The Strategic Shift Towards Private Markets: BlackRock's Acquisition of Preqin

Strategic Rationale Behind BlackRock's Acquisition

BlackRock's acquisition of Preqin aims to replicate its success in public markets within private markets, leveraging Preqin's data to enhance BlackRock's investment technology. This strategic move expands BlackRock's capabilities in private markets, fostering innovation, deeper client relationships, and new investment opportunities.

"With the creation of public benchmarks did to drive stock markets, especially visible through iShares, we believe the combination of BlackRock and Prequin can do for private markets. BlackRock has a compelling track record of executing strategic transactions, integrating them well and earning a strong return on use of shareholder capital." --- (BLK, event transcript, 2024/07/01)

"The acquisition adds a highly complementary data business to BlackRock's investment technology, marking a strategic expansion into the fast-growing private markets data segment." --- (BLK, press release, 2024/06/30)

"unknown: Hi, Larry. Good morning. Thanks for the question, everybody. Just maybe to build on some of the revenue synergy opportunities you highlighted, I was hoping you could talk a little bit about how in addition to sort of enhancing the tech and data offering in BlackRock, this acquisition could also change the way you're thinking about BlackRock's asset management capabilities when it comes to private markets, whether it's launch of secondaries or more co invest opportunities." --- (BLK, event transcript, 2024/07/01)

"And it goes beyond clients simply wanting to do more with BlackRock. They are looking for a partner that innovates and helps them grow. The world's largest asset owners want deep strategic partnerships, increased customization and innovation, approaching that might include a creative co-investment opportunities and co-development of strategies." --- (BLK, earning call, 2024/Q2)

"We've spent decades building our global network of relationships of data and analytics, integrating technology and these are the key differentiations to deepening our relationship with clients and accessing unique investment opportunity and partnerships. With our planned acquisition of GIP and Preqin and core business strength, BlackRock's capability has never been stronger." --- (BLK, earning call, 2024/Q2)

Current Trends in Private Markets

Private markets are experiencing significant growth in assets and demand, yet face challenges in technology infrastructure and transparency. They exhibit relative stability compared to public markets during interest rate changes. The sector is in early stages, with vast potential and increasing retail product growth, and aims to adopt public market tools like risk models and benchmarks.

"But while private markets assets and demand are growing significantly, the current state of private markets investing is well ahead of the underlying technology infrastructure. There is a large gap in private asset transparency relative to the public markets." --- (BLK, event transcript, 2024/07/01)

"I do think when rates go up, the market tends -- the public markets tend to move much more than what we see in the private market." --- (BX, earning call, 2024/Q1)

"I think it's fairly remarkable when you think about the public markets, you think about this symbiotic relationship that risk models and indexes and data have done to create public market indexing, benchmarking, asset allocation, all of those opportunities are ahead of us in the private markets by bringing together risk models, benchmarks and investable indices." --- (BLK, earning call, 2024/Q2)

"Yes. Look, I still think we're in early days in the alternative space. The total industry across all asset classes is equal roughly to the market cap of this magnificent SEP. And when you look at how big infrastructure is, commercial, residential, real estate, private and public companies, we could go on and on, the credit markets." --- (BX, conference, 2024/05/29)

"And I guess somewhat related to that, growth in private markets, retail products has been quite significant and still early days." --- (BLK, earning call, 2024/Q1)

Impact on BlackRock's Portfolio and Strategy

BlackRock's acquisition of Preqin is set to enhance its evolving platform and new strategies, aligning with investor objectives. The integration will likely be reflected in financial reporting and cash flow management, supporting additional activities. This strategic move aims to unlock further portfolio potential and provide significant economic benefits.

"Investors are continuing to turn to BlackRock to unlock the full potential of their portfolios, as reflected by $1.9 trillion of net inflows in the past five years globally. In the U.S., BlackRock offers over 600 mutual funds and ETFs for investors to access different market exposures. As we evolve our platform and launch new strategies, we also constantly assess the regulatory and operating environment as well as how our funds are meeting investors' investment objectives." --- (BLK, press release, 2024/06/07)

"The Company presents investments, as adjusted, to enable investors to understand the economic portion of investments that is owned by the Company as a gauge to measure the impact of changes in net nonoperating income (expense) on investments to net income (loss) attributable to BlackRock." --- (BLK, sec filing, 2024/Q1)

"The Company believes that its cash flows, excluding the impact of the CIPs, provide investors with useful information on the cash flows of BlackRock relating to its ability to fund additional operating, investing and financing activities." --- (BLK, sec filing, 2024/Q1)

"BlackRock is deemed to be the PB of a VIE if it (1) has the power to direct the activities that most significantly impact the entities' economic performance and (2) has the obligation to absorb losses or the right to receive benefits that potentially could be significant to the VIE." --- (BLK, sec filing, 2024/Q1)

"BlackRock could have a direct or indirect benefit from investments made by investors in Israel in the products mentioned in this document, or in other products managed by third parties with whom BlackRock is involved in a business contract." --- (BLK, press release, 2024/04/25)

Integration Challenges and Opportunities

BlackRock anticipates significant growth opportunities from the Preqin acquisition, aiming to close the deal by year-end. Full integration is crucial for leveraging capabilities, as noted by industry peers. The competitive advantage of integration and inquiries from stakeholders about utilizing combined capabilities underscore the ecosystem's recognition of the potential benefits.

"And so, we think there's a lot of great opportunities here to continue to grow and we're looking forward to closing the Preqin transaction before the end of the year." --- (BLK, earning call, 2024/Q2)

"It has to be fully integrated and that's a huge advantage from a capability standpoint by coming with us." --- (BAC, conference, 2024/06/11)

"Ted Pick: Well, I know that competitive set will naturally speak to areas where integration can be an asset." --- (MS, earning call, 2024/Q2)

"So we can get on these platforms. We can if we can start positioning ourselves with some of the large pension funds, there's a lot of running room because we're pretty underpenetrated. So for us, this actually is a big growth opportunity." --- (GS, conference, 2024/05/30)

"Laurence D. Fink: I would just add one more point to that. The inquiries that we've had from big vendors, from exchanges, from different organizations about how can we take what Aladdin, Preqin and eFront has, how can we make that -- how can we -- and how are we going to be able to distribute that and utilize that is a great sign that the ecosystem sees the opportunity that we have." --- (BLK, earning call, 2024/Q2)