BlackRock to flex retail muscles after buying Barclays Global Investors

Make way for the 1,600-pound gorilla in the money management industry.

BlackRock Global Investors – scheduled to emerge in the fourth quarter from the mega-marriage of BlackRock Inc. and Barclays Global Investors – will be the world’s largest money manager, with a stunning $2.7 trillion in assets under management.

While the vast majority of the existing firms’ assets are in the institutional world, the pairing of the two behemoths gives the “new” BlackRock the firepower to become a dominant player in the retail marketplace as well.

During a conference call today to discuss the $13.5 billion deal, Laurence D. Fink, BlackRock’s chairman and chief executive, specifically noted that adding BGI increases BlackRock’s ability to work with financial advisers in creating more customized and “comprehensive” products for individual investors.

“What we saw in BGI is the best indexing and scientific investing platform in the world, and the leading [exchange traded funds] platform in the world,” he said.

Barclays’ ETF operation in particular – San Francisco-based iShares – arms New York-based BlackRock with its most significant retail weapon.

Roughly half of iShares’ $300 billion in global assets under management come from individual investors. By contrast, only about 20% of BlackRock’s $1.4 trillion in assets – or $228 billion – belong to retail and high-net-worth individuals. The acquisition of iShares immediately increases BlackRock’s share of the retail marketplace and creates a platform controlling roughly $526 billion in individual investors’ assets.

Adding iShares’ roughly 350 products – by far the largest lineup of any ETF provider – to the BlackRock retail platform positions the firm to capitalize on what is expected to be an enormous period of growth for ETFs.

According to projections from New York-based Strategic Insight Mutual Fund Research and Consulting LLC, the $550 billion in total ETF assets in the United States should surpass the $1 trillion mark in less than three years,

At the same time, Mr. Fink pointed out that BlackRock also will be able to package iShares’ ETFs alongside its own actively managed mutual funds – a pairing that significantly increases its ability to create “tailored” portfolios for financial advisers and their clients.

“Through the iShares platform, our investment solutions for retail have changed dramatically,” Mr. Fink said. “The ability to work with financial advisers to create an investment solution utilizing both passive and active strategies is a very, very important positioning for BlackRock.”

For the complete story, see the June 15 issue of InvestmentNews.