BlackRock of New York, the money management firm which is planning an initial public offering this year, expects to use financial planners to expand the distribution of its mutual funds.
Financial planners will provide one means for BlackRock to diversify fund distribution which will in turn reduce BlackRock's reliance on its corporate parent, PNC Bank Corp. of Pittsburgh, for mutual fund assets. PNC clients accounted for 81 percent, or $19.5 billion, of the $24.2 billion in assets in the BlackRock Funds as of Dec. 31. BlackRock hopes to use fund supermarkets, presumably tailored to financial planners rather than direct investors, and expand its fund distribution through broker/dealers to increase assets under management.
BlackRock's mutual fund sales increased "significantly" in the past year, the company said in a registration statement filed with the SEC on May 13.
"BlackRock's strategy is to continue to devote significant additional resources to our sales and marketing efforts," BlackRock said in the SEC filing.
In addition to broadening its distribution efforts, BlackRock expects to use investment performance track records to expand its institutional business and potentially acquire other money management firms, the firm said in the SEC filing. BlackRock's Provident Institutional Funds, an institutional money market fund family, had nearly $25.4 billion in assets under management as of Dec. 31, the firm said in the SEC filing.
BlackRock separate accounts had approximately $69 billion in assets under management as of Dec. 31, the firm said.
BlackRock expects to raise as much as $100 million through the IPO, the registration statement said. The filing did not specify a date for the IPO. Calls to BlackRock for comment were referred to Laurence D. Fink, CEO and chairman, who did not return a call.
BlackRock's strategy is a reasonable one, analysts and consultants said. The IPO gives BlackRock both increased independence from PNC and raises the firm's profile, said Jeff Benjamin, a consultant at Cerulli & Associates, a fund consulting firm in Boston. Those factors could make it easier for BlackRock to penetrate the financial planner market, he said.
"I wouldn't be surprised to see BlackRock be a little bit more of a name," Benjamin said.
BlackRock said in the SEC filing that PNC will continue to control the firm, although the exact percentage of PNC's ownership stake was not explicit in the filing.
PNC acquired BlackRock Financial Management, then a $24 billion fixed-income money manager, in 1995. By the end of 1996, BlackRock assumed responsibility for PNC's mutual funds. BlackRock, Inc. was formed last year so that PNC could consolidate what it described in the SEC filing as a "substantial portion" of its asset management business in BlackRock.
The firm's open-end mutual fund business has more than doubled in assets since 1994, increasing from $10 billion to $24.2 billion as of Dec. 31, BlackRock said. Prior to 1996, the BlackRock Funds' primary distribution was through PNC. The firm now has 23 wholesalers and has selling agreements with more than 200 broker/dealers. BlackRock's market share in long-term funds grew to .49 percent as of March 31, up from .29 percent on the same date in 1998, according to Financial Research Corp., the fund tracking firm in Boston.
BlackRock's reputation is that it is "generally a bond shop, generally institutional and generally good" in terms of performance, said Bill Rocco, an analyst with Morningstar of Chicago. Of the 69 BlackRock funds which Morningstar rated as of April 30, 35 had either four or five stars, Morningstar's top ratings, the rating company said.