BLACKROCK
Worldwide Leader in Asset and Risk Management
AUGUST 2016
While BlackRock is known as a large asset manager, our size
says little about our structure and risk profile, our history, or
how we function today. In this ViewPoint, we provide an
overview of our organization and discuss the factors that
differentiate BlackRock specifically, and the asset
management industry more generally, from other financial
institutions.
Throughout this evolution, BlackRock has maintained its focus
on managing assets on behalf of its clients, as well as
providing risk management and advisory services. Clients of
the firm include corporate, public and multi-employer pension
plans, governments, insurance companies, official institutions,
endowments, foundations, charities, corporations, banks,
sovereign wealth funds, mutual funds, and individuals around
the world.
Overview
BlackRock was founded in New York in 1988 by eight
partners, five of whom remain active in the firm today.
BlackRock has grown from a start-up to a market leader by
attracting clients and employees, and by acquiring several
other asset management companies along the way.
BlackRock’s mission is to create a better
financial future for our clients, by building
the most respected investment and risk
manager in the world
BLACKROCK AT A GLANCE
Global expertise, local service
 Established in 1988
 Public since 1999; NYSE: BLK
 Independent with no majority shareholder
 $4.89 (or €4.41) trillion assets under management (AUM)
 Approximately 12,600 employees
 Over 1,800 investment professionals*
 Presence in over 65 cities across 30 countries
Advisory
0.2%
Cash
Management
8%
Equity
50%
Alternatives
2%
Multi-asset
8%
Fixed Income
32%
Source: BlackRock, data as of 30 June 2016.
*As of 31 March 2016.
BlackRock is a global firm that combines the benefits of
worldwide reach with local service and relationships.
Investment centers in nearly 30 cities (including New York,
London, San Francisco, Tokyo, and Hong Kong) facilitate
access to major capital markets. Likewise, account managers
in over 65 cities across 30 countries (six in the Americas,
seven in Asia Pacific, and seventeen across Europe, the
Middle East, and Africa) deliver global expertise to our diverse
client base.
The assets BlackRock manages on behalf of clients include
cash, fixed income, equity, alternatives and multi-asset class
mandates. In addition, the AUM reflects approximately $11 (or
€9) billion in advisory assignments, which include long-term
portfolio liquidation assignments.
Independent asset manager
BlackRock is an independently managed public company with
no single majority stockholder. The firm has been listed on
the New York Stock Exchange under the symbol “BLK” since
1999. In April 2011, BlackRock was added to the S&P 500
Index, reflecting both the valuation of the company and the
broad ownership of its stock. The PNC Financial Services
Group, Inc. has a minority ownership stake in BlackRock with
the remainder owned by institutional and individual investors,
as well as BlackRock employees. Independent directors
comprise a majority of the BlackRock board of directors.
The opinions expressed are as of August 2016 and may change as subsequent conditions vary.
2
BLACKROCK’S HISTORY
The Asset Management Business
ASSET MANAGERS DO:
Fiduciaries to our clients
 Act on behalf of clients
Asset managers, also known as investment managers, are
hired by clients to invest assets on their behalf. In this role,
asset managers act as fiduciaries. Asset managers invest
within the guidelines specified by their clients for a given
mandate set out in the investment management agreement
(IMA) or established by the offering or constituent documents
that establish the fund. Importantly, the investment results,
whether positive or negative, belong to the client.
 Rely on a generally stable fee-based income stream
 Receive regulatory oversight at both the manager and
portfolio levels (in the US and EU regulatory regimes
and elsewhere)
ASSET MANAGERS DO NOT:
 Invest with their own balance sheets by engaging in
principal trades
Client assets held by custodians
The “assets under management” are owned by clients. They
are generally held by third-party custodians selected by, and
under contractual obligation to, these clients. The custodian
maintains the official books and records and facilitates trade
settlement with counterparties. As such, asset managers do
not have physical control or direct access to clients’ assets.
Likewise, the client, not the asset manager, is the
counterparty to trades. Consequently, asset managers have
small balance sheets relative to those of other types of
financial institutions.
 Employ balance sheet leverage
 Guarantee investor principal, nor do they offer a
government guarantee or backing
 Provide liquidity for funds
 Have access to central bank liquidity
What Distinguishes Asset Managers Within
the Financial Industry?
The agency model
Stable fee structure
Asset managers are generally paid fees for services on a set
schedule based on the amount of assets under their
management. This fee structure generates a more stable
income stream than that of a transaction-oriented financial
institution. In addition, asset managers generally have little
debt on their balance sheets.
Asset managers are characterized by a business model that
is fundamentally different than that of other financial
institutions, such as commercial banks, investment banks,
insurance companies and government-sponsored entities.
Asset managers are different than most other financial firms
in that they act as advisors or agents on behalf of their
clients. While asset managers do not use their balance
sheets in the ordinary conduct of their business, other
financial companies do engage in activities involving
significant levels of balance sheet risk. For example,
investment banks act as principal in trading, market-making
[2]
and prime brokerage; finance companies access the capital
markets for funds and re-lend these monies; and insurance
companies provide long-term financing for real estate and
other hard assets as part of their asset-liability management.
BLACKROCK’S LARGEST LOCATIONS
Rank*
City
Country
Americas (over 6,700 employees)**
Another critical difference between a commercial bank and an
asset manager is the absence of reliance on government
guarantees or support. Banks accept deposits that, in the US,
are then insured by the Federal Deposit Insurance
Corporation and, in the EU, are obliged to participate in
national Deposit Guarantee Schemes. Asset managers,
meanwhile, clearly disclose to clients that investment
performance is not guaranteed by the manager, the
government, or any other party.
This distinction was critically important in shielding asset
management companies from much of the turmoil that
occurred during the financial crisis of 2008. Notably, no asset
manager was among the 700 US financial institutions that
received a direct investment under the TARP Capital
Purchase Program.2
1
New York, NY
United States
2
San Francisco, CA
United States
3
Princeton, NJ
United States
4
Wilmington, DE
United States
5
Seattle, WA
United States
6
Boston, MA
United States
7
Toronto
Canada
8
Philadelphia, PA
United States
9
Chicago, IL
United States
10
Mexico City
Mexico
Europe (over 3,400 employees)
1
London
United Kingdom
2
Edinburgh
United Kingdom
3
Peterborough
United Kingdom
4
Zurich
Switzerland
5
Frankfurt
Germany
6
Dublin
Ireland
7
Milan
Italy
Collective investments
8
Munich
Germany
CIVs play an important role in many clients’ portfolios. Some
clients prefer these investment vehicles for the diversification
they provide. Examples of CIVs include mutual funds,
exchange traded funds (ETFs), collective trust funds, and
hedge funds.
9
Amsterdam
Netherlands
10
Paris
France
Asset Management Products
Investment strategies can be offered in a variety of structures,
which can be broken down into two main categories –
commingled investment vehicles (CIVs) and separate
accounts.
CIVs are typically subject to a robust set of regulatory
requirements that can differ by the type of client who can
invest in the fund and jurisdiction in which the fund is offered.
Examples of regulatory regimes that CIVs can be subject to
include the Investment Company Act of 1940 in the US and
Undertakings for Collective Investment in Transferable
Securities (UCITS) in the European Union (EU). CIVs are
separate legal entities from the asset manager. They are
typically overseen by a board of directors or equivalent (i.e.
trustees or directors).
Asia Pacific (over 2,500 employees)
1
Gurgaon
India
2
Singapore
Singapore
3
Hong Kong
China
4
Tokyo
Japan
5
Sydney
Australia
6
Taipei
Taiwan
7
Melbourne
Australia
8
Seoul
South Korea
*Rank by number of employees. Data as of 15 July 2016.
**Includes United States, Canada, Central America, and South America
Separate accounts
Separate accounts are individual portfolios managed for a
single client – they can be thought of as a “fund for one”.
The vast majority of separate accounts are long-only
strategies managed for institutional investors. 1 The client is
the legal owner of the assets in the separate account, and
therefore, separate accounts are subject to the regulation that
the client is subject to.
1 “Factsheet: Separate Accounts Do Not Pose Systemic Risk”, SIFMA, April 17, 2014. Available at http://www.sifma.org/issues/item.aspx?id=8589948619
2 US Government Accountability Office; Office of Special Inspector General for the Troubled Asset Relief Program; US Department of Treasury.
[3]
Regulation of Asset Managers
Oversight at manager and portfolio levels
Asset managers are subject to comprehensive regulation that
includes regular examinations and reporting that requires
managers to establish and maintain extensive risk
management and compliance policies and procedures.
US
In the US, the Securities and Exchange Commission (SEC) is
the primary regulator of asset managers that are registered as
investment advisers. Asset managers that operate trust
banks are overseen by the Office of the Comptroller of the
Currency (OCC) if federally chartered, and by state banking
authorities if state-chartered.
Many asset managers are also subject to regulation by the
Department of Labor under the Employee Retirement Income
Security Act (ERISA) for work on behalf of certain pension
plans and by the Commodity Futures Trading Commission
(CFTC) if they invest client funds in commodities or certain
derivatives instruments. The Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank), enacted in July
2010, introduced a host of new rules that provide for
enhanced reporting, oversight and transparency for financial
instruments and financial institutions, including asset
managers.
EMPLOYEES AT LARGEST US AND EUROPEAN
BANKS AND AT BLACKROCK
European Union
In the EU, the vast majority of the legislation that underpins
the regulatory environment for asset managers is agreed
upon at the European level, following co-decision by the EU
Member States and the European Parliament. EU legislation
is subsequently implemented at the national level
(Directives) or applied directly (Regulations). Common
European rules create the legislative conditions for the
Single Market in goods and services in the EU. Similar to
Dodd-Frank in the US, the European Market Infrastructure
Regulation (EMIR), for example, establishes central clearing
counterparties (CCPs) and trade repositories, and the
proposal to revise the Markets in Financial Instruments
Directive (MiFID) will include provisions that aim to strengthen
investor protection and increase market transparency.
The supervision of asset managers in Europe continues to
be carried out by national authorities, such as the Financial
Conduct Authority (FCA) and the Prudential Regulation
Authority (PRA) in the UK3, the Federal Financial
Supervisory Authority (BaFin) in Germany, and the Authority
for the Financial Markets (AFM) in the Netherlands.
Asia-Pacific
In the Asia-Pacific region, regulatory agencies overseeing
asset managers include the Financial Services Agency in
Japan, the Securities and Futures Commission in Hong
Kong, and the Australian Prudential Regulation Authority and
the Australian Securities and Investments Commission in
Australia, among others.
What Differentiates BlackRock?
Stand-alone investment management company
BlackRock was founded as a stand-alone investment
management company focused on providing asset
management and risk management services to clients. The
firm brings together expertise across capital market sectors,
and asset allocation, portfolio management, financial
modeling, and risk management disciplines. BlackRock’s
fiduciary culture differentiates it from sell-side firms.
State-of-the-art proprietary risk analysis technology
Width of circle represents approximate total employees scaled to 100 as of most
recent date available. Source: BlackRock, data based on financial filings.
Produced on 7/15/16.
An integral part of BlackRock’s fiduciary culture is our core
belief that rigorous risk management is critical to the delivery
of high-quality asset management services. The firm’s
leaders identified a growing gap between the sell-side and
the buy-side, and had a vision for a tool that asset managers
needed to prudently manage risk. Having determined that
no existing system adequately fulfilled this need, BlackRock
designed and built a proprietary state-of-the-art system,
which evolved into the technology platform known as
BlackRock Solutions®.
3 As of 1 April 2013, the Prudential Regulation Authority and the Financial Conduct Authority succeeded the Financial Services Authority (FSA), assuming responsibility for
financial regulation and supervision.
[4]
Today, portfolio managers throughout BlackRock have
access to proprietary technology which enables them to
make more informed decisions. These tools can analyze
individual securities, aggregate a portfolio of securities, and
compare that portfolio and its risk characteristics to an
index or another relevant benchmark.
BLACKROCK SOLUTIONS
Public Policy
Risk-informed investment management requires the right
tools to assess security- and portfolio-level risks, to
rebalance portfolios to meet portfolio manager objectives,
and to process transactions efficiently. As a result,
BlackRock developed an integrated suite of investment
management tools designed to be used by BlackRock’s
investment professionals. Starting in 2000, BlackRock
began offering those risk analytics and trade processing
tools, as well as advisory services, to external clients
under the BlackRock Solutions® brand.
Engagement in financial regulatory reform
Risk analysis and investment processing tools
Asset managers act as fiduciaries, so a focus on clients is
central to the business model. In recognition of this
fiduciary responsibility, BlackRock has identified financial
regulatory reform as a critical issue for our clients. We
support the creation of a regulatory regime that increases
transparency, protects investors and facilitates responsible
growth of capital markets, while preserving consumer
choice and assessing benefits versus implementation
costs.
The Aladdin Institutional Business delivers our risk
analysis and investment processing tools, known as
Aladdin® to institutional clients including asset managers,
insurers, banks, pensions, and official institutions. Aladdin
allows client organizations to combine risk analytics, order
management and trade processing on a single platform.
This can help eliminate redundant data input across
multiple systems, enhance data integrity through shared
and transparent information, and increase operating
efficiencies and controls. Aladdin’s risk analytics allow risk
managers and portfolio managers to analyze their
exposures and risks across asset classes in accordance
with their own internal risk management practices and
policies, as part of each client’s broader investment
decision process.
In addition, BlackRock’s focus on asset management and
risk management services is very different from a bank that
offers deposits, loans, and other products to customers.
Investor perspective
Historically, investor participation in public policy debate
has been limited. However, we believe the investor
perspective is critical to consider. As a result, BlackRock
has actively engaged in discussions with policymakers on a
wide range of financial regulatory reform topics.
Financial Markets Advisory Group
The Financial Markets Advisory Group (FMA) within
BlackRock Solutions advises clients in managing their
capital markets exposure and businesses. FMA focuses
on enterprise risk management and regulatory reporting
support, complex financial modeling, balance sheet and
financial strategy development and specialized asset
management and transaction support services. The FMA
team uses customized analytical and modeling techniques,
as well as BlackRock Solutions’ suite of data management,
financial modeling and risk management tools in executing
these advisory engagements.
RELATED CONTENT
A complete library of ViewPoint public policy papers, comment
letters, and responses to consultations prepared by BlackRock is
available at www.blackrock.com.
[5]
This publication represents the regulatory and public policy views of BlackRock. The opinions expressed herein are as of July 2016 and are subject to change at any time due to
changes in the market, the economic or regulatory environment or for other reasons. The information in this publication should not be construed as research or relied upon in
making investment decisions with respect to a specific company or security or be used as legal advice. It should not be construed as research. Any reference to a specific
company or security is for illustrative purposes and does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities, or an offer or
invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.
This material may contain ‘forward-looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There
is no guarantee that any forecasts made will come to pass.
The information and opinions contained herein are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, but are not necessarily all inclusive
and are not guaranteed as to accuracy or completeness. No part of this material may be reproduced, stored in any retrieval system or transmitted in any form or by any means,
electronic, mechanical, recording or otherwise, without the prior written consent of BlackRock. This publication is not intended for distribution to, or use by any person or entity in
any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Issued by BlackRock Investment Management (UK) Limited (authorised and regulated by the Financial Conduct Authority). Registered office: 12 Throgmorton Avenue, London,
EC2N 2DL. Registered in England No. 2020394. Tel: 020 7743 3000. For your protection, telephone calls are usually recorded. BlackRock is a trading name of BlackRock
Investment Management (UK) Limited.
In Singapore, this is issued by BlackRock (Singapore) Limited (Co. registration no. 200010143N) for use only with institutional investors as defined in Section 4A of the
Securities and Futures Act, Chapter 289 of Singapore.
In Hong Kong, this material is issued by BlackRock Asset Management North Asia Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong.
In Korea, this material is for Qualified Professional Investors only.
In Japan, this is issued by BlackRock Japan. Co., Ltd. (Financial Instruments Business Operator: The Kanto Regional Financial Bureau. License No375, Association
Memberships: Japan Investment Advisers Association, The Investment Trusts Association, Japan, Japan Securities Dealers Association, Type II Financial Instruments Firms
Association.) for Professional Investors only (Professional Investor is defined in Financial Instruments and Exchange Act) and for information or educational purposes only, and
does not constitute investment advice or an offer or solicitation to purchase or sells in any securities or any investment strategies.
In Taiwan, Independently operated by BlackRock Investment Management (Taiwan) Limited. Address: 28/F, No. 95, Tun Hwa South Road, Section 2, Taipei 106, Taiwan. Tel:
(02)23261600.
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recipient who warrants by receipt of this material that they are a wholesale client and not a retail client as those terms are defined under the Australian Corporations Act 2001
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on which the information is based (which may be sourced from third parties) are correct as at the date specified in this material. While every care has been taken in the
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Except where contrary to law, BIMAL excludes all liability for this information. Past performance is not a reliable indicator of future performance. Investing involves risk including
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©2016 BlackRock. All rights reserved. BLACKROCK is a registered trademark of BlackRock.
All other marks are property of their respective owners.
GOV-0103