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BlackRock to Close 250 Funds

Zacks Equity Research

According to a Financial Times report, BlackRock, Inc. (BLK) plans to close nearly 250 funds from its existing range of products. This is a concerted effort to focus more on products that account for a higher proportion of revenues.

Recently, in its investor day conference, BlackRock announced that it manages over 7000 varied portfolios. Of these, the top 50%, comprising about 3000 fund vehicles, currently generates nearly 99% of the company’s total fund revenues. Subsequently, the bottom 50% of the portfolios contributes a meager 1%. Therefore, BlackRock is required to rationalize these funds in order to perform more efficiently.

Last year, BlackRock had closed nearly 250 funds in order to rationalize the bottom 50% of its portfolio. Further, the closure of an additional 250 funds in 2013 will result in the company shutting nearly 1/6th of its fund vehicles.

Alongside, in Mar, 2013, BlackRock announced around 300 job cuts, which equaled nearly 3% of the company’s total workforce as of Dec 31, 2012. The layoffs were a part of BlackRock’s reorganization efforts that included restructuring of its investment units.

Furthermore, BlackRock’s fund group has consolidated its Australian fund range. The company has closed over 90 portfolios. This equals to about 50% of various portfolios that the company offers to its clients in Australia. These factors have resulted in the strengthening of BlackRock’s position in Australia that will augment its growth.

The process of rationalizing the company’s portfolios is pivotal for BlackRock. This will help enhance the capacity and reduce complexity in the company’s business, which in turn will prove to be beneficial for BlackRock.

BlackRock currently carries a Zacks Rank #3 (Hold). Some better performing asset managers include Artisan Partners Asset Management Inc. (APAM), GAMCO Investors, Inc. (GBL) and Noah Holdings Limited (NOAH). All these carry a Zacks Rank #1 (Strong Buy).

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