BlackRock Inc. executives could provide the first details this week on how they will integrate their firm with Barclays Global Investors. Consultants and clients at both firms say they'll be looking for signs of how the organizations and cultures of the two megafirms will mesh, and whether top executives at Barclays Global Investors will be given meaningful leadership positions in the merged organization — to be called BlackRock Global Investors — when the deal is finally signed late this year or early next year.
Among the legions of tea-leaf readers, one source familiar with some of the players said the prospects for BGI executives are probably stronger on the investment side than on the non-investment side, with BGI's fixed-income team making a “strong showing” in New York.
The source, who declined to be named, said it's possible that Peter Knez, chief investment officer for fixed income at BGI, could be tapped for a leading role with BlackRock's bread-and-butter bond business.
Mr. Knez, in an e-mailed response to questions, declined to comment, as did BlackRock spokesman Brian Beades.
Client and consultant interest in personnel and organizational details reflects nagging concerns that BlackRock's past success in acquiring firms such as State Street Research & Management Co. and MLIM won't necessarily translate when the target is a money management icon in its own right.
“There's a lot of interest in seeing how these pieces are going to fit together,” and the longer BlackRock takes to provide answers, the more of an issue it could become for clients and consultants alike, said one investment consulting veteran, who declined to be named.
Some investment consultants say BlackRock has led them to expect the first answers to those questions in September, but one, who also declined to be named, reported signs that BlackRock is moving to make a “big announcement soon,” perhaps as early as this week.
While BlackRock has gone from strength to strength over the past year, performance results for its legacy bond business suffered last year, but has improved so far in 2009.
Its $86 billion core bond strategy trailed its benchmark, the Barclays Capital Aggregate index, by 5.57 percentage points in 2008, but has outperformed by 2.37 points for the first half of 2009, according to data from eVestmentAlliance, Marietta, Ga. BlackRock's $26 billion core-plus strategy, meanwhile, trailed the same benchmark by 7.02 percentage points in 2008, but has outperformed by 3.25 points for the first half of this year.
Despite being known primarily as an indexer, BGI's active fixed-income strategies proved relatively resilient last year. Its $8.3 billion CoreActive strategy trailed the Barclays Capital Aggregate benchmark by just 45 basis points in 2008, before outperforming by 2.82 percentage points in the first half of 2009, according to eVestmentAlliance.
Its $764 million CorePlus bond fund, meanwhile, trailed the Barclays Capital Aggregate by 42 basis points in 2008, before outperforming by four percentage points during the first half of 2009.
While BlackRock is an active bond manager, it has been widely seen as offering investors less tracking error than fellow bond giants Pacific Investment Management Co. and Western Asset Management Co.
“The biggest issue with BlackRock is that they've always sold themselves as kind of an index-plus manager, adding a moderate amount of value,” noted an executive with a competing bond firm, who declined to be named. Instead, since 2007, their performance has been as challenged as firms that have traditionally been much further out along the risk spectrum, the executive said.