New York-based BlackRock Inc. is shaking up its approach to active management by embracing a greater role for technology and reshuffling its portfolio-management teams.
Specifically, the asset-management giant is “positioning its equity investment platform for the future of active management.” This effort includes “reorienting” certain investment teams, primarily in the U.S.; shifting resources and responsibilities within teams; and investing more heavily in data science.
The firm is also changing its approach to research so that “the best insights derived both through big data analysis and fundamental research to be shared across every investment team across the active equity platform.”
The new approach comes under the leadership of Mark Wiseman, former CEO of the Canada Pension Plan Investment Board (CPPIB), who joined BlackRock last year to run its active equity business.
“Traditional methods of equity investing are being reshaped by massive advances in technology and data sciences. At the same time, client preferences are shifting, focusing not just on outcomes but on how both performance and fees impact value,” says Wiseman, global head of active equities at BlackRock, in a statement.
“The active equity industry needs to 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,” he adds. “We are revitalizing our active equity capabilities by harnessing the power of ‘human and machine’ to efficiently and consistently deliver investment performance to our clients.”
In addition, BlackRock’s active equity products are being organized into four product ranges: core alpha, high conviction alpha, outcome oriented, and country/sector specialty.
“Clients have moved beyond just active and passive techniques. They are choosing from a variety of products that incorporate multiple investment strategies, return targets, levels of risk and cost expectations,” Wiseman says. “We are evolving our product offerings to ensure we stay ahead of those changing client desires.”
The shift will impact approximately US$30 billion in assets under management (about 11% of total active equity AUM), BlackRock reports. The firm will also incur a charge of approximately US$25 million in the first quarter of 2017 in connection with severance and accelerated compensation expense as a result of the changes.