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Wednesday, March 29, 2017

Fink Reorgs BlackRock Stockpicking Around Four Pillars

News summary by MFWire's editors

Larry Fink and Mark Wiseman are shaking up the way BlackRock [profile] approaches stockpicking.

Larry Fink
Chief Executive Officer
Yesterday Fink unveiled a host of changes to the New York City-based asset management giant's active equities business, which has more than 400 employees. Those changes include job cuts, product shifts around a new four-pillar focus, and more hiring down the line. And the changes follow Fink's hiring last year of Wiseman as global head of active equities (both fundamental and quantitative).

40-plus people are being laid off, an unnamed source tells Trevor Hunnicutt of Reuters. Seven fundamental equity PMs are being removed "from their current assignments," according to another unnamed source, the wire service reports. Landon Thomas Jr. of the New York Times estimates that "at least 36 people" are leaving BlackRock as part of the shifts.

BlackRock's statement does not detail the cuts, but it does confirm that the changes will cost about $25 million this quarter thanks to "certain one-time, severance and accelerated compensation expense associated with the repositioning."

Meanwhile, Wiseman is also hiring. He wants to hire people with "deep research capabilities, technology and data analytics skills, and will put more emphasis on hiring in the emerging markets, especially Asia," Sabrina Willmer of Bloomberg reports. Wiseman says that within the next 18 months he'll be adding roughly the same amount of people as are being laid off.

On the product side, BlackRock expects the shifts to affect about $30 billion in AUM, a little less than 11 percent of its $275 billion in total active equity AUM (which in turn is more than five percent of BlackRock's $5.1 trillion in total AUM). Wiseman confirms that he is organizing the active equity product suite around four areas: "core alpha," powered by the quant team and including a new nine-fund Advantage series; "high conviction alpha," which will be both highly concentrated and unconstrained; "outcome oriented," including outcomes like providing income or investing sustainably; and "country and sector specialty."

The product changes will reduce client fees by about $30 million, BlackRock estimates.

Fink, chairman and CEO of BlackRock, describes the active equity business reorganization as laying the foundation for "the future of active equity management."

"The active equity industry needs to change. 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," Wiseman states. "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."

"We're in really rough seas, but BlackRock is an aircraft carrier," Wiseman tells the Wall Street Journal's Sarah Krouse. "Everyone else is in dinghies, and they're bailing like hell." 

Edited by: Neil Anderson, Managing Editor

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