BlackRock Inc.'s stock price has suffered this year following the firm's blockbuster acquisition of Barclays Global Investors last December, but some analysts and bankers say the deal should eventually prove a triumph for CEO Laurence D. Fink.
Mr. Fink is poised to “reset our understanding of how large a global (money management) business can be,” said Donald H. Putnam, San Francisco-based managing partner of investment bank Grail Partners.
For the moment, the market's assessment appears harsh.
At Friday's close of $145.40 a share, BlackRock's stock was down 37% from the start of the year, while the Standard & Poor's 500 index slipped a mere 3.9%.
Meanwhile, the price-earnings premium BlackRock's stock consistently enjoyed — as a series of acquisitions morphed the fixed-income giant into a $3 trillion manager with strengths in exchange-traded funds, equities, alternatives and indexing as well — has evaporated.
BlackRock's price-earnings premium of more than 20% over the sector's average has given way to a 3% to 5% discount, noted one analyst at a money management firm whose portfolio managers own a healthy dollop of BlackRock stock. He declined to be named.
That BlackRock's stock reached an intraday high of $243.80 on Jan. 11 suggests investors were receptive early on to arguments Mr. Fink has made in successive earnings calls: Combining strengths in passive and active management, bonds, equities and alternatives, as well as risk controls and portfolio construction, leaves BlackRock uniquely positioned as investors increasingly seek out “partners” to help them meet their retirement savings and investment goals.
Efforts to reach Mr. Fink, who was on vacation, were unsuccessful.
BlackRock Vice Chairman Susan L. Wagner has quarterbacked the firm's acquisition strategy. In a recent interview, she said it's still “early days” for the BGI integration, but BlackRock can already point to some “significant mandates ... which neither of us would have won alone.”
In addition to the announcement in May of a $3.5 billion 529 savings plan mandate from the Columbus-based Ohio Tuition Trust Authority, Ms. Wagner cited a number of wins from clients at home and abroad; she wouldn't name the clients.
Those included a total of more than $11 billion; the biggest, $7.5 billion, was for fiduciary outsourcing from a Dutch company.
Some of those hirings are included in the close to $60 billion pipeline of net long-dated wins Mr. Fink reported for the company's latest results through June 30 — a total analysts cite as a healthy 8% clip of organic growth, or net client inflows, for the company.
For the first two post-acquisition quarters, however, outflows due to “concentration issues” — by clients looking to limit the proportion of their portfolios being handled by a single manager — and terminations due to weak results for some of BGI's active quantitative strategies helped depress sentiment toward the stock.
For the quarter ended June 30, net outflows from active quant strategies surged to $26.3 billion, from $8.8 billion for the prior quarter.