BlackRock brought in more money last quarter than ever before. Here's where the $11.5 trillion asset manager hopes to become the industry leader next.
Thos Robinson/Getty Images
- BlackRock brought in $221 billion in net inflows in the third quarter, the most in its history.
- The world's largest asset manager, though, is focused on growing its private markets business.
- After growing to $11.5 trillion in assets thanks to cheap ETFs, the firm is focused on higher-fee products.
BlackRock became the world's largest asset manager because it made cheap funds for the masses. Now, the $11.5 trillion behemoth wants to put high-fee private market strategies in your portfolio.
The firm brought in more assets last quarter — $221 billion — than ever before, but on its earnings call, the firm's leaders focused more on integrating strategies from the recent acquisition of Global Infrastructure Partners into model portfolios than on its ballooning ETF franchise.
"This is a revenue growth story," said BlackRock's chief financial officer Martin Small Friday morning. GIP, the infrastructure asset manager that BlackRock paid $12.5 billion for, is expected to add $250 million in management fees to BlackRock's bottom line in the fourth quarter alone.
"This is a meaningful accelerant to our private markets capabilities," he said.
A quarter century after BlackRock went public — the firm IPOed on October 1, 1999 — the firm hopes to blend its private market strategies into its model portfolios for wealth managers. Private equity and private credit strategies have the potential to bring on higher returns but are also less liquid and more expensive investments than mutual funds or ETFs. The manager is hoping to be the builder of next-generation technology, whether that's data centers needed for artificial intelligence or infrastructure needed for decarbonization.
"We're not going to say they're alternatives because they'll just be part of the market," said BlackRock CEO Larry Fink, about private strategies, which have long been touted in industry lingo as "alternatives" to the public market.
Fink said risk will be measured by the liquidity of these blended portfolios. The firm's $3.2 billion acquisition of data giant Preqin will help bring these more complex strategies to a broader audience. The acquisition is set to close at the end of the year.
"It's going to happen with the expansion of data and analytics," Fink said.
The firm's focus may be shifting because there aren't many more levers to pull for increased growth in its iShares franchise, which crossed $1 trillion in total assets last quarter. The firm's leaders said the fourth quarter is traditionally a strong one for this segment of their business, and the franchise has also seen serious inflows following political events and central bank decisions.
Comparatively, retail allocation to the private markets is in the "low-single digits," according to Small, giving BlackRock another territory to expand into.
"The opportunities ahead of us have never been better than they are now," Fink said. Private credit, for example, could pick up billions of dollars from the firm's insurance clients, which have $700 billion invested with BlackRock.
"We've never shied away from taking big bets," Fink said, and private market strategies are the latest roll of the dice.