BlackRock said its proposed acquisition of privately held London-based alternative markets data provider Preqin could lead to the indexing of private markets, while assuring that BlackRock’s clients will also have the ability to access Preqin as a stand-alone service once the transaction closes.
On June 30, BlackRock said it agreed to acquire Preqin for $3.22 billion in cash in a transaction slated to close by the end of the year. The deal is expected to strengthen the giant asset manager’s “expansion into the fast-growing private markets data segment,” citing that the fast growing alternative asset market is projected to reach almost $40 trillion by the end of the decade.
In a call with analysts on July 1 after the planned acquisition was announced, Laurence D. Fink, BlackRock’s chairman and CEO, said: “We believe we could index to private markets,” adding “just as index has become the language of public markets, we envision we could bring the principles of indexing, even iShares, to the private markets.”
Fink added: “We anticipate indexes and data will be important future drivers of the democratization of all alternatives. And this acquisition (of Preqin) is the unlock.”
Fink further indicated in the analyst call that this acquisition is “about driving evolution and growth in the private markets by measuring them, understanding their drivers of performance and making them more investable.” Fink also pointed out how the public markets were transformed by data, benchmarks and risk analytics. “They made markets more accessible from the developed to the emerging from stocks to bonds,” he said. “They've made investment performance and drivers of return much more transparent … They've grown durable, high-growth revenue pools that are adjacent to asset management and they have generated enormous value for clients and shareholders. Our aim is to do all of that in the far less mature data, analytics and index business for all the private markets.”
The acquisition of Preqin is only a starting point and will drive further data collection and benchmarks to be used by clients for asset allocation and performance analysis, said Clémence Droin, a partner at Indefi, a Paris-based investment manager strategy consultant. “Developing a private markets index seems challenging, yet could be achieved with greater scale and coverage,” she noted. “Market consolidation will also play a crucial role — the private markets landscape is today still very fragmented and home to a wide number of small-scaled local and niche boutiques. As consolidation happens, access to data will be faster and easier and the ambition of creating an index more palatable.”
“BlackRock’s acquisition of Preqin makes sense from a strategic business perspective, as they continue to build out their portfolio analytics database and tech platform,” said Alan Kosan, senior vice president and the head of alpha research at Segal Marco Advisors. “The addition of Preqin bolts on a complementary private markets data source to their existing portfolio management tool kit.”
BlackRock, Kosan noted, can offer a broader range of analytics to their investors across public and private markets, while potentially enhancing Preqin’s content, benchmarking utility and industry footprint through their financial sponsorship.
However, Kosan cautioned that this acquisition also raises a few questions, including “how BlackRock will decide to price Preqin to current and prospective customers, and how some general partners may react to serving as source to a database that is no longer independently owned?"
An analyst on the July 1 call also posed that “a large portion of Preqin's customer base is probably a competitor of BlackRock’s in some form or fashion within the private markets,” and added that he wondered how some of Preqin’s existing clients would be comfortable with their platform being brought into the “broader BlackRock ecosystem.” In response, Rob Goldstein, BlackRock’s chief operating officer, noted that the fastest-growing part of the Aladdin business is actually other asset managers. “So this is something that we're quite accustomed to in terms of being a platform as a service and our broader technology business,” Goldstein said. “With regard to Preqin, in particular, we're very confident that clients will be the biggest beneficiary from the transaction. It increases our Aladdin client reach fivefold and if clients choose to, they'll have the opportunity to seamlessly manage public and private portfolios together across both workflow and data on a single unified platform.”
Noting that Preqin will still be offered as a standalone service, Goldstein explained in the call that Preqin’s current clients “do not need to access the software through Aladdin.” Goldstein also cited that BlackRock’s acquisition of eFront — Aladdin’s private markets platform — five years ago was somewhat similar to the proposed acquisition of Preqin. “What we did (with eFront) was mobilize outreach to the GPs, make sure to introduce our goals, make sure they understood the information protection barriers that we have in place and we have been doing this really since the beginning of being a technology provider. And we will continue to safeguard Preqin's GP and LP data from use by any other parts within BlackRock on the investment side.” The addition of Preqin, Goldstein added in the call, “does not change our data commitments or how we use eFront client data.”
While access to data is key, it is also mainstreaming for alts, Droin of Indefi added.
“As private markets used to be opaquer than the listed space, there is now greater access to information as client education is crucial to the democratization of alts,” she stated. “Tech and (artificial intelligence) will certainly support this trend and in this case, BlackRock is well positioned to be a frontrunner.”
The proposed acquisition of Preqin comes six months after BlackRock said it would acquire Global Infrastructure Partners for some $12.5 billion in cash and stock.
Meghan Neenan, managing director and the North American head of non-bank financial institutions at Fitch Ratings, commented that “given Preqin’s leading private market/alternatives data presence, BlackRock’s acquisition is another pivotal step for their overall growth in private assets.”
Droin said that Preqin will be a complement to Aladdin and eFront and aims to turn BlackRock into the end-to-end private market tech provider both for asset owners and asset managers.
“BlackRock places private markets at the core of its investment and technology business development strategy with the objective to capture the global demand for alts,” she said.
The deal also provides several opportunities for growth synergies — namely, cross selling and the ability to leverage and further develop private market data, Droin added.
BlackRock’s has about $10.47 trillion in assets under management.
