BlackRock cuts fees and jobs; stockpicking goes high-tech
By Trevor Hunnicutt
NEW YORK (Reuters) - BlackRock Inc on Tuesday said it would overhaul its actively managed equities business, cutting jobs, dropping fees and relying more on computers to pick stocks in a move that highlights how difficult it has become for humans to beat the market.
The world's biggest money manager has faced active stock fund withdrawals and the revamp is its biggest attempt yet to engineer a turnaround.
Last May, BlackRock said it had recruited Mark Wiseman, the head of Canada's biggest public pension fund, to oversee the stockpicking operations after he revamped that fund's operations to embrace data-mining and other technological approaches to investing.
BlackRock is rebranding or adjusting investment strategies on about 11 percent of its $275 billion active stock fund business, putting a greater emphasis on technology-driven investing approaches in the largest set of sweeping changes for the business since transformational mergers that allowed it to grow to manage more than $5 trillion in assets.
Among the changes, BlackRock is removing some seven traditionalist "Fundamental" portfolio managers from their current assignments, according to a source familiar with the matter. More than 40 employees are being laid off, including some of the portfolio managers, according to another source.
The company will also cut fees on some products that are being rebranded as an "Advantage" series of lower-cost active funds.
Planned fee cuts on that group of funds and its "Income" products will slice about $30 million of BlackRock's revenue, and the company will take a $25 million charge this quarter to reflect severance and other compensation expenses.
The company said it will also expand its investments in data-mining techniques that it said can improve investment performance. Other funds are being refocused to take "high-conviction" bets on stocks. Continued...