BlackRock hunts for next iShares acquisition

‘I said to be in the game, we must play the game. And so, we are in the game.’

Jamie Gordon

BlackRock iShares

BlackRock founder, chairman and CEO Larry Fink said his firm needs to be “in the game” and will seek out “transformational” opportunities after its assets under management (AUM) broke above the $9trn mark in Q1.

His comments come amid continued uncertainty in the banking sector and follow BlackRock’s decision to send personnel to Switzerland to consider acquiring part of Credit Suisse prior to UBS’s regulator-brokered takeover of its Swiss rival.

“If there is an opportunity to do something transformational, we are going to be prepared to do it,” Fink told analysts on an earnings call last Friday.

He reflected on the impact of Efront on the firm’s Aladdin platform, Aperio in wealth management and cash matrix and its role in the firm’s money market funds in recent months.

“It is through inorganic opportunities that we look at if we can expand our footprint. As I said in my prepared remarks, we are asking ourselves to reimagine BlackRock,” he continued.  

“What are the other big opportunities? Should there be a big opportunity as more and more organisations use technology? How can we double down on what we’re doing with Aladdin technology? How can we build out our footprint globally at this time?”

BlackRock is an example of a firm not afraid of making ambitious acquisitions. The firm acquired State Street Research & Management in 2005 and Merrill Lynch Investment Managers in 2006. It even acquired Credit Suisse’s CHF16bn ETF business in 2013 for a sum estimated to be between $200m and $300m.

However, its defining acquisition has always been its $13.5bn buy-up of Barclays Global Investors (BGI) and its iShares franchise in 2009, which saw it become the new dominant force in passive investing.

The issuer’s assets under management (AUM) also more than doubled from $1.4trn to $3.3trn, making it the world’s largest money manager – a title it has retained to this day.

Interestingly, BlackRock initially withdrew from buying BGI in 2004, with Fink stating the firm lacked the “pedigree” to make such an acquisition. BlackRock’s lack of success in recent Credit Suisse uncertainty may not deter the firm from looking for similar opportunities in the near future.

In the recent analyst call, Fink repeated what he told the team he sent to Switzerland: “I said to be in the game, we must play the game. And so, we are in the game. We are across the board working with our clients across the board. We are working with policymakers across the board. We are working with regulators worldwide.

“And through all that, there is an opportunity for something inorganic and transformational. We are going to be prepared to do something like that but I will just leave it at that.”

Fink’s comments accompanied a robust set of quarterly results for the firm, with its AUM recovering $500bn to $9.1trn, including $110bn inflows largely supported by fixed income ETFs. 

Morgan Stanley analysts now expect BlackRock’s AUM to exceed $15trn in five years, led by fixed income and cash management.

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