Meet the world’s biggest asset manager
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KAI RYSSDAL: Juggernaut is not a word you want to use lightly when you’re talking about something economic. But that does seems a pretty fair description of what happened in the world of asset management today. This morning the fund manager BlackRock reached a deal to buy up Barclays Global Investors. Nothing really remarkable so far. Deals happen all the time, of course.
But this one will form a company that controls $2.7 trillion in assets. That is more, by the by, than the Federal Reserve does. And needless to say, once the deal closes BlackRock will be the biggest money manager on the planet. Still, some of you may be asking: BlackRock who?
Marketplace’s Amy Scott has the answer from New York.
Amy Scott: BlackRock mostly invests money on behalf of pension funds, endowments and other money managers. So it’s not exactly a household name.
Industry consultant Geoff Bobroff says that could change.
Geoff Bobroff: BGI and our friends at BlackRock were relatively equal in size. By combining themselves, they will become head over heels over anyone else in terms of the size of the organization.
The merger will give BlackRock more access to small investors. Barclays is a big provider of exchange-traded funds. Those are increasingly popular investments that track the returns of stock indices or commodities.
BlackRock started 21 years ago as a one-room, two-phone investment shop in New York. But in the last few years its power has grown as it’s gobbled up competitors. The Federal Reserve hired BlackRock to manage bad assets from AIG and Bear Stearns.
Dushyant Shahrawat follows the money management business at Tower Group. He says it’s a tough time in the industry. BlackRock’s profits fell 65 percent last quarter.
Coming out of this environment, I think investors are going to take out their money out of under the mattresses, or out of money market funds, or their checking account, and deploy more money into traditional money management funds like the ones we’ve been talking about.
Shawrawat says the new firm’s size could help it ride out the recession. But it may also draw scrutiny from anti-trust regulators in the U.S. and Europe.
In New York, I’m Amy Scott for Marketplace.
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