BlackRock will cut its staff by three percent in anticipation of rough market conditions, according to an internal memo.
About 500 employees globally will leave the asset manager “in the weeks ahead,” BlackRock president Robert Kapito said in the memo obtained Thursday by Institutional Investor. Kapito pointed to growing market uncertainty and evolving investor preferences in an increasingly complex operating environment.
“The uncertainty around us makes it more important than ever that we stay ahead of changes in the market and focus on delivering for our clients," Kapito said in the memo. “The changes we are making now will help us continue to invest in our most important strategic growth opportunities for the future.”
BlackRock will focus on areas such as solving client needs in retirement, illiquid alternatives, exchange-traded funds, and factor investing, as well as an industry shift toward portfolio construction from product selection, according to the memo. The growth of low-cost passive funds that track indexes has added to the difficulty faced by many asset managers amid the market turmoil.
“We are a markets business,” Melissa Garville, a spokesperson at BlackRock, said by phone. “Markets are down, so our AUM is down and we collect fewer fees. There has been a shift to lower fee products and indexes in the business.”
BlackRock, which had $6.44 trillion in assets under management on September 30, has not yet released fourth quarter results.
Following the layoffs, BlackRock’s staff will still be four percent larger than a year ago, according to the memo.
The firm made some hires in September. It added Martin Jaugietis to co-lead its client portfolio solutions pensions team, Joseph Gelly to work as a managing director and Matthew Weinstein to work as a director of its pensions OCIO team, an internal BlackRock memo said at the time.
BlackRock has grown in other ways in the past year, which Kapito highlighted in his memo.
“We built out our technology capabilities - enhancing Aladdin, opening our new AI Lab, and investing in Envestnet and Acorns,” Kapito wrote. “We acquired Tennenbaum Capital to deepen our private credit capabilities. And we bought Citibanamex’s asset management business to increase our presence in Mexico’s fast-growing market.”
According to the memo, technology and establishing distribution capabilities in high-growth areas are two other key areas for BlackRock.
“This year, while key competitors will be playing defense, BlackRock is continuing to invest in the critical strategic initiatives that will fuel our growth in the years ahead,” Kapito said. “Even in volatile markets and with significant industry headwinds, we can find opportunities for growth – as iShares demonstrated in the fourth quarter by achieving its highest quarterly flows ever.”