BlackRock Eyes Data Science
March 29, 2017
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
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
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
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
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.”
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