Dear Commons Community,
Laurence D. Fink, the CEO of BlackRock, has become convinced that the company must bet big on the power of machines, be it algorithms; big data; or artificial intelligence. As reported in today’s New York Times:
“BlackRock laid out an ambitious plan to consolidate a large number of actively managed mutual funds with peers that rely more on algorithms and models to pick stocks.
The initiative is the most explicit action by a major fund management firm in reaction to the exodus of investors from actively managed stock funds to cheaper funds that track every variety of index and investment theme.
Some $30 billion in assets (about 11 percent of active equity funds) will be targeted, with $6 billion rebranded BlackRock Advantage funds. These funds focus on quantitative and other strategies that adopt a more rules-based approach to investing.
“The democratization of information has made it much harder for active management,” Mr. Fink said in an interview. “We have to change the ecosystem — that means relying more on big data, artificial intelligence, factors and models within quant and traditional investment strategies.”
As part of the restructuring, seven of BlackRock’s 53 stock pickers are expected to step down from their funds. Several of the money managers will stay on as advisers. At least 36 employees connected to the funds are leaving the firm.
You can assume that a number of other Wall Street brokerage firms will follow Blackrock’s lead.