BlackRock, the world's largest asset manager, is reportedly looking to raise $10 billion or more to make equity investments, attempting to replicate the approach of billionaire investor and business mogul Warren Buffett. (See also: Crypto, Cannabis, FOMO Drive New Investor Inflow.)
The effort, named BlackRock Long-Term Private Capital, is seeking capital from sovereign-wealth funds, pensions and other big investors and is slated to complete fundraising by the middle this year. The vehicle would target investments between about $500 million to $2 billion on long-term trends such as a burgeoning global middle class and Millennial spending habits, according to Bloomberg, citing an anonymous source familiar with the matter. It plans to hold positions for over a decade and will target annual returns in the low to mid teens, with risks and returns that straddle those expected from stock investments and buyout funds.
Seeking Higher Fees from Wealthier Retail Investors
In directly buying and holding stakes in companies, BlackRock would start to look a lot like Buffett's Berkshire Hathaway Inc. (BRK.A) and compete against Wall Street private equity giants such as Carlyle Group LP and Apollo Global Management LLC (APO). The strategy would also position CEO and co-founder Laurence Fink in competition with his old firm Blackstone Group LP (BX), in which BlackRock was spun off from in 1994.
BlackRock surpassed $6 trillion in assets for the first time last year, driven by a growing demand for cheaper funds that mimic stock and bond indexes. BlackRock Long-Term Private Capital will allow the asset manager to grow out its alternative investments business and target wealthier retail investors, a segment with higher private-equity-like fees in a time where traditional firms are competing for capital from more cost-conscious investors. BlackRock already manages $145 billion in higher-fee investment strategies that include private equity and hedge funds of funds, real assets and private credits.
The roughly $10 billion would mark the largest amount ever raised by the New York City-based company, which is also contributing some of its own money to the initiative. (See also: Buffett: Cryptocurrency Will Come to a Bad End.)