BlackRock signals active overhaul with shift to quant

BlackRock signals active overhaul with shift to quant

Fund giant BlackRock is to overhaul its active equity strategies in the US with a greater focus on quantitative and non-human approaches, signalling a possible direction of travel for active managers in the UK and elsewhere.

The asset manager is to "reorient" certain investment teams around what it dubbed "a more focused product line up".

This meant shifting resources and responsibilities within teams, leading to some potential stockpicking manager exits and redundancies.

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The changes will see around dozens of fund strategies overhauled to use more quantitative methods, affecting some $30bn (£24.2bn) of assets. It also extends beyond BlackRock's suite of US equity strategies - the most affected by a shift to quantitative and passive strategies. 

The $5trn fund group said it will now focus on "harnessing the power of human and machine to efficiently and consistently deliver investment performance", with a greater onus on data analysis and other quantitative methods.

BlackRock will also separate its US-domiciled active equity products into four ranges: core alpha, high-conviction alpha, outcome-oriented, and country and sector speciality.

While the changes do not affect BlackRock products outside of the US, they hint at one of the options open to active fund groups seeking to compete with a rush to passive vehicles and greater scrutiny around cost.

Mark Wiseman, global head of active equities at the firm, said: “Traditional methods of equity investing are being reshaped by massive advances in technology and data sciences. At the same time, client preferences are shifting, focusing not just on outcomes but on how both performance and fees impact value.

"Asset managers who simply use the same techniques and tools from the past will limit their ability to generate alpha and deliver on client expectations. The steps we are taking are an extension of the strategy we announced in 2016 to combine our quantitative and fundamental investment teams into a cohesive active equity investment platform that leverages the full scale and resources of BlackRock."

Signs of a fresh approach to active management have also become apparent in the UK, amid continuing pressure from passives.

Earlier this year Schroders chief executive Peter Harrison noted plans to increase the FTSE 100-listed asset manager's use of seed capital and turn its focus to alternative asset classes.

"There is going to be a continued shift to passive," he said. "I don't think that trend is going to slow. I think active managers who can add value will do well in that environment, but one needs to be capable of moving one's feet.

"We really need to move to get the product set ready for the next period."