BlackRock Inc., fresh off a $28 billion deal spree to transform into a major player in alternative assets, is integrating complex private investments into its ready-made portfolios for individuals.
In what the firm calls a first for the asset-management industry, BlackRock set up the model portfolios with publicly traded stocks and bonds alongside more complex private equity and credit funds — and will possibly include other alternatives at some point.
The managed models available Wednesday will make it easier for financial advisers to offer alternative assets to clients who have typically had little exposure to private markets.
“For years, advisers have been looking for access to private markets,” Jaime Magyera, co-head of BlackRock’s US wealth advisory business, said in an interview. “Being able to bring access to private markets lower down the wealth spectrum — which traditionally has been family office, ultra, ultra-high-net-worth — is the goal.”
The demand from advisers is “very high,” Magyera said. “We have advisers asking for this on a daily basis.”
Private assets would make up, on average, 15% of the investments in the portfolios, which will be customizable. BlackRock didn’t disclose the fees.
Well known for its low-cost stock and bond funds, BlackRock has moved fast over the past year to build out into higher-fee private markets. It spent $12.5 billion to buy Global Infrastructure Partners and £2.55 billion ($3.3 billion) for data firm Preqin, and the company is in the process of completing a $12 billion acquisition of private credit firm HPS Investment Partners.
BlackRock also joined with Partners Group late last year to group different types of private assets into a single portfolio of alternatives for retail clients.
Eye on Risk
The new model portfolios are a natural step for BlackRock, whose chief executive officer, Larry Fink, has questioned the traditional 60/40 portfolio of stocks and bonds. The firm has contended that private assets could bring more diversification to investors, and it has vowed to keep an “eye on risk” in its private funds.
Read More: Larry Fink Is Capitalizing on a Seismic Shift in Private Markets
Fink’s firm is the world’s largest asset manager, overseeing $11.6 trillion, but it’s competing in a crowded field in private markets. Alternative asset giants such as Blackstone Inc., KKR & Co., Ares Management Corp. and Apollo Global Management Inc. have penetrated deeper into private wealth, setting up conferences, parties and steak dinners to boost their profile with wealth advisers who serve as the conduit to individual investors.
BlackRock’s US wealth business accounted for about a quarter of its revenue last year, or roughly $5 billion. Model portfolios are a key part of that and are increasingly how many asset managers distribute ETFs and other funds to investment advisers.
With its new portfolios, BlackRock is including two of its existing funds to start: its own Private Credit Fund, with $1.1 billion of assets, and its Private Investments Fund, with $300 million of private equity assets. The models business may at some point become part of the firm’s plans for marketing new infrastructure, private credit and other alternatives funds.
“Over time you can imagine this being the chassis that we are able to deliver the entirety of BlackRock’s private markets capabilities and the entirety of BlackRock’s public markets capabilities through this one portfolio,” Magyera said.
BlackRock has about $300 billion in its models business worldwide, and the firm expects the total industry tally to double to $10 trillion over the next four years. The portfolios, which are being set up with iCapital and GeoWealth, are in addition to BlackRock’s existing portfolios.
Lawrence Calcano, CEO of iCapital, said he could see a future where BlackRock’s private-markets acquisitions become involved in the new model portfolios.
“Adding some more of the HPS strategies, adding some more of the GIP strategies,” he said, “that just makes the private sleeve even more valuable.”
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