BlackRock deal buys Larry Fink optionality on exit

Rock to stone. Larry Fink faces two existential questions: one, when he will step down from leing $120 billion asset manager BlackRock; and two, what firm’s future will be. On Friday, he got a half-step closer to settling both with $12.5 billion purchase of Global Infrastructure Partners. deal is sensible, and transformational enough to give Fink optionality on retirement – if only he were less ambitious.

Taking BlackRock, best known for its giant index fund business, deeper into private markets makes sense. So-called illiquid alternatives, like infrastructure and real estate, accounted for 1% of firm’s $10 trillion in assets in fourth quarter of 2023 but nearly 9% of revenue. And GIP’s focus on likes of renewable energy or data centers is in a sweet spot: Global interest rates are high enough that leveraged buyouts look risky, but low enough that finding yield is still difficult. Hard infrastructure assets, juiced with a moderate amount of debt, offer a tempting risk-return profile in between LBOs and tritional stocks and bonds.

BlackRock has an edge, too. Its financial markets visory group, which is helping Ukraine build a recovery fund, has relationships with governments in need of investment. And BlackRock is a shareholder in nearly every publicly tred company. Partnerships with Occidental Petroleum and AT&T offer a map for how Fink and GIP’s founder Bayo Ogunlesi, both hailing from investment bank First Boston, can use ir combined $150 billion war chest to take on established practices at Brookfield Asset Management and Macquarie. And price looks reasonable. At upward of 25 times target’s earnings from fees, it’s in ballpark of analyst targets on alternatives firms like Fink’s former employer Blackstone.

trouble for Fink is that deal isn’t totally transformative. It’s about as big as 2009 purchase of Barclays Global Investors, genesis of BlackRock’s now-company-defining iShares funds. But BGI accounted for about half of buyer’s market capitalization 15 years ago. GIP punches in at roughly a tenth. deal also makes business look more like Blackstone, which doesn’t exactly make it stand out.

A simultaneous organizational restructuring shows Fink is thinking bigger. BlackRock is reshaping its exchange-tred fund business, integrating it with or assets at firm under charge of Stephen Cohen. idea is to become a one-stop-shop for investors – wher it’s passive, active, private, public, stocks, or bonds. To extricate clients from a siloed mentality, BlackRock will have to integrate technological platforms, too. Fink can eir leave that to next leer, or stay on and roll up his sleeves.

Larry Fink faces two existential questions: one, when he will step down from leing $120 billion asset manager BlackRock; and two, what firm’s future will be. On Friday, he got a half-step closer to settling both with $12.5 billion purchase of Global Infrastructure Partners. deal is sensible, and transformational enough to give Fink optionality on retirement – if only he were less ambitious.

Taking BlackRock, best known for its giant index fund business, deeper into private markets makes sense. So-called illiquid alternatives, like infrastructure and real estate, accounted for 1% of firm’s $10 trillion in assets in fourth quarter of 2023 but nearly 9% of revenue. And GIP’s focus on likes of renewable energy or data centers is in a sweet spot: Global interest rates are high enough that leveraged buyouts look risky, but low enough that finding yield is still difficult. Hard infrastructure assets, juiced with a moderate amount of debt, offer a tempting risk-return profile in between LBOs and tritional stocks and bonds.

BlackRock has an edge, too. Its financial markets visory group, which is helping Ukraine build a recovery fund, has relationships with governments in need of investment. And BlackRock is a shareholder in nearly every publicly tred company. Partnerships with Occidental Petroleum and AT&T offer a map for how Fink and GIP’s founder Bayo Ogunlesi, both hailing from investment bank First Boston, can use ir combined $150 billion war chest to take on established practices at Brookfield Asset Management and Macquarie. And price looks reasonable. At upward of 25 times target’s earnings from fees, it’s in ballpark of analyst targets on alternatives firms like Fink’s former employer Blackstone.

trouble for Fink is that deal isn’t totally transformative. It’s about as big as 2009 purchase of Barclays Global Investors, genesis of BlackRock’s now-company-defining iShares funds. But BGI accounted for about half of buyer’s market capitalization 15 years ago. GIP punches in at roughly a tenth. deal also makes business look more like Blackstone, which doesn’t exactly make it stand out.

A simultaneous organizational restructuring shows Fink is thinking bigger. BlackRock is reshaping its exchange-tred fund business, integrating it with or assets at firm under charge of Stephen Cohen. idea is to become a one-stop-shop for investors – wher it’s passive, active, private, public, stocks, or bonds. To extricate clients from a siloed mentality, BlackRock will have to integrate technological platforms, too. Fink can eir leave that to next leer, or stay on and roll up his sleeves.