technology to match. 

There’s a retirement crisis, and BlackRock sees an opening to address that with its products.

Mark McCombe, the firm’s chief client officer and the head of BlackRock’s North American business, called the global retirement crisis “one of the most pressing societal issues of our time.”

Last month, the firm launched a tool with insurers Equitable and Brighthouse Financial meant to be integrated into US companies’ defined-contribution plans and provide retirees with steady paychecks through retirement.

Leave a Reply

%d bloggers like this: