BlackRock cuts fees and jobs; stockpicking goes high-tech

BlackRock cuts fees and jobs; stockpicking goes high-tech

BlackRock cuts fees and jobs; stockpicking goes high-tech

Active stock managers in the United States have been smacked with withdrawals in recent years as investors increasingly fled to lower-cost products, including index-tracking ETFs, some of which charge as little as $3 annually for every $10,000 they manage, while the average charged by USA stock mutual fund managers is $131, according to data for 2015 from the Investment Company Institute trade group.

Picker said the changes come at a time when clients at BlackRock and other competing firms are frustrated with the high fees and investments that generated sub-par results, especially compared to much cheaper exchange traded funds. It's also planning to roll out nine new mutual funds managed by its quantitative investment team.

The changes mark the latest of several attempts by BlackRock to boost an active fund business that represents almost a third of its assets but an outsized near-50 percent of its fees. More than 30 people in their active-equity group are being fired; this includes five of the group's 53 fundamental portfolio managers.

Two other groups of funds - one that will make higher risk, concentrated bets and another focusing on specific countries and sectors - round out the reorganisation.

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"We can more efficiently deliver alpha at a better cost with automated processes", Wiseman said. He starts in April. The funds' annual average return is 4 percent and 7.3 percent over three and five years, according to data from Morningstar Inc. The firm has also changed the leadership structure of the active business several times in the past four years.

In September, BlackRock brought in Wiseman, the former head of the Canada Pension Plan Investment Board, to run the quantitative and stock group, which were combined early previous year. Mr. Wiseman arrived during a tough 2016 for the quant group, which contributed to BlackRock's first annual decline in revenue since 2009.

While BlackRock's iShares ETF business has been a huge beneficiary of this trend, taking in a record $140 billion in net flows in 2016, its active US-based equity business has suffered with $19.3 billion withdrawn from these funds a year ago, according to data from Morningstar. Over the past few years, we have deliberately evolved our offerings in ETFs and indexing; we refined and expanded our active fixed income platform in the face of record low interest rates; and we have found new ways to leverage our unique technology platform - all of which helped to drive record net new flows in 2016.

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