By the same token, BlackRock may also want more of the “high quality” earnings that Blackstone enjoys. Fees earned by alternative asset managers are more sticky, because their investments have a much longer time horizon than stocks, and investors are mentally prepared to be patient.
The revenue-sharing deal that BlackRock struck with GIP, which holds stakes in airports in Sydney and London, is telling. It would receive 100 per cent of the management fees, but only 40 per cent of the performance fees from future GIP funds. It’s a sign that BlackRock wants the “sticky” earnings.
By its own account, BlackRock is seeing dramatic industry shifts. In the core US exchange trade funds space, the iShares ETFs are losing ground to Vanguard and aggressive rivals such as JPMorgan Chase & Co. and Dimensional Fund Advisors. Meanwhile, price wars are widespread. When BlackRock launched its first Bitcoin ETF in January, it started off at a 0.3 per centannual fee, which was already below analyst expectations, but had to lower to 0.25 per cent after smaller peers undercut it.
Perhaps this is the peril of an asset manager under the constant scrutiny of public investors. If it was privately held like Vanguard, it would be only responsible to investors in its funds, allowing more focus on delivering returns. But as a publicly listed entity, it has to worry about earnings quality. In the world of Blackstone and BlackRock, raising money is becoming more important than making money for clients. Their ultimate loyalty has to be to their shareholders.