BlackRock execs lay out how last year's $1.3 billion eFront deal is setting up Aladdin to crack into a massive alternative-investment opportunity
BlackRock's Aladdin is eyeing the alternative investments space as a major growth opportunity following its integration of eFront onto its risk-management platform. Acquired in May 2019, eFront is software for the management of alternative investments. Sudhir Nair, global head of the Aladdin business, told Business Insider that asset managers are increasingly focusing on alternative investments, but struggle to analyze risks around private investments. "We think the distinction between the two is going to increasingly erode over time in terms of the need for risk transparency and efficient operating models," Nair added. Click here for more BI Prime stories.
The risk-management platform widely used by investors across Wall Street is positioning itself to address a growing push into alternative investments. After completing its $1.3 billion acquisition of eFront in May 2019, BlackRock has finished integrating the alternative investment management software into the firm's crown jewel, Aladdin. The new platform, which is currently being piloted with some clients, offers transparency into both the public and private markets and speaks to the world's largest asset manager's goal of turning Aladdin into the "language of portfolios." "We think the distinction between the two is going to increasingly erode over time in terms of the need for risk transparency and efficient operating models," Sudhir Nair, global head of the Aladdin business, told Business Insider. "We're on a mission, at a very high level, to have alternatives as an asset class become less alternative through the integration work that we're doing." Read more: BlackRock is eyeing aggressive growth for its Aladdin platform, and says it could manage risk for the entire asset management industry by 2025 BlackRock is well positioned to capitalize on a rise in alts From private equity and venture capital to hedge funds and real estate, alternative investments provide a way for firms to diversify beyond stocks and bonds. When BlackRock announced its deal to buy eFront in 2019, it noted that that the $9 trillion alternative asset management industry presented a huge opportunity for risk and investment management tools. And earlier this month, Business Insider reported on an internal memo at UBS, one of the largest wealth managers in the world, that detailed a push to meet surging demand from family offices and wealthy individuals clamoring for access to private markets. However, putting capital into alternatives doesn't come without its risks. Visibility into the investment is often much more difficult compared to those made in public markets. Offering clarity about exposures across a portfolio is where Aladdin has thrived. Some of the biggest growth the platform saw was in the years following the financial crisis, as firms wanted a better sense of correlations between their various investments. And so as more money pours into alternatives, BlackRock is banking on investors looking for the same transparency they're accustom to in the public markets be made available to them for private deals. "Being able to demonstrate an ability to truly understand from a risk perspective what that allocation to alternatives entails is going to be more and more important," Nair said. "The most recent period of market volatility has really shone a spotlight on that." Read more:The machines running a huge chunk of public markets will only get smarter, and that's putting private equity and stock-pickers on a collision course Inside BlackRock's integration with eFront The marriage of Aladdin and eFront hasn't just been about integrating the latter into the former. The past year has also been about building out new capabilities thanks to the strengths of both systems, Nair said. While eFront has 20 years of experience helping firms manage alternative investments, risk tech was never a focus, he said. As a result, a combination of Aladdin's experience with risk management and eFront's deep knowledge of private-markets modeling and data provided the template for a deeper, more complete view into alternatives that neither provided on their own. "This level of depth provides clients the transparency and the capability to assess risk into private markets that we would have otherwise not been able to do today," Tarek Chouman, head of Aladdin business development and former CEO of eFront, told Business Insider. The importance of offering those insights is apparent in BlackRock's own backyard. The firm has continued to put resources towards teams chasing alternative investments. Nair said that's a huge benefit. BlackRock usage of Aladdin internally has offered great feedback on what does and doesn't work well. "We're big believers that we have to eat our own cooking," he added. "[BlackRock] is a great sandbox environment as we build new capabilities to try them out in." The benefits go beyond risk analysis Constant evolution has been a staple of Aladdin, which was first launched in 1988. In recent years, it rolled out Aladdin Studio, a set of tools that allows engineers to open up and customize the platform to their liking. The $6.5 trillion asset manager has also previously looked to hire for a role specifically focused on managing tech projects for the platform. BlackRock CEO and founder Larry Fink has previously called Aladdin, which helped the firm's technology services group generate nearly a $1 billion in revenue in 2019, a tech startup. Understanding portfolio risk isn't the only thing that's helped the platform grow. Aladdin has also made efforts to provide better connectivity between asset managers and asset services. eFront has been active in this department as well, with a large client segment base consisting of alternative asset services. Nair said those would be avenues the firm would continue to explore. "There's definitely an opportunity along the lines of what I described of building greater connectivity between asset managers and asset servicers for public markets, which Aladdin has been focused on, to do the same with private markets, leveraging eFront's existing relationships with asset servicers," Nair said. Read more: Larry Fink, CEO of the world's biggest asset manager, says BlackRock's massive Aladdin platform is really just a tech startupSEE ALSO: The machines running a huge chunk of public markets will only get smarter, and that's putting private equity and stock-pickers on a collision course SEE ALSO: UBS is rolling out the red carpet for ultra-rich people and family offices who want in on private-market deals SEE ALSO: BlackRock is eyeing aggressive growth for its Aladdin platform, and says it could manage risk for the entire asset management industry by 2025 Join the conversation about this story » NOW WATCH: Why Pikes Peak is the most dangerous racetrack in America
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Larry Fink says BlackRock needs to do 'much more' to tackle diversity. Here's how the world's largest asset manager is trying to build a pipeline of female and Black leaders.
Summary List Placement BlackRock CEO Larry Fink is not often shy about telling the companies his...Summary List Placement BlackRock CEO Larry Fink is not often shy about telling the companies his $7.3 trillion asset manager invests in what to do. Before the pandemic made its way to the United States this January, Fink's annual letter harped on climate change and how companies are ignoring a massive investment risk if they do not address it. In the eight months that have passed since the letter was sent out, the world has changed, as the novel coronavirus has killed millions globally and police killings of Black Americans sparked worldwide movements, which have pressured companies to increase diversity in their ranks. During a talk Thursday morning at Morningstar's digital conference, Fink admitted his company still had a ways to go on diversity — and said he wouldn't be pressing other companies on the matter before he could figure out how to address the issues within his own. "BlackRock must be a mirror of the society where we work," he said. "My optimism was probably proven to be a little too optimistic for how fast we could change." The firm has since made tangible goals for diversity numbers, which Fink outlined in a LinkedIn post from June: women making up 30% of senior leadership by the end of the year; doubling the number of Black employees in senior leadership by 2024; and increasing the overall portion of Black employees by 30% by 2024. Black employees only make up 5% of its US workforce and 3% of senior leadership, he said in the post. "We need to do more, we need to do much more," Fink said, though he did note that more than 30% of the firm's 16-person board is female. The firm currently has women making up 29% of senior leadership. As of December 31, 2019, the firm employed more than 16,000 people worldwide. See more: PIMCO wants to create its own version of BlackRock's Aladdin. Read the memo the bond giant just sent laying out its approach. Birgit Boykin, the firm's acting head of diversity, said on a panel from the Council of Institutional Investors Thursday that the firm "really didn't understand well enough the experience of Black and Latinx employees." Boykin, who is originally from Germany and now lives in San Francisco, said she is still learning a lot about the United States and how engrained systemic racism is in the country. One thing the Boykin is focused on is the pipeline of talent that will make up the next generation of BlackRock's senior leadership team, which is made up of directors and managing directors. The last four years, Boykin said, intern classes and the asset manager's analyst training program have been 50% female. Fink's note from June said the firm's incoming summer analysts and program trainees were the most diverse yet, with 38% of those coming for the summer identifying as Black or Latinx. The hope is to create a more diverse investing team, which will help close salary gaps by gender and race. Boykin said, "representation is one part we need to solve, but also what roles these employees are playing in the firm." Women directors, she said, should not all be siloed in marketing and HR. "It's a multi-year plan," she said. In the meantime, don't expect Fink to push the S&P 500's biggest names on diversity issues until he believes he has solved them at BlackRock. "I'm not sure what I'm going to say to other firms because I'm going to make sure BlackRock is going to be doing it right first," he said. "When I get this right, maybe that's a time when I can ask other companies to do it well too, but right now, we have to prove we can do it right."SEE ALSO: Meet the 17 BlackRock power players carrying out CEO Larry Fink's vision to turbocharge private equity and alternative investments growth SEE ALSO: The top US companies putting women on their boards, promoting minorities, and proving their diversity efforts aren't all just talk SEE ALSO: The biggest US wealth firms won't disclose adviser racial diversity data despite renewing commitments to make their mostly white adviser forces more inclusive Join the conversation about this story » NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid
Citi wages war with hedge funds — Pimco takes on BlackRock's Aladdin — Balyasny's PM training program
Summary List Placement Happy hump day. Wall Street's attempt at returning to some form of normalcy...Summary List Placement Happy hump day. Wall Street's attempt at returning to some form of normalcy has already hit its first roadblock. JPMorgan had to send some employees home after someone on its equities trading team tested positive for the coronavirus, as reported by Bloomberg. It was difficult timing for Wall Street's biggest bank, as its chief executive, Jamie Dimon, had just finished speaking at a conference about the importance of returning to work and reopening cities. If you're not yet a subscriber, you can sign up here to get your daily dose of the stories dominating banking, business, and big deals. Like the newsletter? Hate the newsletter? Feel free to drop me a line at email@example.com or on Twitter @DanDeFrancesco. Citi wages war with hedge funds Back again with another great story out of Dakin Campbell, who has a scoop about Citigroup freezing out the firms it's locked in a legal battle with over the $900 million wire it mistakenly sent. In case you missed it, Citi is currently at odds with about a dozen hedge funds and investment firms that refuse to return money the bank mistakenly sent to them last month on behalf of Revlon. Most financial firms in that position would look to the legal system to try and claw their money back, something Citi has already done But, Citi has another trick up its sleeve. Being one of the most powerful banks on Wall Street has its perks. And the bank has leveraged its position as a key trading partner to freeze out the firms it's at odds with. Click here to read the full story. Zumper, a home-listing site that has raised $150 million from backers like Blackstone and Kleiner Perkins, weeded out thousands of Section 8 renters in a practice some experts say may amount to discrimination Daniel Geiger has an absolute must-read story about home-listing site Zumper. Daniel got his hands on some data that shows how the startup, which has big-name backers like Blackstone and Kleiner Perkins, screens lower-income tenants who receive government assistance. This is one you want to give a read. Inside $8.3 billion Balyasny's Anthem training program, where aspiring portfolio managers are handed hundreds of millions of dollars to prove they can cut it Think you have what it takes to be a portfolio manager? Balyasny Asset Management has a program for you. Reed Alexander and Bradley Saacks have all the details on how the $8.3 billion hedge fund finds its next money managers. Here's the full story. $1.9 trillion PIMCO just launched a new tech team aimed at taking on BlackRock's massive Aladdin business — read the full memo here BlackRock's Aladdin is arguably one of the most successful tech platforms since the wake of the 2008 financial crisis. So, it's no wonder others would look to challenge its business. Enter $1.9 trillion PIMCO. Bradley Saacks and Rebecca Ungarino have a memo outlining the giant asset manager's plans. A majority of Goldman Sachs' summer interns prefer Instagram to TikTok, believe remote work hurts relationships, and think Biden will be elected president in November Biden over Trump. Instagram over TikTok. Dogs over cats. These are some of the takeaways from Goldman Sachs' annual intern survey. Reed Alexander has the entire story here. Odd lots: Davis Polk announces surprise associate bonuses of up to $40,000, becoming the latest firm to tout its financial strength amid the pandemic (BI) Silver Lake-Led Group Pours $650 Million Into Payments Company Klarna (WSJ) The rise of another Indian at Masayoshi Son's SoftBank (The Economic Times) After Wirecard, Ernst & Young Says Auditors Should Focus More on Fraud Prevention (WSJ) Viral videos of a 'UFO' in New Jersey really captured a Goodyear blimp (Insider) Join the conversation about this story » NOW WATCH: Here's what happens when two hurricanes collide