- In Larry Fink's annual letter to BlackRock shareholders released on Monday, the CEO highlighted how challenging 2018 was for asset managers broadly.
- Going forward, Fink is positioning BlackRock - already the world's largest asset manager - for growth based on three areas: portfolio construction, technology, and global presence.
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BlackRock is already the world's largest asset manager, but Larry Fink has plans to make the firm even bigger.
In his annual letter to shareholders released on Monday, the chief executive officer acknowledged that "2018 was a challenge, but we've faced challenging years before."
Despite the headwinds facing the asset management industry - fee pressures; investors fleeing higher-revenue active products for passive strategies; and increased focus on cost-cutting, among other issues - Fink said $6 trillion BlackRock weathered the tougher environment. The firm is consistently one of analysts' top picks for asset managers and Fink is keen to help BlackRock continue expanding faster than the industry average of 3% organic asset growth.
See more: As asset management growth grinds to a halt, firms have to get creative. Here are the 3 avenues analysts say will best boost revenue.
"The pace and magnitude of change in our ecosystem creates a new sense of urgency to pivot quickly. We remain confident in our purpose-driven, strategic direction. But we have to execute differently going forward, by taking a more ambitious, but also long-term and considered, approach," he wrote. "By focusing our strategy and resources on the areas of highest client requirement and demand, we will capture share in the fastest-growing areas of our industry."
Fink highlighted three strategies for growth:
- "Capturing the shift from product selection to portfolio construction:" More individual and institutional investors are shifting away from a focus on general market outperformance, instead seeking to create portfolios based on specific goals, from saving for retirement to funding pensions at particular levels. That's shifting managers' approach from offering products to offering assistance with this outcome-based investing approach in mind. To do that, BlackRock wants to be "product agnostic" with a full range of investing options, from infrastructure to sustainable funds.
- "Leading in technology across the asset management value chain:" The firm has long focused on making itself a technology leader, particularly via its investment management platform Aladdin, and continues investing in the space. Last month, for example, BlackRock said it would buy a Paris-based alternative-investment management platform, in a $1.3 billion cash deal. The tech push touches risk management, portfolio construction, client outreach, investing, and operations scaling. "I firmly believe one of the biggest opportunities for Aladdin is to make it the language of portfolio construction for wealth managers, financial advisors and individual investors," Fink wrote. While technology contributed 6% of the company's revenue last year, it's one of the fastest-growing platforms: technology service revenue increased 19% last year on the heels of strong demand for the investment-management platform Aladdin and digital wealth technologies.
"Becoming increasingly local and investing in high-growth markets around the world:" BlackRock, which has offices in over 30 countries, is focusing on international growth as a point of differentiation. Fink picked out three countries - Mexico, Brazil, and China - as particular areas of focus, with China being "one of the largest future growth opportunities."
Read Fink's full shareholder letter here.
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