BlackRock Inc. (BLK) is cutting jobs and lowering fees for clients as it shifts to a robot-reliant strategy at its stock-picking unit.
The world’s largest asset manager with $5.1 trillion under management, BlackRock is moving away from selecting and selling stocks with the traditional method – humans – and is turning to automated systems for its stock picks.
The reorganization will transfer $8 billion of $201 billion run by traditional stock pickers to lower-fee options, with some fees cut by more than half as a result of the automation, according to a Bloomberg report citing “a person familiar with the matter.” More than 30 BlackRock positions, including fund managers, will be terminated. (See also: Why BlackRock and Fidelity are Betting on Brazil.)
"We are constantly anticipating how macro trends will reshape both our industry and our clients' needs. We then pivot accordingly,” said BlackRock CEO Laurence D. Fink in a statement. The changes were spurred by pressure to “meet the evolving needs of clients.” (See also: BlackRock Warns on Financial Stocks.)
BlackRock is moving money into a new Advantage series that includes nine U.S. mutual funds that have lower risk, saving clients $30 million in fees. The firm said it is hoping to attract new investments at a faster rate with improved performance and pricing.
“There is fee compression in the U.S., which is being driven by technological advances and by the successful and continued growth of ETFs," Mark Wiseman, BlackRock’s global head of active equities, said in an interview with Bloomberg. "We are in a regulatory environment that is pushing hard on the traditional active-equity model. We want to play offense, not defense.”
BlackRock stock has risen 13.9 percent in the past year, although it's fairly flat year to date.