NEW YORK — BlackRock Inc. is poised to venture into alternative investments and the defined contribution businesses, relatively uncharted waters for the $1 trillion money manager.
With the Oct. 2 official close of its acquisition of Merrill Lynch Investment Managers, BlackRock now has a global stage to distribute a more diverse platform of fixed-income and equity strategies, a major and widely known reason it sought the deal. But the acquisition also gives the New York-based megamanager the opportunity to further develop itself in some lesser acknowledged areas, like alternative investments, where the "old" BlackRock had only a moderate presence.
Overall, the combined BlackRock/MLIM entity now has an asset mix of roughly 43% fixed income; 34% equity and balanced investments not already included in fixed income; 19% cash management; 3% alternatives; and roughly 1% real estate.
Combined, the company has slightly more than 4% of its assets in non-traditional asset classes.
While the total dollar amount managed in alternatives is significant — $42 billion — it is still small relative to BlackRock's overall business. Barbara Novick, vice chairwoman and managing director, expects that BlackRock's alternative assets (including real estate) will grow "disproportionately" to its other asset classes because of the room for growth and the continued institutional demand for alternative strategies, including hedge funds and hedge funds of funds.
MLIM's single-strategy hedge fund team, which managed just less than $2 billion, and BlackRock's team, which managed more than $6 billion, were left untouched when the two companies integrated their investment personnel earlier this year. The hedge fund-of-funds teams, which managed $1.5 billion at MLIM, have been consolidated with BlackRock's, which ran about $1 billion, said Ms. Novick. The new team is led by managing director Howard Berkowitz, previously the head of BlackRock's fund-of-funds group.
In addition to the hedge fund offerings, BlackRock's alternatives menu now includes more private equity and debt strategies, real estate equity and debt, absolute return and collateralized debt obligation/structured products.