Reorients Portfolio Teams and Enhances Data and Research to Leverage
Scale and Drive Sustainable Alpha
Segments Active Equity Offerings into Four Product Ranges
Launches Advantage Series to Meet Emerging U.S. Retail Client Needs
and Preferences
NEW YORK--(BUSINESS WIRE)--
BlackRock is positioning its equity investment platform for the future
of active management – leveraging its unique scale and breadth of
capabilities to drive sustainable alpha. The firm is also segmenting its
active equity product offerings into four product ranges to meet
evolving client preferences, which includes launching the new BlackRock Advantage
series of core alpha products.
“At the heart of BlackRock is a culture that embraces change and turns
it into opportunity,” said Laurence D. Fink, Chairman and CEO. “We are
constantly anticipating how macro trends will reshape both our industry
and our clients’ needs; we then pivot accordingly.
“That unwavering commitment to embracing change for the benefit of our
clients has resulted in an almost continuous review of BlackRock’s
product platform. Over the past few years, we have deliberately evolved
our offerings in ETFs and indexing; we refined and expanded our active
fixed income platform in the face of record low interest rates; and we
have found new ways to leverage our unique technology platform – all of
which helped to drive record net new flows in 2016.
“When we hired Mark Wiseman last year, we announced we would similarly
review active equities in anticipation of changes in the investment
landscape and client preferences. We are acting now to leverage our
unique business model to lay the foundation for what we believe will be
the future of active equity management.”
The Future of Active Equity Investing
“Traditional methods of equity investing are being reshaped by massive
advances in technology and data sciences. At the same time, client
preferences are shifting, focusing not just on outcomes but on how both
performance and fees impact value,” said Mark Wiseman, Global Head of
Active Equities at BlackRock.
“The active equity industry needs to change. Asset managers who simply
use the same techniques and tools from the past will limit their ability
to generate alpha and deliver on client expectations. The steps we are
taking are an extension of the strategy we announced in 2016 to combine
our quantitative and fundamental investment teams into a cohesive active
equity investment platform that leverages the full scale and resources
of BlackRock. We are revitalizing our active equity capabilities by
harnessing the power of ‘human and machine’ to efficiently and
consistently deliver investment performance to our clients.”
Leveraging Scale of Investment Platform, Data Innovation and
Collaboration to Drive Sustainable Alpha Generation
The changes BlackRock is making include reorienting certain investment
teams, primarily in the U.S., around a more focused product line-up,
while also shifting resources and responsibilities within teams to best
leverage the full breadth of BlackRock’s platform in seeking to generate
sustainable alpha.
The firm is also investing further in data science innovation, which
leverages the unique capabilities of Aladdin®, and
strengthens the connections that quantitative and fundamental investors
both need to distill unstructured information into investable insights.
BlackRock is creating a more integrated approach to collaboration across
fundamental research teams to leverage the firm’s global reach,
including insights generated from teams in local markets. This new
structure will allow the best insights derived both through big-data
analysis and fundamental research to be shared across every investment
team across the active equity platform.
Segmenting Product Offerings to Align With Distinct Client Needs
BlackRock’s equity strategies reflect a continuum of investment building
blocks – spanning index, factors, quantitative, fundamental and
alternatives – used to tailor solutions for specific client needs.
Within that spectrum, BlackRock’s active equity offerings are being
organized in four product ranges, each designed for a specific client
need and priced along a continuum to deliver the value clients expect.
“Clients have moved beyond just active and passive techniques. They are
choosing from a variety of products that incorporate multiple investment
strategies, return targets, levels of risk and cost expectations,” said
Wiseman. “We are evolving our product offerings to ensure we stay ahead
of those changing client desires.”
The four distinct product ranges for BlackRock’s active equity products
will be:
1. Core Alpha – products for clients seeking market returns plus
consistent alpha (outperformance over a benchmark) with lower levels of
risk. This includes a new Advantage series of products for
U.S. investors and initially is expected to include nine mutual funds
providing access to BlackRock’s industry leading quantitative investment
team. Approximately 90% of the investment team’s overall strategies have
outperformed their respective benchmarks or peer median over the past
five years.*
2. High Conviction Alpha – for clients seeking higher risk/return
products. These strategies provide access to portfolio managers that can
deliver returns in more highly concentrated and unconstrained/absolute
return strategies.
3. Outcome Oriented – products designed to provide clients with specific
outcomes, such as income or sustainable investment strategies. This will
include an expanded range of income products to meet growing client
needs for higher dividend yields.
4. Country and Sector Specialty – offering clients specific country and
sector exposures, where BlackRock offers deep expertise.
“The segmenting of our active equity offerings will sharpen the focus on
different client needs, just as we have successfully done with our
iShares® ETF product ranges,” said Wiseman. “This
reinforces our commitment to our active equity franchise for offering
important building blocks in the portfolios of many clients and to
delivering maximum value for clients with those products.”
Strategy or portfolio management repositioning will impact approximately
$30 billion in assets under management (about 11% of total active equity
AUM). There will be no repositioning of active equity products currently
managed outside of the U.S. The Boards of Directors of applicable funds
reviewed and voted in favor of the various proposals.
Launch of the new Advantage series and an expanded range of income funds
includes both new products and the conversion of certain existing funds
with approximately $8 billion in assets. These changes will result in
approximately $30 million of annualized savings to clients from lower
fees. BlackRock anticipates that these products will attract new assets
at a faster rate over time as a result of improved pricing and
performance. The firm will also incur a charge of approximately $25
million in the first quarter of 2017 reflecting certain one-time,
severance and accelerated compensation expense associated with the
repositioning.
About BlackRock
BlackRock is a global leader in investment management, risk management
and advisory services for institutional and retail clients. At December
31, 2016, BlackRock’s AUM was $5.1 trillion. BlackRock helps clients
around the world meet their goals and overcome challenges with a range
of products that include separate accounts, mutual funds, iShares®
(exchange-traded funds), and other pooled investment vehicles. BlackRock
also offers risk management, advisory and enterprise investment system
services to a broad base of institutional investors through BlackRock
Solutions®. As of December 31, 2016, the firm had
approximately 13,000 employees in more than 30 countries and a major
presence in global markets, including North and South America, Europe,
Asia, Australia and the Middle East and Africa. For additional
information, please visit the Company’s website at www.blackrock.com
| Twitter: @blackrock_news
| Blog: www.blackrockblog.com
| LinkedIn: www.linkedin.com/company/blackrock
*Source: BlackRock, as of 12/31/2016. 90% of accounts for the
investment teams' retail and institutional strategies, which include
three retail mutual funds (performance applies to institutional share
class), five institutional mutual funds, 28 institutional CTFs, 13
private commingled vehicles and 15 separate accounts.
Forward-looking Statements
This press release, and other statements that BlackRock may make, may
contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act, with respect to BlackRock’s future
financial or business performance, strategies or expectations.
Forward-looking statements are typically identified by words or phrases
such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,”
“comfortable,” “expect,” “anticipate,” “current,” “intention,”
“estimate,” “position,” “assume,” “outlook,” “continue,” “remain,”
“maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or
future or conditional verbs such as “will,” “would,” “should,” “could,”
“may” and similar expressions.
BlackRock cautions that forward-looking statements are subject to
numerous assumptions, risks and uncertainties, which change over time.
Forward-looking statements speak only as of the date they are made, and
BlackRock assumes no duty to and does not undertake to update
forward-looking statements. Actual results could differ materially from
those anticipated in forward-looking statements and future results could
differ materially from historical performance.
In addition to risk factors previously disclosed in BlackRock’s
Securities and Exchange Commission (“SEC”) reports and those identified
elsewhere in this press release, the following factors, among others,
could cause actual results to differ materially from forward-looking
statements or historical performance: (1) the introduction, withdrawal,
success and timing of business initiatives and strategies; (2) changes
and volatility in political, economic or industry conditions, the
interest rate environment, foreign exchange rates or financial and
capital markets, which could result in changes in demand for products or
services or in the value of assets under management; (3) the relative
and absolute investment performance of BlackRock’s investment products;
(4) the impact of increased competition; (5) the impact of future
acquisitions or divestitures; (6) the unfavorable resolution of legal
proceedings; (7) the extent and timing of any share repurchases; (8) the
impact, extent and timing of technological changes and the adequacy of
intellectual property, information and cyber security protection; (9)
the potential for human error in connection with BlackRock’s operational
systems; (10) the impact of legislative and regulatory actions and
reforms, including the Dodd-Frank Wall Street Reform and Consumer
Protection Act, and regulatory, supervisory or enforcement actions of
government agencies relating to BlackRock or PNC; (11) terrorist
activities, international hostilities and natural disasters, which may
adversely affect the general economy, domestic and local financial and
capital markets, specific industries or BlackRock; (12) the ability to
attract and retain highly talented professionals; (13) fluctuations in
the carrying value of BlackRock’s economic investments; (14) the impact
of changes to tax legislation, including income, payroll and transaction
taxes, and taxation on products or transactions, which could affect the
value proposition to clients and, generally, the tax position of the
Company; (15) BlackRock’s success in negotiating distribution
arrangements and maintaining distribution channels for its products;
(16) the failure by a key vendor of BlackRock to fulfill its obligations
to the Company; (17) any disruption to the operations of third parties
whose functions are integral to BlackRock’s ETF platform; (18) the
impact of BlackRock electing to provide support to its products from
time to time and any potential liabilities related to securities lending
or other indemnification obligations; and (19) the impact of problems at
other financial institutions or the failure or negative performance of
products at other financial institutions.
BlackRock’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q
and BlackRock’s subsequent filings with the SEC, accessible on the SEC’s
website at www.sec.gov
and on BlackRock’s website at www.blackrock.com,
discuss these factors in more detail and identify additional factors
that can affect forward-looking statements. The information contained on
the Company’s website is not a part of this press release.
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BlackRock
Investor Relations
Tom Wojcik,
212-810-8127
tom.wojcik@blackrock.com
or
Media
Relations
Brian Beades, 212-810-5596
brian.beades@blackrock.com
Source: BlackRock