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BlackRock (BLK) Diversifies U.S. iShares ETF Service Providers
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In an effort to diversify its post-trade service providers beyond long-time partner State Street (STT - Free Report) , BlackRock, Inc. (BLK - Free Report) is including The Bank of New York Mellon Corporation (BK - Free Report) , Citigroup Inc. (C - Free Report) and JPMorgan (JPM - Free Report) as custodians for servicing its iShares exchange traded funds (ETFs) listed in the United States.
The transition to the new service providers (likely to take 18 months for completion) is projected to commence in the second half of next year.
BlackRock's latest move is expected to support growth of the U.S. iShares ETF market, thereby fortifying the broader ETF ecosystem.
Salim Ramji, the global head of iShares & Index Investing at BlackRock, stated, "Tens of millions of investors now choose ETFs to gain efficient and transparent access to sources of market return all around the world. As we anticipate decades of growth ahead for iShares and the industry, these changes reinforce and diversify our operational foundation so that we can deliver more ETF exposures at greater scale and with the high standards that our clients expect."
Per the agreement that BlackRock has entered, Citigroup will service 40% of the portfolio, while JPMorgan will service 30%. BNY Mellon will service 15% and the remaining 15% stays with State Street.
Each one among BNY Mellon, Citigroup, JPMorgan and State Street will provide custodial, fund administration, fund accounting, and transfer agency services to a subset of U.S.-listed iShares ETFs.
The senior managing director and global head of Technology & Operations at BlackRock, Derek Stein, commented, "All four providers have long-standing relationships with BlackRock and have proven track records in the post-trade servicing of funds. The decision to diversify across these world-class financial institutions is based on our desire to create a robust operating model for servicing ETFs, which will help us scale the iShares franchise and mitigate concentration risk."
State Street said in a statement that it will continue to provide services to iShares and "a diverse set of BlackRock funds."
Roman Regelman, the chief executive of asset servicing and head of digital for BNY Mellon, said that BlackRock's initiative to diversify its service providers is good news for the ETF industry. Such diversification will add flexibility and encourage transparency, thus, promoting innovation.
BlackRock, the world's largest asset manager, has also been contemplating adding new service providers in 2022 for its Ireland-based iShares business.
Notably, BlackRock's iShares has been the biggest provider of ETFs, with $3 trillion in assets.
As the iShares ETF business witnesses robust growth, holding and processing trades for the assets has become more attractive for banks. More banks are now being motivated and, hence, are competing to get a larger piece of the market. With the increase in competition, related fees are being pushed down, which might reduce costs for consumers.
Our Take
Supported by a strong liquidity position, BlackRock has been making efforts to restructure its equity business. The restructuring initiatives along with strategic acquisitions that the company has been making are expected to keep aiding top-line growth. The efforts will help BlackRock expand its global reach and market share as well.
Moreover, steadily improving assets under management balance will likely further support the company's revenue growth.
Over the past six months, shares of BlackRock have gained 5.7% against the 6.7% decline recorded by the industry.
Image: Bigstock
BlackRock (BLK) Diversifies U.S. iShares ETF Service Providers
In an effort to diversify its post-trade service providers beyond long-time partner State Street (STT - Free Report) , BlackRock, Inc. (BLK - Free Report) is including The Bank of New York Mellon Corporation (BK - Free Report) , Citigroup Inc. (C - Free Report) and JPMorgan (JPM - Free Report) as custodians for servicing its iShares exchange traded funds (ETFs) listed in the United States.
The transition to the new service providers (likely to take 18 months for completion) is projected to commence in the second half of next year.
BlackRock's latest move is expected to support growth of the U.S. iShares ETF market, thereby fortifying the broader ETF ecosystem.
Salim Ramji, the global head of iShares & Index Investing at BlackRock, stated, "Tens of millions of investors now choose ETFs to gain efficient and transparent access to sources of market return all around the world. As we anticipate decades of growth ahead for iShares and the industry, these changes reinforce and diversify our operational foundation so that we can deliver more ETF exposures at greater scale and with the high standards that our clients expect."
Per the agreement that BlackRock has entered, Citigroup will service 40% of the portfolio, while JPMorgan will service 30%. BNY Mellon will service 15% and the remaining 15% stays with State Street.
Each one among BNY Mellon, Citigroup, JPMorgan and State Street will provide custodial, fund administration, fund accounting, and transfer agency services to a subset of U.S.-listed iShares ETFs.
The senior managing director and global head of Technology & Operations at BlackRock, Derek Stein, commented, "All four providers have long-standing relationships with BlackRock and have proven track records in the post-trade servicing of funds. The decision to diversify across these world-class financial institutions is based on our desire to create a robust operating model for servicing ETFs, which will help us scale the iShares franchise and mitigate concentration risk."
State Street said in a statement that it will continue to provide services to iShares and "a diverse set of BlackRock funds."
Roman Regelman, the chief executive of asset servicing and head of digital for BNY Mellon, said that BlackRock's initiative to diversify its service providers is good news for the ETF industry. Such diversification will add flexibility and encourage transparency, thus, promoting innovation.
BlackRock, the world's largest asset manager, has also been contemplating adding new service providers in 2022 for its Ireland-based iShares business.
Notably, BlackRock's iShares has been the biggest provider of ETFs, with $3 trillion in assets.
As the iShares ETF business witnesses robust growth, holding and processing trades for the assets has become more attractive for banks. More banks are now being motivated and, hence, are competing to get a larger piece of the market. With the increase in competition, related fees are being pushed down, which might reduce costs for consumers.
Our Take
Supported by a strong liquidity position, BlackRock has been making efforts to restructure its equity business. The restructuring initiatives along with strategic acquisitions that the company has been making are expected to keep aiding top-line growth. The efforts will help BlackRock expand its global reach and market share as well.
Moreover, steadily improving assets under management balance will likely further support the company's revenue growth.
Over the past six months, shares of BlackRock have gained 5.7% against the 6.7% decline recorded by the industry.
Currently, BlackRock carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.