US asset management giant BlackRock has announced a repositioning of its active equity management strategy by cutting human stock picking at the expense of a quantitative approach relying on advances in big data.
BlackRock said strategy or portfolio management repositioning will impact around $30bn in assets under management, forming about 11% of the firm’s total active equity AUM.
It specified there will be no repositioning of active equity products currently managed outside of the US.
Concretly, 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 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.
“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 Mark Wiseman, global head of Active Equities at BlackRock.
Wiseman assessed 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 $8bn in assets.
BlackRock said these changes will result in approximately $30m of annualised savings to clients from lower fees.
The firm added it will also incur a charge of approximately $25m in the first quarter of 2017 reflecting expenses associated with the repositioning.
As at 31 December 2016, BlackRock’s AUM was $5.1trn.