BlackRock prefers data-driven investments to traditional approach

To engineer a turnaround, BlackRock is increasingly focusing on “scientific” data-driven approaches to beat the market.

BlackRock Inc, the world’s biggest asset manager, has stated it will be overhauling its actively managed equities business by dropping fees, cutting jobs, and by relying more on computers to pick stocks in a move that underscores the growing challenges for humans to beat the market.

The move is the biggest attempt by BlackRock to engineer a turnaround.

To oversee its biggest stock-picking operations, BlackRock stated that he has hired Mark Wiseman for the job. Wiseman heads Canada’s biggest public pension fund.

BlackRock is increasingly open to data mining and other technological approaches to making investments.

The company is in the process of adjusting its investment strategies on almost 11% of its $275 billion active stock fund business and is increasingly emphasizing on technology-driven investing approaches.

As per a person familiar with the matter at hand, as part of this broader strategy, BlackRock is removing seven traditional “Fundamental” portfolio managers from their current assignments.

As per another source, portfolio managers are also being removed from their traditional role.

The company is also likely to cut its fees on a range of products that are being rebranded as an “Advantage” series of lower-cost active funds.

The planned reduction in fees is likely to slice off almost $30 million from its revenues. The company will take a hit of $25 million as a result this quarter.

In recent years, stock managers in the U.S. have been affected by withdrawals as investors have increasingly fled to lower-cost products, including index-tracking exchange-traded funds, some of which charge as little as $3 per annum for every $10,000 they manage.

The average amount charged by U.S. stock mutual fund managers is $131, as per data available from the Investment Company Institute trade group.

Larry Fink, BlackRock’s CEO has often expressed disappointment in the performance of the company’s actively managed stock funds. He has increasingly worked on pivoting focus to data-driven “Scientific” forms of investment by its equity teams.

“It seems like the Vanguard approach to active equity management,” said Jason Kephart, senior analyst at Morningstar Inc. “The easiest way to make an active strategy more attractive is just to charge less for it.”


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