Larry Fink Has One Big Headache

Chief Executive Officer Larry Fink said last year that he’d spent “hundreds of millions of dollars rebooting” BlackRock’s stockpicking business. He still has work to do. Of the company’s 84 actively managed U.S. equity funds, 70 ranked in the bottom half of their categories over the past five years, according to data from research firm Morningstar. Clients have noticed: In 19 of the past 21 quarters they’ve pulled money from BlackRock’s actively managed U.S. and international equity funds, whose assets declined to $292.8 billion at the end of 2014, from $334.5 billion in 2010, a period when the Standard & Poor’s 500-stock index soared more than 60 percent. “We’ve had to make some tough decisions and had quite a lot of pain in outflows,” says Quintin Price, head of the company’s Alpha Strategies group. “It’s not about outperforming every single quarter. It’s outperforming over time.”

BlackRock’s stock funds are the one big headache left for Fink. The rest of his businesses are flourishing. His 2009 acquisition of Barclays Global Investors, a leader in exchange-traded funds, put BlackRock in position to benefit from the public’s increasing preference for “passive” investments such as ETFs, almost all of which track indexes. BlackRock, which manages $4.8 trillion, sold more ETFs than any of its competitors last year, attracting $102.8 billion to bring its ETF assets to $1.1 trillion. In 2012, Fink reorganized the company’s bond unit, which had performed poorly during the financial crisis. Returns improved, and since the end of 2012, BlackRock’s actively managed fixed-income funds have attracted $48 billion, compared with $24.8 billion gathered by its bond ETFs.