BlackRock — the world’s largest asset manager with more than $9 trillion of assets — has a vision for the asset management industry: In the future, it won’t just be competing for capital from the biggest institutions and small investors. It will be a central part of how most asset managers and owners operate.
Throughout rapid 15-minute presentations at Wednesday morning’s Investor Day for shareholders and sell-side analysts, BlackRock executives argued that the firm is more than an asset manager with an expansive presence across different products, asset classes, and geographies. They borrowed language used by technology companies, characterizing BlackRock as a multifaceted platform.
“Our ambition is to be the cloud of investment management in technology. We believe our platform strategy combined with the access we provide the industry, best expertise we deliver for our clients, and our constant aim for excellence in client service, means we will deliver differentiated organic growth and operating leverage over time,” said Martin Small, chief financial officer and global head of corporate strategy.
In the $108 trillion asset management industry, the largest firms are getting bigger — but they don’t dominate like other companies in their respective spaces. In 2022, BlackRock was managing 8 percent of the market, up 1 percent from 2016. The top five firms managed 16 percent in 2022, up from 13 percent in 2016.
While the top five asset managers make up 10 percent of the industry’s revenue (BlackRock accounts for 3 percent), it’s a different story for other industries. The top five credit card issuers, for example, earn 46 percent of their industry revenue, BlackRock pointed out in its investor day presentation.
Aladdin — which started as BlackRock’s in-house risk management platform and is now used by more than 1,000 organizations for some or all of their investment processes — is the core of BlackRock and what the firm sees as its future. Giving other asset managers, as well as institutional investors and private wealth managers, access to Aladdin is helping them achieve scale, glean insights, and support their businesses in ways they couldn’t do otherwise, according to BlackRock.
“Asset management is an information processing business,” Robert Goldstein, BlackRock’s chief operating officer, said during his presentation.
Aladdin users also deepen their relationship with BlackRock over time. One example from Wednesday’s presentation: In 2017, an insurance company with a $55 billion portfolio gave BlackRock $1 billion to invest, then began using Aladdin to evaluate its portfolio three years later. This year, the insurer began using the enterprise version of Aladdin — much the same way BlackRock uses it for itself — and the portion of the portfolio invested by BlackRock swelled to more than $32 billion. Out of BlackRock’s 25 biggest clients, 68 percent have increased their wallet share with the firm over the last five years. And once customers start using Aladdin, they rarely stop: It has a three-year average client retention rate of 98 percent.
As a result, BlackRock’s technology revenue grew to $1.4 billion in 2022 and its three-year compound annual growth rate was 12 percent. (BlackRock’s total revenue was $17.8 billion in 2022.)
As part of its platform strategy, BlackRock expects its technology revenue to grow substantially. Aladdin has captured 11 percent of the roughly $12.5 billion addressable market. BlackRock estimates that large institutional and wealth managers who aren’t already clients account for another $5 billion in potential sales, with smaller ones making up about $6 billion.
For years, BlackRock CEO Larry Fink has said that BlackRock would effectively morph into more of a technology company and that notion was fully embraced during the investor day.
“BlackRock has never been afraid to make big investments and big bets. Our willingness to disrupt ourselves and the industry to deliver better outcomes to clients created the foundation of what BlackRock is today,” Fink said during his presentation Wednesday.
“And we will be driving our growth into the future. We made a bet on taking our proprietary internal Aladdin technology and offering it to the external client . . . We’re not only growing Aladdin’s capabilities, we are making a bigger addressable market by extending it to adjacent offerings,” Fink added.
