Back to top

Image: Bigstock

BlackRock (BLK) to Restructure Active Equity Business

Read MoreHide Full Article

BlackRock Inc. (BLK - Free Report) announced plans to restructure its traditional actively managed equities business and improve product offerings as per changing client needs. In this context, the company intends to launch the BlackRock Advantage “series of core alpha products,” cut fees, slash jobs and change asset mix.

Further, with the appointment of Mark Wisemen last year, as the global head of Active Equities, BlackRock has been working to replace the traditional stock picking strategy with an automated one. These restructuring efforts are part of this initiative.

Initiatives in Detail

BlackRock plans to focus more on technology and data analytics and make investments in data-based technology to improve the funds’ performance.  Moreover, the company is likely to layoff over 30 employees including some portfolio managers, as per persons familiar with the matter.

BlackRock will offer four new products in the active-equity segments – Core Alpha, High Conviction Alpha, Outcome Oriented and Country and Sector Specialty. Advantage series and new products will comprise of new funds along with the existing funds worth approximately $8 billion. These funds will be collectively managed by its automated stock picking system.

Reasons for Restructure & its Financial Implications

The asset management business in the U.S has been going through tough times as the majority of the investments are directed toward low-fee passive offerings like ETFs rather than high-fee active strategies. BlackRock’s actively managed funds have been witnessing outflows over the past several quarters while its ETF business recorded inflows. Hence, in order to encourage investors to move again towards actively managed funds, the company is taking these efforts

Wiseman said, “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. We are evolving our product offerings to ensure we stay ahead of those changing client desires.”

Overall, the new restructuring program will impact nearly $30 billion or 11% of its assets under management. Notably, the company will not be making any changes to its active equity products managed outside the country.

Driven by these efforts, BlackRock’s top-line is expected to be adversely impacted by roughly $30 million annually. Further in the first quarter 2017, the company will record $25 million charge as severance and compensation expenses to its exiting employees.

Shares of BlackRock increased 4.6% over the last six months; underperforming the Zacks categorized Financial - Investment Management industry’s growth of 9.7%.



BlackRock, currently, carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same industry are Ameriprise Financial, Inc. (AMP - Free Report) , Apollo Global Management, LLC (APO - Free Report) and Lazard Ltd. (LAZ - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameriprise Financial recorded an upward earnings estimate revision of 2.2% for the current year over the past 60 days. Its shares increased 35.52% over the past one year.

Apollo Global Management witnessed an upward earnings estimate revision of 9.2% for the current year over the past 60 days. Moreover, the stock price increased 37.21% over the past one year.

Earnings estimates for Lazard moved north by nearly 4.2% over the past two months. Its share price increased around 17.06% in the last one year.

The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>

Published in