BlackRock, Inc. is an American global investment management corporation based in New York City. Founded in 1988, initially as a risk management and fixed income institutional asset manager, BlackRock is the world's largest asset manager with $5.7 trillion in assets under management as of July 2017. BlackRock operates globally with 70 offices in 30 countries and clients in 100 countries. Due to its power and the sheer size and scope of its financial assets and activities, BlackRock has been called the world's largest shadow bank.
History
BlackRock vs. Blackstone: Private Equity Rivalry - June 30 -- Bloomberg's Jason Kelly examines the business rivalry between BlackRock and Blackstone as the firms begin to pursue the same investors. He speaks on “Market Makers.†-- Subscribe...
1988â€"1997
BlackRock was founded in 1988 by Larry Fink, Robert S. Kapito, Susan Wagner, Barbara Novick, Ben Golub, Hugh Frater, Ralph Schlosstein, and Keith Anderson to provide institutional clients with asset management services from a risk management perspective. Fink, Kapito, Golub and Novick had worked together at First Boston, where Fink and his team were pioneers in the mortgage-backed securities market in the United States. During Fink's tenure, he had lost $100 million as head of First Boston. That experience was the motivation to develop what he and the others considered to be excellent risk management and fiduciary practices. Initially, Fink sought funding (for initial operating capital) from Pete Peterson of The Blackstone Group who believed in Fink's vision of a firm devoted to risk management. Peterson called it Blackstone Financial Management. In exchange for a 50 percent stake in the bond business, initially Blackstone gave Fink and his team a $5 million credit line. Within months, the business had turned profitable, and by 1989 the group's assets had quadrupled to $2.7 billion. The percent of the stake owned by Blackstone also fell to 40%, compared to Fink's staff.
By 1992, Blackstone had a stake equating to about 35% of the company, and Schwarzman and Fink were considering selling shares to the public. The firm adopted the name BlackRock in 1992, and by the end of that year, BlackRock was managing $17 billion in assets. At the end of 1994, BlackRock was managing $53 billion. In 1994, Blackstone Group's Stephen A. Schwarzman and Fink had an internal dispute over methods of compensation and over equity. Fink wanted to share equity with new hires, to lure talent from banks, unlike Schwarzman, who did not want to further lower Blackstone's stake. They agreed to part ways, so the BlackRock partners (Sue Wagner) orchestrated a deal to sell part of the company. In June 1994 Blackstone sold a mortgage-securities unit with $23 billion in assets to PNC Bank Corp. for $240 million. The unit had traded mortgages and other fixed-income assets, and during the sales process the unit changed its name from Blackstone Financial Management to BlackRock Financial Management. Schwarzman remained with Blackstone, while Fink went on to become chairman and CEO of BlackRock Inc. In 1998, PNC’s equity, liquidity, and mutual fund activities were merged into BlackRock.
1999â€"2009
BlackRock went public in 1999 at $14 a share on the New York Stock Exchange. By the end of 1999, BlackRock was managing $165 billion in assets. BlackRock grew both organically and by acquisition. In August 2004, BlackRock made its first major acquisition, buying State Street Research & Management's holding company SSRM Holdings, Inc. from MetLife for $375 million in cash and stock. The acquisition raised BlackRock's assets under management from $314 billion to $325 billion. The deal included the mutual-fund business State Street Research & Management in 2005. BlackRock merged with Merrill Lynch Investment Managers (MLIM) in 2006, halving PNC's ownership and giving Merrill Lynch a 49.5% stake in the company. In October 2007, BlackRock acquired the fund-of-funds business of Quellos Capital Management.
The U.S. government contracted with BlackRock to help clean up after the financial meltdown of 2008. According to Vanity Fair, the financial establishment in Washington and on Wall Street believed BlackRock was the best choice for the job. In 2009, BlackRock first became the No. 1 asset manager worldwide. In April 2009, BlackRock acquired R3 Capital Management, LLC and took control of the $1.5 billion fund. On 12 June 2009, Barclays sold its Global Investors unit (BGI), which included its exchange traded fund business, iShares, to BlackRock for US$13.5 billion. Through the deal, Barclays attained a near-20% stake in BlackRock. BGI was headquartered in San Francisco, with research and portfolio management teams in London, Sydney, Tokyo, Toronto, and other cities.
2010â€"2017
In 2010, Ralph Schlosstein, the CEO of Evercore Partners and a BlackRock founder, called BlackRock "the most influential financial institution in the world." On 1 April 2011, BlackRock replaced Genzyme on the S&P 500 index.
In 2013, Fortune listed BlackRock on its annual list of the world's 50 Most Admired Companies. In 2014, The Economist said that BlackRock's $4 trillion under management made it the "world's biggest asset manager," and it was larger than the world's largest bank, the Industrial and Commercial Bank of China with $3 trillion. In May of the same year, BlackRock invested in Snapdeal.
In December 2014 a BlackRock managing director in London was banned by the British Financial Conduct Authority for "not being a fit and proper" person, because he paid £43,000 to avoid prosecution for dodging train fares. BlackRock said: "Jonathan Burrows left BlackRock earlier this year. What he admitted to the FCA is totally contrary to our values and principles."
At the end of 2014, the Sovereign Wealth Fund Institute reported that 65% of Blackrock's assets under management were made up of institutional investors.
By June 30, 2015, BlackRock had US $4.721 trillion of assets under management. On August 26, 2015, BlackRock entered into a definitive agreement to acquire FutureAdvisor, a digital wealth management provider with reported assets under management of $600 million. Under the deal, FutureAdvisor would operate as a business within BlackRock Solutions (BRS). BlackRock announced in November 2015 that they would wind down the BlackRock Global Ascent hedge fund after losses. The Global Ascent fund had been its only dedicated global macro fund, as BlackRock was "better known for its mutual funds and exchange traded funds." At the time, BlackRock managed $51 billion in hedge funds, with $20 billion of that in funds of hedge funds.
In March 2017, the Financial Times announced that BlackRock, after a six-month review led by Mark Wiseman, had initiated a restructuring of its $8bn actively-managed fund business, resulting in the departure of seven portfolio managers and a $25m charge in Q2, replacing certain funds with quantitative investment strategies. In May 2017, BlackRock increased its stake in both CRH plc and Bank of Ireland. By April 2017, iShares business accounted for $1.41tn, or 26 percent, of BlackRock's total assets under management, and 37 percent of BlackRock’s base fee income. In April 2017, BlackRock backed the inclusion of mainland Chinese shares in MSCI’s global index for the first time.
Divisions
BlackRock Solutions
In 2000, BlackRock launched BlackRock Solutions, the risk management division of BlackRock, Inc. The division grew from the Aladdin System (which is the enterprise investment system), Green Package (which is the Risk Reporting Service) PAG (portfolio analytics) and AnSer (which is the interactive analytics). BlackRock Solutions (BRS) serves two roles within BlackRock. First, BlackRock Solutions is the in-house investment analytics and “process engineering†department for BlackRock which works with their portfolio management teams, risk and quantitative analysis, business operations and every other part of the firm that touches the investment process. Second, BlackRock Solutions (BRS) and the three primary divisions (which include risk management investment platform solutions, FMA, and client solutions) are services that offered to institutional clients. As of 2013, the platform had nearly 2,000 employees.
BlackRock differentiates itself from other asset managers by claiming its risk management is not separate. Risk management is the foundation and cornerstone of the firm's entire platform. Aladdin keeps track of 30,000 investment portfolios, including BlackRock's own along with those of competitors, banks, pension funds, and insurers. According to The Economist, the platform monitors almost 7 percent of the world’s $225 trillion of financial assets.
BlackRock Solutions was retained by the U. S. Treasury Department in May 2009 to manage the toxic mortgage assets (i.e. to analyze, unwind, and price) that were owned by Bear Stearns, AIG, Inc., Freddie Mac, Morgan Stanley, and other financial firms that were affected in the 2008 financial crisis.
Key people
- Laurence D. Fink â€" Founder, Chairman & CEO
- Blake Grossman, former Vice Chairman
- Robert S. Kapito â€" Founder & Co-President
- Susan Wagner â€" Founder, member of the Board of Directors
- Simon Chirayath â€" Vice Chairman
- Barbara Novick â€" Founder, Vice Chairman
- Philipp Hildebrand â€" Vice Chairman
- Robert Goldstein â€" Senior Managing Director, Chief Operating Officer
- Gary Shedlin â€" Senior Managing Director, Chief Financial Officer
- Bennett W. Golub â€" Founder, Senior Managing Director, Chief Risk Officer
See also
- List of S&P 500 companies
- Companies listed on the New York Stock Exchange (B)
- List of asset management firms
- List of CDO managers
- List of companies based in New York City
- List of hedge funds
- List of mutual-fund families in the United States
- Charles Hallac
Notes
Further reading
- Brooker, Katrina (October 29, 2008). "Can this man save Wall Street?". Fortune.Â
- Foley, Stephen (April 2, 2017). "BlackRock's active funds navigate rough seas". Financial Times.Â
External links
- Official BlackRock website
- BlackRock Smart Beta website
- BlackRock Factor Investing website
- BlackRock Global Cash Management website
