US asset management giant BlackRock has announced a series of moves in Hong Kong alongside a major repositioning of its US active equity management strategy, that is cutting human stock picking at the expense of a quantitative approach, due to what it calls “advances in big data”.
BlackRock said that its strategy or portfolio management repositioning will impact around US$30bn in assets under management, forming about 11% of the firm’s total active equity assets under management.
It specified there will be no repositioning of active equity products currently managed outside of the US, however, the company has also announced a series of changes in Asia, particularly surrounding its global emerging markets (GEM) offering, at the same time.
The changes come as part of a move to set Asia Pacific as its new GEM hub. BlackRock said that Andrew Swan, head of Asian equities’ role has now been expanded to head of Asian and global emerging markets equities.
The emerging markets teams will be led by Belinda Boa, as CIO of Emerging Markets, Fundamental Active Equity, to, as the company said, “bring about greater alignment and an exchange of insight throughout emerging markets professionals covering Latin America, Emerging Europe and Asia Equities”. She also remains as head of Active Investments for Asia Pacific, covering active equities, fixed income and multi-asset.
Both Swan and Boa will be based in Hong Kong.
Gordon Fraser, a portfolio manager in the GEM equity team, will also be relocating to Hong Kong from London and a newly created role of head of research for the GEM team, also based in Hong Kong. BlackRock said that it has also appointed Doug Chow to become global head of active equities integration and data, based in Hong Kong.
As part of its US move, BlackRock said that “a few investment teams, primarily in the US”, will be reoriented around a “more focused product line-up”, while also shifting resources and responsibilities. BlackRock said as part of its move towards reducing the reliance on active stock picking, that it seeks to create “a more integrated approach to collaboration across fundamental research teams to leverage the firm’s global reach”, including insights generated from teams in local markets.
This new structure will “enable insights derived both through big-data analysis and fundamental research”, to be shared across every investment team across the active equity platform, it said.
The decision to move away from human stock picking was taken by Mark Wiseman, global head of active equities at BlackRock, who joined the firm from the Canada Pension Plan Investment Board last year.
“Traditional methods of equity investing are being reshaped by massive advances in technology and data sciences. At the same time, client preferences are shifting, focusing not just on outcomes but on how both performance and fees impact value,” said Wiseman, global head of Active Equities at BlackRock.
Wiseman added that the active equity industry needs to change to generate “sustainable alpha” and deliver on client expectations.
At the same time, BlackRock is set to reshuffle its active equity offerings in four product ranges.
The four distinct product ranges for BlackRock’s active equity products will be:
- Core Alpha – products for clients seeking market returns plus consistent alpha (outperformance over a benchmark) with lower levels of risk.
- High Conviction Alpha – for clients seeking higher risk/return products (highly concentrated and unconstrained/absolute return strategies).
- Outcome Oriented – products designed to provide clients with specific outcomes, such as income or sustainable investment strategies.
- Country and Sector Specialty – offering clients specific country and sector exposures.
BlackRock’s active equity fund range overhaul will be completed by the launch of the new Advantage series and an expanded range of income funds.
The new Advantage series of core alpha products for US investors is expected to include initially nine mutual funds providing access to BlackRock’s quantitative investment team.
It will include both new products and the conversion of certain existing funds with approximately US$8bn in assets.
BlackRock said these changes will result in approximately US$30m of annualised savings to clients from lower fees. It added that it will also incur a charge of approximately US$25m in the first quarter of 2017 reflecting expenses associated with the repositioning.
As at 31 December 2016, BlackRock’s total AUM was US$5.1trn.