Oct 3, 2019
BlackRock is the largest investment company in the world based in New York. It manages a total assets of over $ 6 trillion (December 2017), of which one third is in Europe. Listed on the New York Stock Exchange, it offers investment solutions in fixed income, equity and money market, alternative investments and real estate. Leader in America in ETFs and ETCs, it is present in the Milan financial center with the iShares product range listed on the ETF Plus index of the Italian Stock Exchange.
BlackRock operates globally with 70 offices in 30 countries and customers in 100 countries. Due to the size and scope of its financial activities, it has a strong influence. For its power, BlackRock has been called the “greatest shadow bank in the world”, similar to the “wifi, invisible yet present”.
BlackRock was founded in 1988 by Laurence “Larry” Fink and Robert S. Kapito with a group of colleagues (Susan Wagner, Barbara Novick, Ben Golub, Hugh Frater, Ralph Schlosstein and Keith Anderson) to provide institutional clients with wealth management services with recourse to risk. Many of them had already worked together in First Boston where the idea had been developed. The project appeals to Pete Peterson, head of the Blackstone group, which funds the initial operating capital with a $ 5 million credit line. Thus the company began operating within Blackstone as a financial management group under the name of Blackstone Financial Management dealing with fixed income. Within a few months the business becomes profitable, in 1989 the assets quadrupled to $ 2.7 billion, in 1992 they are $ 17 billion and under management and 53 billion in 1994.
That same year, Fink and Blackstone’s number one, Stephen A. Schwarzman, show different strategic visions. So the two decide to part ways: Schwarzman stays with Blackstone, Fink becomes president and CEO of what was once Blackstone Financial Management and now takes the name of BlackRock Inc. Field of activity: asset management. The business model: OneBlackRock, that is a common platform instead of having many companies with autonomous operating units. In 1995 BlackRock merged with the bank holding company PNC Financial Services expanding its management to include equity funds, in 1999 it managed assets for $ 165 billion and was listed on the New York Stock Exchange at $ 14 per share. In August 2004, BlackRock made its first major acquisition, taking over MetLife’s State Street Research & Management holding company for $ 375 million in cash and shares. Thus managed assets go from $ 314 to $ 325 billion.
In 2006, Merrill Lynch Investment Managers was incorporated (a 49.5% stake in the company ends up in the hands of Merrill Lynch), in October 2007 it acquired the Quellos Capital Management fund business in March 2008, a few months before the collapse Wall Street financial, Larry Fink is called by the head of the New York Federal Reserve, Timothy Geithner (later to be finance minister with Barack Obama), helping him clean up the “junk bonds” found in the Bear Stearns portfolio, the investment bank just saved by the US government.  Fink has already developed the Aladdin software (acronym of Asset liability and debt derivates investment network) which translates market data into investment choices. After Bear Stearns, BlackRock intervenes on the toxic funds of Citibank, AIG, Fannie Mae and Freddie Mac, becoming de facto the operational arm of the US government to play the role of firefighter of the crisis.
In April 2009, BlackRock acquired R3 Capital Management and took control of the $ 1.5 billion fund. In June, it took over $ 13.5 billion from Barclays (which has a 20% stake in BlackRock), Barclays Global Investors based in San Francisco: it brings iShares, one of the world’s leading ETF suppliers, to become the largest savings manager in the world with over $ 3.350 billion.
BlackRock is a $ 3.790 billion asset manager in 2013 and Fortune lists it on its annual list of the 50 most admired companies in the world. The following year, The Economist recognizes him, with $ 4 trillion in management, as the “largest asset manager in the world”, even bigger than the world’s largest bank, the Industrial and Commercial Bank of China (3 trillion of dollars). In May 2014 BlackRock invests in Snapdeal, an Indian company. At the end of 2014, the Sovereign Wealth Fund Institute states that 65% of assets managed by Blackrock are institutional investors.
In August 2015, BlackRock acquired FutureAdvisor, a digital asset management provider with assets under management of 600 million dollars: it will operate within BlackRock Solutions. In November 2015, the BlackRock Global Ascent hedge fund was liquidated, its only macro fund, following heavy losses. At that time BlackRock managed $ 51 billion in hedge funds.
In March 2017, the Financial Times announced that BlackRock, following a six-month review conducted by Mark Wiseman, initiated a restructuring of its fund business ($ 8 billion), with the removal of seven portfolio managers and new strategies for investment for some funds. In April 2017 the activities of iShares represent 26% of the total resources managed by BlackRock and 37% of the income of the company which a month later, in May, increases its participation in CRH plc and Bank of Ireland.
In early January 2019 BlackRock announced plans to reduce the workforce by 3% (500 people). In the same week, Fink promotes former senior general manager Mark Wiedman, head of international operations and BlackRock’s corporate strategy, raising voices that see Wiedman as Fink’s possible heir.
In April 2019, continuing on the path of diversifying the investment portfolio, he launched his private equity fund, the Long Term Private Equity, with a collection of 2.75 billion dollars but with the aim of reaching 20. In August the first buyout transaction: for 870 million dollars BlackRock acquires control of Authentic Brands, a company based in New York, founded in 2010 and led by the founder Jamie Salter: it owns Sport Illustrated and manages several clothing brands and related licenses to the names of many celebrities, from Elvis Presley to Marilyn Monroe, from Muhammad Ali to Shaquille O’Neal.
For fiscal 2017, BlackRock reported profits of US $ 4.970 billion, with annual sales of US $ 12.491 billion, an increase of 12% compared to the previous fiscal cycle. BlackRock shares are trading at over $ 414 per share and its market capitalization was valued at over $ 61.7 billion in October 2018. Starting in 201, BlackRock ranked 237th on the Fortune 500 list of major US companies by turnover.
After Norway’s state pension fund, a sovereign fund, reduced its holding to below 2% from the 5% held from 2014 to 2016, the five largest shareholders are as of March 21, 2018:
– PNC Financial Services – 25.01%
– Vanguard Group – 6.23%
– BlackRock Inc. – 5.27%
– Capital World Investment – 5.16%
– Wellington Management Group – 4.37%
The iShares story begins in March 1996 when Barclays launched an instrument that was intended to replicate the MSCI indexes introduced by Morgan Stanley, called by the acronym “WEBS” (World Equity Benchmark Shares). The WEBS were among the first ETFs traded on the American Stock Exchange in New York and after a few years they were renamed “iShares MSCI Series”. In March 2009, after 13 years from the launch of the first WEBS, iShares was transferred from Barclays to BlackRock.
Aladdin data analysis system
According to experts, BlackRock’s success is based on the data analysis system, led by Robert Goldstein, called Aladdin, of the subsidiary BlackRock Solutions. Aladdin stands for “Asset, Liability, Debt and Derivative Investment Network”. The IT system distributed by 5,000 mainframes in four unknown locations performs 200 million calculations a week. Another part of Aladdin is made up of 2,000 IT specialists, programmers and data analysts who evaluate business and economic data. The Aladdin system is able to calculate every second the value of shares, bonds, foreign currencies or credit instruments in billions of investment portfolios. At the same time, Aladdin sheds light on how this value will change when the market changes due to a number of factors: for example, the economy slows down, sales figures increase when exchange rates fall, oil prices rise. BlackRock evaluates each individual investment using Aladdin. In addition to the $ 5.12 billion in BlackRock’s in-group financial products, Aladdin also oversees the development of around 30,000 investment portfolios, worth about € 15 trillion. This activity represents around 7% to 10% of all activities worldwide from over 170 pension funds, banks, insurance companies, foundations and other institutional investors.
BlackRock is one of the main shareholders of thousands of companies around the world, major companies in the sectors of energy, chemistry, transport, food processing, aeronautics, real estate. It is (or has been) the main single shareholder of the financial companies JPMorgan Chase, Bank of America and Citibank, Apple, McDonald’s, Nestlé (until August 2015) and the energy companies Exxon Mobil and Shell. He is also a major shareholder of Deutsche Bank, Intesa Sanpaolo, Bnp, ING.
BlackRock’s influence extends beyond its business portfolio. Many other important investors rely on the Aladdin analysis system from BlackRock Solutions. Dozens of central banks such as the US Federal Reserve and the European Central Bank (ECB), finance ministries and sovereign funds receive advice from BlackRock experts who designed the ECB loan securitization program when the central bank needed expertise exterior. In Greece and Cyprus BlackRock has thoroughly analyzed the banks’ balance sheets, then advised governments. It intervened in Ireland and Spain. Some have criticized the fact that BlackRock has had personal talks with the president of the European Central Bank (ECB), Mario Draghi. An exchange was Frankfurt’s answer, to better understand the dynamics in the markets. And anyway twice the ECB called him as Advisor, the last in 2016 to prepare the stress tests for 39 European banks.
It also makes use of important consultants. George Osborne, British finance minister from 2010 to 2016, has a consulting contract, € 740,000 to work one day a week. In Germany Frederic Merz, former head of the CDU in the German Parliament. In Switzerland the former governor of the National Bank, Philippe Hildebrand. In France Jean-Francois Cirelli, consultant to Emmanuel Macron. The journalist Heike Buchter, author of a book on BlackRock published in 2015, concludes his research on Handelsblatt: “No government, no authority has such a complete and profound vision of the global financial and business world as BlackRock”.