BlackRock's big funds cut commission rates for Wall Street research

Tue Apr 4, 2017 3:44pm EDT
 
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By Trevor Hunnicutt and Olivia Oran

NEW YORK (Reuters) - BlackRock Inc BLK.N, the world's biggest asset manager, slashed the amount it paid out in commissions to Wall Street firms for research by more than half for its largest mutual fund over the last two years, according to filings.

The cuts show the immense power large asset managers have to curb fees they pay banks and the diminishing role of sell-side research at a time when Wall Street firms are facing a slump in stock trading commissions.

BlackRock's $40 billion Global Allocation Fund MALOX.O paid out $13.4 million in commissions in the 2016 fiscal year for trades tied to research, compared with $28.8 million two years earlier.

The commissions fell even though the BlackRock fund routed roughly the same level of transactions to brokerages in exchange for access to their research notes and other related services.

The same pattern is true for other big BlackRock funds, according to a Reuters analysis of U.S. Securities and Exchange Commission filings from three of BlackRock's five largest funds. Some of those funds paid out more in total commissions, but trading activity in those funds increased to a greater degree, meaning that the actual commission rate fell.

A BlackRock spokeswoman declined to comment.

In announcing an overhaul of its actively managed equities business last week, BlackRock said it was "harnessing the power of 'human and machine,'" relying more on computers and data-mining to pick stocks.

Equities revenue, which includes executing stock trades and buying and selling derivatives related to stocks, is slumping across Wall Street.   Continued...

 
A man walks next to a BlackRock sign pictured in the Manhattan borough of New York, October 11, 2015.  REUTERS/Eduardo Munoz - RTS415V