- BlackRock plans to index the private and alternative assets market after acquiring Preqin.
- The acquisition deal was finalized on June 30 at a value of $3.22 billion.
- However, BlackRock will need to work on the democratization and consolidation of alternative assets.
BlackRock CEO Laurence D. Fink has said in a call with analysts that they are planning to index the private market after its acquisition of Preqin – a private capital database provider.
The deal to acquire Preqin was finalized on June 30 for $3.22 billion in cash. BlackRock seeks to tap the potential of private markets and alternative assets with this acquisition. Alternative assets are ones other than stocks, cash, and bonds and include:
- Private Equity
- Private debt
- Venture capital
- Commodities
- Hedge funds
- Real estate
The alternative assets market is expected to swell to a massive $40 trillion by the end of 2030.
‘We anticipate indexes and data will be important future drivers of the democratization of all alternatives. And this acquisition (of Preqin) is the unlock.’ – BlackRock CEO Laurence D. Fink
However, unlike traditional markets, there’s a lack of consolidation in this sector. Private investments are fragmented and include ‘small-scaled local and niche boutiques’. Indexing the market will need a quick consolidation of these instruments, as per analyst Clémence Droin.
CEO Fink laid out a roadmap for the development of private markets:
- The first step involves measuring the evolution and potential growth in the market.
- Next, BlackRock will need to identify the main drivers of performance – the factors that drive growth in the sector.
- Lastly, these instruments will need to be made more investible and accessible.
Fink also reflected on the success of indexing in public markets. BlackRock’s approach to data, benchmarks, and risk analytics has helped the investment giant grow ‘durable, high-growth revenue pools’.
That’s exactly what Fink plans to do with private markets, where data and analytics are still at a pre-mature stage. This acquisition of Preqin will help drive data collection and benchmarks.
Reaction to the Announcement
Since most of Preqin users are BlackRock competitors, there’s a debate on how they will perceive this acquisition. However, Rob Goldstein, BlackRock’s COO, feels that customers are the ones who’ll benefit the most from this acquisition.
They’ll be able to manage both private and public assets under a single platform. However, Rob clarified that Preqin will still be available as a standalone product and customers will not be required to go through Aladdin to access it.
‘We will continue to safeguard Preqin’s GP and LP data from use by any other parts within BlackRock on the investment side.’ – Rob Goldstein, BlackRock’s COO
Analysts have also hailed this acquisition as pivotal for BalckRock’s strategy. Droin, a strategy consultant at Indefi pointed out that artificial intelligence and tech will leverage this acquisition and we may see unimagined synergy gains.
This will also help the investing giant capture the increasing global demand for alternative assets and offer an end-to-end platform for both asset managers and owners.
BlackRock also acquired eFront – its private markets platform – five years ago. Only six months ago, it acquired Global Infrastructure Partners (GIP) for $12.5 billion. GIP manages $100 billion worth of debt assets and infrastructure funds – twice what BlackRock manages in these instruments.
And now with the acquisition of Preqin, the leading name in private market data, BlackRock is well-positioned to lead the next decade of end-to-end investing – from traditional stocks to private markets and infrastructure funds.
