BlackRock, Inc. (NYSE:BLK), one of the largest asset managers, is expanding its alternative investment offerings to retail investors with a new fund of funds offering.
BlackRock’s new fund includes diversity based on market environment
The BlackRock Multi-Manager Alternative Strategies Fund Investor A Shares (MUTF:BMMAX) includes a diversity based on market environment. The fund features one managed futures trend follower, QMS Capital Management, with another quantitative trader, Chicago-based PEAK6 Advisors LLC, running a relative value strategy, a statement from BlackRock, Inc. (NYSE:BLK) revealed.
The most significant strategy exposure in the fund is long / short fundamental stock investing, while Loeb King Capital Management is the only event driven fund. Long short participants include MeehanCombs LP, LibreMax Capital LLC, Benefit Street Partners, LLC and Independence Capital Asset Partners.
Alternative investments are a profitable segment for BlackRock, Inc. (NYSE:BLK). Alternative investment products delivered 9.1 percent of BlackRock’s total revenue last year while representing only 2.6 percent of total assets under management, a Reuters report by Ashley Lau noted.
Although the fees – advertised at 1.95 percent but which can climb to 3.64 percent when operating expenses and sales commissions are factored in – might be high by mutual fund standards, – they are ‘cheap’ compared with the hedge fund average of 2 percent management fees and 18 percent of profits generated.
Cash flows into BlackRock’s mutual fund offering
Citing an August 6 report from McKinsey & Co, the article noted cash flows into retail alternatives such as BlackRock, Inc. (NYSE:BLK)’s mutual fund offering, are projected to deliver nearly 50 percent of the net new revenues that US asset managers generate from retail investors.
BlackRock, Inc. (NYSE:BLK) defines alternatives as that other than long only stock and bond investing. The firm offers various alternative strategies on its platform, including trading hedge funds, private equity, infrastructure and real estate investments. While these offerings were primarily targeted towards institutional investors, the firm is extending its offering – and bringing with it is considerable brand reputation and deep distribution contacts – to offer the product to retail investors sold through financial advisors.
The key benefit of such alternative investment strategies is that they are designed to deliver performance when traditional stock market investments might find difficulty.
“Following the market volatility of recent years, it is critical for investors to understand that exposure to a wider range of investments is necessary as part of a core investment strategy,” said Ken Barbuscio, head of product and platform development for BlackRock, Inc. (NYSE:BLK)’s U.S. Wealth Advisory Division. “BMMAX provides individual investors with a way to diversify across alternative investment managers and strategies in a single portfolio solution.”