Economy

BlackRock cuts fees and jobs; stockpicking goes high-tech

BlackRock cuts fees and jobs; stockpicking goes high-tech

The revamp marks Blackrock's biggest attempt to rejuvenate its actively managed equities business as investors shift to ETFs.

BlackRock, the world's largest investor, just shook up its business, slashing fees on some funds and saying it will increasingly turn to computing power to drive investing decisions.

Two other groups of funds - one that will make higher risk, concentrated bets and another focusing on specific countries and sectors - round out the reorganisation. The money manager said it will incur a charge of about $25 million this quarter for severance, compensation and other costs associated with the overhaul.

Wiseman said: "We're in really rough seas, but BlackRock is an aircraft carrier".

"The active equity industry needs to change". This compares with the industry average of 5.3% and 8.8%.

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As a result of the BlackRock layoffs, the company will be moving $6 billion of the $201 billion in control of stock pickers to quantitative analysts.

The executive behind the overhaul is Mark Wiseman, the former CEO of the Canada Pension Plan Investment Board, who was hired previous year to turn around the stock-picking business. Mr. Wiseman arrived during a tough 2016 for the quant group, which contributed to BlackRock's first annual decline in revenue since 2009.

So to combat their woes, BlackRock is shifting to quantitative strategies like many fundamental hedge funds are. The company's yearly average return over the last five years is 7.3%. 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.

The "repositioning" of funds will impact $30bn of the firm's assets under management, 11% of its total active equity AUM, and fees will be cut.

Wiseman said his group plans over the next 18 months to hire about the same number of employees who were laid off. BlackRock is looking for people with deep research capabilities, technological and data analytics skills, and will put more emphasis on hiring in the emerging markets, especially Asia.


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