BlackRock Inc Chief Executive Laurence Fink expects a wave of consolidation to sharpen the split between large and small asset management firms, following his company's $13.5 billion deal to buy a key unit of Barclays PLC.
Among financial sectors, "the investment management industry is the last industry that hasn't done a lot of consolidation," Fink said in an interview on June 17.
Now he expects the distinctions to harden between giant and boutique firms. "I believe we'll wind up with a basket of small managers and a basket of big ones," Fink said. While the industry is perhaps best known for large firms like Vanguard Group Inc and Fidelity Investments, with more than $1 trillion in assets under management, it also includes a host of mid-sized firms with less than $100 billion in assets such as managers owned by Hartford Insurance Group and Manulife Financial.
Fink was speaking before the emergence of a filing on June 17 that showed PNC Financial Services Group Inc agreed to buy about $506 million worth of BlackRock preferred shares to help it buy the Barclays unit.
Fink told investors last week he isn't contemplating further acquisitions himself for now. But Fink's comments support the conventional wisdom that more deals are to come after rough ride for managers shaken up by falling assets and a resulting decline in profits.
Bank of America has been trying to sell its Columbia Management unit, for instance, while Lincoln National Corp also has put its asset-management business on the block.
Also, in a June 16 research note, Citigroup analyst Keith Walsh listed 69 asset managers owned by financial companies that might need to sell them to raise money. The deal isn't expected to close until the fourth quarter but it already has shaken the funds industry by setting up New York's BlackRock to be the world's largest asset manager, with more than $2.7 trillion under management.
It will give BlackRock control of what has been Barclays leading set of exchange-traded funds, or ETFs, which appeal to many over traditional mutual funds because of their tax advantages and low minimum investments.