How big can BlackRock get? With more than US$4.4-trillion in assets under management, BlackRock is the largest money manager in the world by a wide margin

How big can BlackRock get?

Jonathan Ratner | June 19, 2014 7:50 AM ET
With more than US$4.4-trillion in assets under management, BlackRock Inc. is the largest money manager in the world by a wide margin, but that has some investors worried that its growth will inevitably slow down.

RBC Capital Markets analyst Eric Berg, however, is confident BlackRock is being very disciplined in launching new products that can help increase AUM over time and is targeting market leadership in key markets to help boost overall growth.

Some of BlackRock’s more recent offerings include the Global Multi-Asset Income Fund and Fixed Income Balance Risk product.

Mr. Berg also highlighted the iShares business, where management believes growth in passively-managed ETFs will not simply come from fund investors substituting actively managed funds with passively managed funds.

“Rather, within BlackRock’s world view, a multitude of potential clients, ranging from self-directed retail investors to institutional investors such as pension plans, sovereign funds and insurance companies, can utilize ETFs for distinct purposes,” the analyst told clients.

He’s not surprised to see BlackRock focusing on the growth opportunity in alternative investing either.

Only 3% of BlackRock’s AUM is currently allocated to alternatives, so there is room for more exposure through hedge-fund strategies, private-equity funds of funds, opportunistic credit strategies, real estate and infrastructure investments.

Deutsche Bank analyst Brian Bedell thinks BlackRock management effectively tackled the “too-big-to-grow” question at its investor day by identifying good traction and solid execution plans in key growth areas. The company also reaffirmed a 5% annual organic AUM growth target, as well as an expectation of continued double-digit EPS growth in normal markets.

As a result, Mr. Bedell has more confidence in his EPS growth forecasts of 12% in 2014 and 16% in 2015, both of which are above analysts’ average expectations.

The analyst expects BlackRock shares to re-attain a 10% P/E premium versus the S&P 500 in the next 12 months, which drives his US$358 price target.

Mr. Berg at RBC also noted BlackRock has traded at an average premium to peers of roughly 10% in the past five years. However, in the new world of “solutions-oriented money managers” he sees emerging, BlackRock is in a good position to take additional market share. The analyst expects that will translate into faster organic growth than its competitors.

As a result, he believes BlackRock’s premium could rise to 23%, producing a price target of US$386 on the stock, representing an upside of more than 20%.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: