- The acquisition could open up the market beyond hedge funds to retail investors
- We examine exactly how this could happen, and what it could mean
- The asset manager’s acquisition of a private-market data provider could transform how people invest in the private markets.
BlackRock (NYSE:BLK), the world’s largest Asset Management Company (AMC) with $10.5 trillion in assets under management, penned a deal to acquire London-based Preqin earlier this week, a firm that provides data and analytics on private markets for institutional investors.
Private-market investments, included under the umbrella of alternative investments, consist of privately owned companies and don’t trade as stocks on the public markets. Examples of two large privately owned companies are Fidelity Investments and the candy maker Mars.
The $3.2 billion acquisition announced on June 30 could open up this market beyond hedge funds and institutional investors to more mainstream investors. Here’s how:
Private Markets to Hit $40 Trillion by 2030
Preqin is a key acquisition for BlackRock because it allows the asset manager to tap into the massive and fast-growing private markets at a much greater scale. According to EY, there is currently about $24 trillion invested in the private markets. In fact, that total is expected to grow to $40 trillion by the end of the decade.
As the private markets grow, so does the need for institutional investors to obtain data and analytics, which Preqin provides. The firm covers 190,000 funds, 60,000 fund managers and 30,000 private-market investors.
Preqin’s data reaches more than 200,000 users, including asset managers, insurers, pensions, wealth managers, banks and other service providers. The firm has increased its revenue by 20% annually over the past three years, and is expected to generate $240 million in revenue this year.
However, it is just scratching the surface of this $8 billion addressable market for private-market data, which is anticipated to grow by 12% per year to $18 billion by 2030.
When this deal closes by the end of 2024, BlackRock will incorporate Preqin’s private-market data onto its Aladdin platform, which fund managers and institutional investors use to manage their portfolios.
Preqin will give them even more data and transparency on these private companies so that they can build even better portfolios.
“Together with Preqin, we can make private markets investing easier and more accessible while building a better-connected platform for investors and fund managers,” said Sudhir Nair, global head of Aladdin. “This presents a substantial opportunity for Aladdin to bridge the transparency gap between public and private markets through data and analytics.”
However, the merger’s utility could go beyond portfolio managers to include retail investors.
Fink on Transformational Acquisition
In a conference call after the announcement, BlackRock CEO Larry Fink painted a broader picture of what this acquisition could mean for investors.
“This acquisition is all about driving evolution and growth in the private markets by measuring them, understanding their drivers of performance, and making them more investable,” Fink said on the conference call.
Similar to how data, benchmarks and risk analytics helped transform the public markets, Fink believes they could do the same for private investments.
“Our aim is to do all of that in the far less-mature data analytics and index business for all the private markets,” he added.
Specifically, BlackRock is planning to index the private markets, which could involve developing private-market benchmarks or indexes and creating funds and exchange-traded funds that invest in them.
“Just as indexes have become the language of public markets, we envision that we can bring the principles of indexing, even iShares, to the private markets,” Fink added. “We believe that indexes and data will be important future drivers of the democratization of all alternatives, and this acquisition is the unlock.”
Of course, iShares is BlackRock’s market-leading family of ETFs. If this acquisition brings benchmarked ETFs to customers, it could be a huge revenue opportunity for BlackRock and make private-market investing far more accessible to retail investors.