NEW YORK (Reuters) - BlackRock Inc (BLK.N) is using its access and leverage as a major shareholder in public companies to strike more client-winning deals with private companies, a top executive for the world’s largest asset manager said on Friday.
Because of its $1.1 trillion iShares exchange-traded funds business, where portfolios are designed to track market indexes, BlackRock holds a large position in most major U.S.-listed companies.
Such a pervasive presence means that private companies, particularly those that harbor ambitions to go public and would like BlackRock as an investor, listen when the money manager pitches them a deal for a loan or an equity stake on behalf of its clients.
“There is no CEO that doesn’t return our call because typically we’re up high on the shareholder register,” Mark McCombe, global head of BlackRock’s institutional client business, told Reuters reporters and editors attending the Reuters Global Wealth Management Summit on Friday.
“We are everybody’s largest shareholder.”
Over the last year, McCombe’s team has been ramping up efforts to use that access to land more high-octane private credit and equity deals for clients that in the past might have used banks and boutique “alternative” investment managers.
McCombe said BlackRock’s push into the alternatives space, which includes investments in real estate and infrastructure, is “indirectly related” to banks pulling back from this type of business.
Regulations introduced since the financial crisis, such as the Volcker Rule, named after former Federal Reserve Chairman Paul Volcker, have put restrictions on the ability of banks to make big bets with their own money investing in these sort of assets. Many banks have since backed away, paving the way for new entrants.
McCombe offered as an example of this approach the joint $900 million stake his company and U.S. private equity company First Reserve took in a Mexican natural-gas pipeline project.
The deal would not have been possible without BlackRock’s relationship with Pemex, the state-controlled oil company, McCombe said at the Summit, held at the Reuters office in New York.
The BlackRock “alternatives” unit - for which McCombe serves as a co-head - includes ventures ranging from hedge funds to private equity and infrastructure projects. It is a small unit for the company - accounting for just 3 percent of BlackRock’s $4.4 trillion in “long-term” assets, excluding cash accounts. But alternatives punch above their weight, drawing 8 percent of BlackRock’s fees, according to its latest quarterly earnings release.
The New York-based BlackRock faces stiff competition in these alternative markets from private-equity funds, banks and other asset managers with longer-standing presences in those assets and international markets.
Additional reporting by Olivia Oran; Editing by Linda Stern, Carmel Crimmins and James Dalgleish