BlackRock Inc. (NYSE: BLK) is known as one of the elite financial firms in the world, but it seems that it is becoming less human. Essentially, the firm is taking steps toward robo-investing and robo-advisory. Although these changes might imply job losses and management fee pricing changes, there will be a larger emphasis on computer-based investing models.
In recent memory, traditional methods of equity investing have been totally reshaped by massive advances in technology and data sciences. While at the same time, client preferences are shifting, with a focus not just on outcomes but on how performance and fees impact value.
According to BlackRock management, 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.
Laurence D. Fink, chairman and CEO of BlackRock, commented:
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.
Part of BlackRock’s strategy is to separate its active equity products into four distinct product ranges: Core Alpha, High Conviction Alpha, Outcome Oriented, and Country and Sector Specialty. BlackRock is looking to sharpen its focus on different client needs by this segmentation.
The firm described these segments as follows:
- 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.
Shares of BlackRock were trading at $379.97 on Wednesday, with a consensus analyst price target of $425.64 and a 52-week trading range of $317.60 to $399.46.