BlackRock Funds, Up and Down

Chidem Kurdas

Multi-trillion-dollar asset manager BlackRock has been building its alternatives business for years, largely through acquisitions, the most recent being Swiss Re’s private equity business. Chief executive Laurence Fink pointed out some of the achievements this year at a conference call.

BlackRock Obsidian fixed income fund has gained 20% year to date. The company started new funds, including Global Alpha in fixed income, which is up 7% already. And BlackRock funds of funds beat their benchmarks and peers for 13 quarters running, Mr. Fink said.

Other BlackRock hedge funds were adversely affected by the turbulent environment. Chief financial officer Ann Marie Petach said some of them had extreme volatility, going up and down by multiple percentage points from week to week. This makes it hard to estimate where they are relative to their high-water mark. A fund can be above its high-water mark one week and below the next week.

The volatility is due to the risk on/off movements in the market, Mr. Fink says. BlackRock’s commitment to alternatives remains strong, Ms. Petach said.

However, hedge funds and private equity remain a small share of BlackRock’s overall business—accounting for only 3% of total assets, though 9% of fee revenues. This is after the company redefined what it classifies as alternative assets.

But the variety BlackRock offers, from index ETFs to a growing range of specialist hedge funds, makes it a convenient one-stop investment shop for institutions. Mr. Fink says they’re in talks with a client for a $15 billion mandate. Whether part of that will be invested in hedge fund strategies in unknown but the possibility suggests that BlackRock  has emerged as a formidable competitor to alternatives managers.

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