- Reductions may be biggest in the money manager's history
- BlackRock said to continue hiring, investing in growth areas
BlackRock Inc. plans to cut about 400 jobs in what may be the biggest round of layoffs to date at the world’s largest money manager, according to people with knowledge of the matter.
The reductions, equal to about 3 percent of the firm’s 13,000 employees, will be announced in the coming weeks, said the people, who asked not to be identified because they weren’t authorized to speak. Despite the cuts, the firm will continue to invest and hire in key areas and expects to end the year with a higher headcount, according to one person.
Farrell Denby, a company spokesman, declined to comment. In a memo to employees, BlackRock said the job cuts have not yet been finalized and that those affected by the changes will be treated fairly and with respect.
“Being a global leader requires that we continually re-assess our organization to look for ways to serve clients better, operate more efficiently, focus resources on strategic priorities and create new opportunities for our strongest employees,” the firm said in the memo from President Rob Kapito and Chief Operating Officer Rob Goldstein.
Chief Executive Officer Laurence D. Fink said in January that the market swings at the start of this year may put pressure on companies to eliminate jobs. Revenue at BlackRock is forecast to grow just 1 percent in the first quarter and decline in the second quarter, according to 11 analysts surveyed by Bloomberg. The only other time BlackRock cut jobs on a similar scale was in 2013 after a reorganization, though it ended that year with a higher headcount.
BlackRock is following a number of money managers in letting people go as stock market volatility erodes fees earned for overseeing client assets. Global stocks, as measured by the MSCI ACWI Index, fell almost 12 percent this year through Feb. 11, before paring losses to 1.2 percent through Tuesday.
“Having a market decline like this in the first couple of weeks of the year in my mind puts a negativity across the economy,” Fink said in a Jan. 15 interview with CNBC. “I actually believe you will start seeing more layoffs in the middle part of the first quarter, definitely in the second quarter.”
The company’s earnings last quarter fell short of analysts’ estimates because of rising expenses, including compensation costs. Analysts expect net income in the first quarter to fall 12 percent from a year earlier, to $727 million, according to 9 estimates compiled by Bloomberg.
Fink said during a conference call discussing fourth-quarter earnings that BlackRock has the mindset to make investments during volatile periods like this year while others run from them. The firm has said previously it aims to invest in areas such as infrastructure and alternatives, and wants to boost the sale of products to individual investors.
BlackRock rose 0.4 percent in New York trading Wednesday. The shares declined 7.3 percent in the past year, better than the 16 percent drop in the 19-member Standard & Poor’s index of asset managers and custody banks.
The firm eliminated about 300 jobs, or less than 3 percent of its workforce, in the previous round of job cuts three years ago. That reduction was part of a reorganization that included the shakeup of its investment units in 2012, and was focused on improving performance. Since then, headcount has increased by about 2,500.
The current cuts are more broad-based and will happen across regions and businesses, said one of the people. They’re aimed at streamlining the business and reallocating resources to areas with the most growth opportunities, this person said.
BlackRock’s decision follows similar moves by State Street Corp., which announced in October it would be firing 600 employees globally to accelerate cost reductions. Franklin Resources Inc., the investment firm that manages the $50 billion Templeton Global Bond Fund, cut about 1 percent of its global staff in February after assets declined.
Fink built BlackRock from a bond shop started in a one-room office to a $4.6 trillion global money manager with much of the growth fueled by acquisitions, including the 2009 purchase of Barclays Plc’s investment unit. The firm attracted $54 billion in net new money in the fourth quarter, helped by a broad lineup of offerings.
Fink and Kapito have led three reorganizations in the last four years. They have promoted younger executives to senior roles after a number of the firm’s co-founders left or retired from active positions.
The firm reorganized its senior ranks earlier this year, which involved combining its fundamental and active equity groups and setting up a new real assets group. In 2014, BlackRock expanded its top leadership, resulting in new roles for at least 10 senior executives.