NEW YORK — It all started in June 1988 with one computer.
"When we created BlackRock, I bought the first computer," recalled Charles S. Hallac, a founding partner of the $391 billion New York-based money manager.
Mr. Hallac and Ben Golub, another BlackRock founder, used that computer to write analytical programs to help them manage money better. BlackRock Inc. began managing portfolios in 1988, but Mr. Hallac and colleagues soon realized "we needed to manage risk."
By 1990, the firm had a paperless office and continued to build its internal risk management capabilities — not only crunching the firm's own portfolio numbers, but also creating risk models to better manage them. Being a fixed-income shop, BlackRock principals had plenty of numbers to crunch.
"In the mid-'90s we started to think about the fact that this (risk management process) is a distinguishing feature of the firm and whether we could maintain this forever," Mr. Hallac explained. "We had all this capability but it was more and more expensive to maintain.
"What we realized was that unless we had more people using it, we couldn't keep it," he said.
Barbara Novick, another BlackRock founder and a managing director and head of new business development, explained that around this time, some clients began asking if BlackRock could produce reports for portfolios it wasn't managing. The firm had already been delivering reports to clients about portfolios BlackRock itself was running.
"It started almost as a cottage industry," she said. "Then we started thinking we have something here that's valuable."
Thus, it turned out that the additional people Mr. Hallac wanted to help support the management and development of BlackRock's risk management capabilities were existing BlackRock clients.