BlackRock cuts fees and jobs; stockpicking goes high-tech

[YMPL]

Fund managers have slowly been replaced by robots...

BlackRock cuts fees and jobs; stockpicking goes high-tech
29 Mar 2017 09:13
[NEW YORK] BlackRock Inc on Tuesday said it would overhaul its actively managed equities business, cutting jobs, dropping fees and relying more on computers to pick stocks in a move that highlights how difficult it has become for humans to beat the market.

The world's biggest money manager has faced active stock fund withdrawals and the revamp is its biggest attempt yet to engineer a turnaround.

Last May, BlackRock said it had recruited Mark Wiseman, the head of Canada's biggest public pension fund, to oversee the stockpicking operations after he revamped that fund's operations to embrace data-mining and other technological approaches to investing.

BlackRock is rebranding or adjusting investment strategies on about 11 per cent of its US$275 billion active stock fund business, putting a greater emphasis on technology-driven investing approaches in the largest set of sweeping changes for the business since transformational mergers that allowed it to grow to manage more than US$5 trillion in assets.

Among the changes, BlackRock is removing some seven traditionalist "Fundamental" portfolio managers from their current assignments, according to a source familiar with the matter. More than 40 employees are being laid off, including some of the portfolio managers, according to another source.

The company will also cut fees on some products that are being rebranded as an "Advantage" series of lower-cost active funds.

Planned fee cuts on that group of funds and its "Income" products will slice about US$30 million of BlackRock's revenue, and the company will take a US$25 million charge this quarter to reflect severance and other compensation expenses.

The company said it will also expand its investments in data-mining techniques that it said can improve investment performance. Other funds are being refocused to take "high-conviction" bets on stocks.
...
REUTERS

Source: Business Times Breaking News

[Duskerdawn]

Fund managers have slowly been replaced by robots...

BlackRock cuts fees and jobs; stockpicking goes high-tech
29 Mar 2017 09:13
[NEW YORK] BlackRock Inc on Tuesday said it would overhaul its actively managed equities business, cutting jobs, dropping fees and relying more on computers to pick stocks in a move that highlights how difficult it has become for humans to beat the market.

The world's biggest money manager has faced active stock fund withdrawals and the revamp is its biggest attempt yet to engineer a turnaround.

Last May, BlackRock said it had recruited Mark Wiseman, the head of Canada's biggest public pension fund, to oversee the stockpicking operations after he revamped that fund's operations to embrace data-mining and other technological approaches to investing.

BlackRock is rebranding or adjusting investment strategies on about 11 per cent of its US$275 billion active stock fund business, putting a greater emphasis on technology-driven investing approaches in the largest set of sweeping changes for the business since transformational mergers that allowed it to grow to manage more than US$5 trillion in assets.

Among the changes, BlackRock is removing some seven traditionalist "Fundamental" portfolio managers from their current assignments, according to a source familiar with the matter. More than 40 employees are being laid off, including some of the portfolio managers, according to another source.

The company will also cut fees on some products that are being rebranded as an "Advantage" series of lower-cost active funds.

Planned fee cuts on that group of funds and its "Income" products will slice about US$30 million of BlackRock's revenue, and the company will take a US$25 million charge this quarter to reflect severance and other compensation expenses.

The company said it will also expand its investments in data-mining techniques that it said can improve investment performance. Other funds are being refocused to take "high-conviction" bets on stocks.
...
REUTERS

Source: Business Times Breaking News

It took them more than 10 years to decide that Warren Buffett is right, shame on the investing world.  He made a $1mil bet against fund managers 10 years ago and wrote it in his book: The Snowball. (http://www.businessinsider.com/vanguard-...&r=US&IR=T)

However, it is a good sign for active investors, you stand to find more valuable stocks at lower prices due to the reduction of active investors. Additionally, we all think computers are awesome right? Well not exactly correct, they are predictable and some people are using that to their advantage. I read a recent article on bloomberg which states that the chinese insiders are raising their stock prices of their companies then selling it off when ETF's are forced to buy the shares due to the nature of index-based ETFs. (i.e. when a stock hits a certain valuation, the index encompasses the share or a larger portion of their share in their mix). Just some food for thought.

[weijian]

It took them more than 10 years to decide that Warren Buffett is right, shame on the investing world.  He made a $1mil bet against fund managers 10 years ago and wrote it in his book: The Snowball. (http://www.businessinsider.com/vanguard-...&r=US&IR=T)

However, it is a good sign for active investors, you stand to find more valuable stocks at lower prices due to the reduction of active investors. Additionally, we all think computers are awesome right? Well not exactly correct, they are predictable and some people are using that to their advantage. I read a recent article on bloomberg which states that the chinese insiders are raising their stock prices of their companies then selling it off when ETF's are forced to buy the shares due to the nature of index-based ETFs. (i.e. when a stock hits a certain valuation, the index encompasses the share or a larger portion of their share in their mix). Just some food for thought.

hi Duskerdawn,
Welcome to VB.

I don't think it is a good sign for the average active investor. Because from what i am observing, active investing sphere is slowly moving towards the "winner takes all" phenomenon and so the top quantile performing active investors are getting smaller and smaller in absolute numbers. This could just be a reflection of survivorship bias and the nature of capitalism (big gets bigger). I am guessing that unless one is in the top quantile already, the odds are still stacked against active investors in the foresee-able future.

And i also think that humans are just as much predictable as computers - Humans get greedy when prices rise and loss aversion kicks when prices fall. At least computers are more consistent (due to lack of emotions)
In the investing world, i think it is only the secondary effects that are unpredictable. 1st order effects ain't too hard to be acted upon or updated into a computer program, i reckon.

[yeokiwi]

Because from what i am observing, active investing sphere is slowly moving towards the "winner takes all" phenomenon and so the top quantile performing active investors are getting smaller and smaller in absolute numbers.

If everyone is a winner, there is no winner.
The same investing methodology has been repeated and written down and has not changed much over the years. So, I suppose the winners will still remain as a small group of investors.

The last ten years had changed the speed and ease of investment information flow, lower brokerage charge and availability of the foreign markets. But how to invest is still roughly the same.

[weijian]

Money is a commodity but those who manage money and do it well at scale, are not. In fact, asset management is very sticky.

But when your competitor is the biggest and internally managed, you will probably be in trouble. Asset managers may have to avoid facing Vanguard game in their main game (they make money offering indexes to passive investors) and look some niche - private equity, private credit, insurance and different asset classes like gold/crypto/real estate. Of course, the occasional star like Cathie Woods' Ark ETFs can definitely also strive when their stars align.

Vanguard’s record fee cuts tighten screws on BlackRock, Invesco

The Valley Forge, Pennsylvania-based company unleashed its largest-ever fee reduction this week, slashing its average asset-weighted expense ratio to just 0.07 per cent across its US$10 trillion under management – a sliver of the industry average of 0.44 per cent. The move sent shock waves across asset management, dragging down BlackRock to its worst day since 2022 on Monday (Feb 3) while also sending the likes of Invesco and State Street tumbling.

Fuelling the angst is the fact that Vanguard is not under the same pressure to maintain margins as its competitors are. Vanguard’s fund investors elect its board members, meaning they effectively own the company. As such, extra cash or assets are typically funnelled towards lowering fees.

https://www.businesstimes.com.sg/compani...ck-invesco