BlackRock is reorganizing its active equity investment platform, which will see it reduce staff and rely more on cheaper strategies based on quantitative computer models.
BlackRock will break out its active equity offerings into four product ranges, which includes launching the new Advantage series, confirmed spokesman Ed Sweeney.
The Advantage series will consist of core alpha strategies and an expanded range of income funds, which includes both new investment offerings and the conversion of certain existing funds with roughly $8 billion in assets. Of the $8 billion, about $6 billion is going to quantitative strategies, while $2 billion is moving to outcome-based solutions.
“The active equity industry needs to change,” said Laurence D. Fink, chairman and CEO, in a news release announcing the change. “Asset managers who simply use the same techniques and tools from the past will limit their ability to generate alpha and deliver on client expectations.”
The changes BlackRock is making include shifting certain investment teams, primarily in the U.S., around a more focused investment strategy lineup, while also shifting resources and responsibilities within teams to best leverage BlackRock's platform.
Strategy or portfolio management repositioning will affect about $30 billion in assets under management — around 11% of total active equity AUM. There will be no repositioning of active equity strategies currently managed outside of the U.S.
These changes will result in approximately $30 million of annualized savings to clients from lower fees.
The four distinct ranges for BlackRock's active equity strategies will be: Core alpha, products for clients seeking market returns plus outperformance over a benchmark with lower levels of risk; high-conviction alpha, for clients seeking higher risk/return products; outcome-oriented strategies designed to provide clients with specific outcomes, such as income or sustainable investment strategies; and country and sector specialty, offering clients specific country and sector exposures.
There will also be roughly three dozen staff reductions because of the reorganization. Most of these reductions will be in traditional portfolio management. The firm anticipates the headcount to be flat over the next 18 months to two years.
BlackRock's AUM was $5.1 trillion as of Dec. 31.