The world's largest fund manager just sent a message to investors everywhere

  • The world's largest fund manager just sent a message to investors everywhere

The world's largest fund manager just sent a message to investors everywhere

These strategies provide access to portfolio managers that can deliver returns in more highly concentrated and unconstrained/absolute return strategies.

The firm says it is making wholesale changes to the actively managed equities funds that have fallen out of favour as a result of the investor shift towards lower cost passive funds, the FT reports.

The company's new investment strategy will be implemented in 11 percent of the stock fund business, which now holds $275 billion in active stock.

Past year the world's largest asset manager saw $20bn in outflows from its actively-managed equities business.

Fink, who has re-jiggered BlackRock's active-equity business before, and his rivals face mounting pressure from investors over fees. The lower fees will reduce annual revenue by about US$30 million, the New York-based company, which manages US$5.1 trillion, said in a statement on Tuesday.

While BlackRock's iShares ETF business has been a huge beneficiary of this trend, taking in a record $140 billion in net flows in 2016, its active US-based equity business has suffered with $19.3 billion withdrawn from these funds a year ago, according to data from Morningstar. "We want to play offense, not defense".

The company has taken the view that it is hard for human beings to beat the market with traditional bets on large US stocks.

"These are stormy seas for active managers, but we at BlackRock are an aircraft carrier, and we are going to chart our way through these seas". Planned fee cuts will slice about $30 million of BlackRock's revenue, and the company will take a $25 million charge this quarter to reflect severance and other compensation expenses.

The move comes as actively managed funds, particularly in mainstream equity markets, suffer significant outflows of money to passive funds such as ETFs. And since previous year, BlackRock's dyed-in-the-wool stock pickers have worked in the same division as its quants.

The core alpha product range will offer lower risk for "consistent alpha", alongside a further three categories, High Conviction Alpha for risk-seeking investors, Outcome Oriented with a focus on income and a Country and Sector Speciality range. The firm has also changed the leadership structure of the active business several times in the past four years. "Historical data has now proven that the average [portfolio manager]'s performance is cyclical, and hiring the top performers over the last five years may not likely lead to strong performance over the next five". Meanwhile, its ETF business has been booming, with record inflows past year.

There appears to be extensive planning behind this new attack plan outlined by BlackRock, as the head of Canada's most prominent public pension fund, Mark Wiseman, was brought on board and tasked with monitoring stock picking.