BlackRock, Inc. (BLK)

BlackRock, the global investment management firm is entering the year 2007 with merger of Merrill Lynch Investment Management (MLIM) and has done a great deal branding the BlackRock label globally. Though considered a traditional bond house the new management has made its portfolio more diversified. It has a risk management and enterprise investment system outsourcing services targeting institutional clients much popular in the European continent.

Huge potential is seen in the European countries and has been integrated into the Aladdin Platform – a unified technology platform from BlackRock solutions. Huge liquidity in Japan, Korea, Taiwan and India makes Asia an attractive destination to expand. It has also resorted to third party distribution of its products and well supported by Merrill Lynch’s brokers network.

The assets under managements as of 2006-year end is spread as fixed income products accounting for 41%, equity with 35%, money market or liquid products constituting 20% and alternative investments with the remaining 4%. There has been a dramatic shift towards equities with more inflows from large non-U.S. entities. Inverted yield curve has resulted in outflow of funds from the fixed income portfolio.

The real areas of concern have been its ability to manage equities, which has not been its core competence and even those inherited from the MLIM acquisition have not been star performers. Huge proportions of its fixed income clientele are the pension funds and insurance companies making it hard to bank upon in the recent times. Also one-fifth of the funds are parked in money management product; thereby creating more volatile scenario. Though the merger has been going right on track there are certain synergies, which could not been cashed till the year 2008. A lot of onus rest on the core investment team to create products with superior returns for the distribution channel to pitch it positively and the immediate future of the company looks dull.