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Are Institutional Investors Ready for BlackRock’s Big Data Pivot?

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BlackRock is the world’s biggest publicly-traded investment manager, overseeing an excess of US$ 5 trillion in assets under management. The behemoth manager runs portfolios and sells products to some of the largest sovereign funds, pensions, endowments and other long-term asset owners.

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The lucrative days of traditional stock picking, also known as active equity management, for larger asset managers has become intensely fierce, forcing rivals to merge with each other, mandating cutbacks in products and laying off professional staff. In March, Aberdeen Asset Management and Standard Life agreed to merge in an all-share deal, with shareholders of Standard Life owning two-thirds of the combined company. Preceding this merger, in October 2016, Janus Capital Group (the home of Bill Gross), merged with Henderson Group. On the layoff front, money manager Legg Mason Inc. chopped up roughly 30 jobs in its corporate offices, in a bid to refocus, “its resources in response to the disruption affecting the asset management industry,” according to a Legg Mason statement in March. Legg Mason’s Baltimore rival, T. Rowe Price Group Inc., is also facing financial pressure, as they try to realign its bread-and-butter active management business. With that being said, BlackRock has cautiously embraced smart beta strategies, while pivoting more resources toward computer-driven investment models.

Decades ago, the ticker tape or a discrete phone call to a “connected” broker was enough to make a decision to buy or sell a stock, then the rollout of Bloomberg or Reuters terminals, and now niche data sources are sprouting out, such as drones calculating A,B,C for X.

Choppy Waters Ahead

This gradual upheaval in the parochial asset management industry has gotten the attention of BlackRock’s founder and CEO Larry Fink. Fink had hired Mark Wiseman, the former President and CEO of the Canada Pension Plan Investment Board (CPPIB), to serve as BlackRock’s global head of active equities and chair of BlackRock Alternative Investors. Wiseman, known for his pragmatism and helping a government investor like CPPIB transform into an institution that manages a significant portion of capital internally, was tasked with undertaking a six-month analysis of BlackRock’s struggling active equity business. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

SWFI First Read, January 16, 2018

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BP Plans to Take $1.7 Billion Charge to End Legal Claims on Deepwater Horizon

BP Plc is planning to take a US$ 1.7 billion charge to end legal claims regarding the disastrous 2010 Deepwater Horizon spill in the Gulf of Mexico.

Ethereum Co-Founder Leaves Fenbushi Capital

Vitalik Buterin, a co-founder of Ethereum, which is a cryptocurrency, exited China-based Fenbushi Capital. Fenbushi Capital was formed in 2015. Buterin is retaining his role as an advisor of Fenbushi Capital. Buterin dropped out of the University of Waterloo in 2014 when he got a Thiel Fellowship. This permitted him to work on Ethereum full time.

Kingdom Holding Sells Four Seasons Beirut Hotel Stake

Saudi Arabia’s Kingdom Holding sold its position in the Four Seasons Hotel in Beirut for roughly US$ 100 million. Blominvest, a unit of Blom Bank, advised on the transaction. The Four Seasons will continue to manage the property.

Mercer Signs Deal to Buy BFC

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Deutsche Bundesbank to Slowly Add Renminbi into Foreign Reserve Mix

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Deutsche Bundesbank’s executive board made a decision to invest in Chinese renminbi in the summer of 2017 as part of its foreign currency reserves. The German central bank on January 15, 2018, confirmed it will start investing in Chinese renminbi and also consider investing in additional foreign currencies. The move mimics the European Central Bank (ECB), which already considers the Chinese renminbi as a reserve currency. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Bpifrance, CDB and Cathay Capital Launch Third Cross Border Fund

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Bpifrance, China Development Bank Capital Co., Ltd. (CDB Capital) and Cathay Capital agreed to launch Sino French Midcap Fund II. This is the second fund the group is launching after the €500 million Sino French Midcap Fund I from June 27, 2014. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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