Blackrock (BLK), the world’s largest and more diverse investment manager; the firm has chalked up exceptional growth in two areas — wealth management and in the use of big data to monitor portfolios, an area where it has become dominant, asserts Stephen Leeb, editor of The Complete Investor.
Since 2012, assets under management have grown from $3.8 trillion to $6.3 trillion. Revenues from the firm’s risk management technology, driven by software known as “Aladdin” (for Asset, Liability, Debt, and Derivative Investment Network), have grown from $390 billion to $677 billion, an annualized rate of 12%.
Aladdin marks Blackrock as the acknowledged leader in wealth management. Initially Blackrock kept the software for its own exclusive use, deploying it to monitor its portfolios across various metrics, with risk metrics the most important. In the 1990s the company started marketing Aladdin to other money managers.
Today Aladdin is used in servicing some $18 trillion in assets — an amount equivalent to America’s GDP — with roughly 35% of that sum comprised of assets that Blackrock itself manages.
Aladdin’s stunning success is compelling evidence of Blackrock’s clear leadership in using AI and big data in the service of wealth management. Aladdin and associated technologies are targeted for 25% growth over the next five years, spearheading Blackrock’s overall growth. The program recently expanded its reach beyond institutional managers to private wealth managers.
This means massive amounts of capital remain available to be brought under the Aladdin umbrella: Current estimates are that global private wealth will increase to about $250 trillion by the early to mid 2020s compared to around $160 trillion today. Aladdin is positioned to gain a growing share of this growing market as it adds new services and further establishes itself as the leading software platform.
While these technology platforms should provide the greatest upside, assets under management also should grow. Blackrock leads in virtually all asset classes, from ETFs to fixed income to alpha-seeking equity funds.
As of March 2018, it was performing well above peer medians in virtually every asset category, and in most of them its lead over peers had increased over the past two years. The firm is a strong example of how to offer upside along with the kind of safety that will protect you if the market turns down.
AUTHOR…INVESTMENT ADVISER…MONEY MANAGER
Stephen Leeb is a prolific author, investment adviser, and money manager who has been analyzing financial markets for more than 40 years. He is known for his prescience in connecting the dots among hidden or overlooked trends – macroeconomic, scientific, and geopolitical – and accurately describing the investment implications, often going against the conventional wisdom. He is the author of nine books on investing and geopolitical trends including his most recent book, China’s Rise and the New Age of Gold: How Investors Can Profit from a Changing World (2020, McGraw-Hill Education). He is founder and editor of the award-winning investment letter The Complete Investor, published by Capitol Information Group, a Washington, D.C.-based financial publisher. Stephen is chief investment officer of his own wealth management firm based in New York City.