Rohit Bhagat, BlackRock's newly appointed chairman and managing director for Asia-Pacific, says the 'new' BlackRock model is not about scale. The goal is to use that scale to provide tailored products and ideas to clients in a variety of regulatory environments, not to engage in mass production.
Although the most obvious thing about the merger is its unparalleled size, Bhagat insists the deal is not about scale, although scale can provide certain benefits. The driving logic of the transaction was to create a more complete set of investment solutions and products for clients, both institutional and retail, he says.
But size can help the firm differentiate its offering, says Bhagat. In a world where alpha opportunities are sourced globally, there is an advantage to diverse expertise and the ability to share information more widely. In addition, many of the firm's clients' corporate activities are increasingly cross-border and require servicing coordinated across multiple jurisdictions. A third benefit is that there are economies of scale in certain platforms for trading, research, compliance and so on.
He met last week with AsianInvestor on a visit from San Francisco and will relocate to Hong Kong formally at the start of 2010. On December 1, BlackRock completed its acquisition of Barclays Global Investors, creating the world's largest asset manager, with $3.19 trillion of assets under management.
Of this, $344.9 billion is sourced from clients in Asia-Pacific (as of September), making BlackRock the largest global (ie US or European) manager of regional assets, and second overall after Sumitomo Trust & Banking.
Bhagat, who was born in New Delhi but has built his educational and professional career in the US, most recently served as global chief operating officer at BGI. He says the firm is enhancing its interest in Asia-Pacific, as manifested in the chairman role it has created.
He will oversee Japan, Australia and Asia (ex-Japan) and sits on the firm's operating committee.
Meanwhile, the firm has finalised its senior management team for the region.
In Asia ex-Japan, Peter Swarbreck, a managing director at BlackRock pre-merger, will head Hong Kong and be responsible for retail channels regionally. Winnie Pun will lead the institutional business for Asia ex-Japan.
[Editor's note: The December print edition of AsianInvestor's cover story by Jame DiBiasio mentioned Bhagat's appointment, but went on to say, "...while the previous Asia managers of both businesses will retire or leave the region". Although BGI's Mark Talbot is indeed retiring, Peter Swarbreck certainly is not, nor is he leaving the region. We apologise to Peter Swarbreck for our error.]
In Japan, the business will be run by Ross Hikida (of BGI) with Hiroyuki Arita (of 'old' BlackRock) as his deputy head, while Will Britten (BGI) is running Australia with Damien Frawley ('old' BlackRock) as deputy head.
The previous BlackRock executives will continue to run the businesses in Taiwan, South Korea and Singapore, while the Beijing representative office will now be headed by the former BGI chief rep, Larry Lee.
Other appointments include: Nick Good, who retains his role as Asia head of i-Shares; Michael Marquardt as regional COO ex-Japan/ex-Australia (he was previously BGI's Japan COO and is moving from Tokyo to Hong Kong in the expanded role); while Dieter Schwaller, the previous Asia (including Japan) COO at 'old' BlackRock, will serve as Japan COO. Driving marketing for the combined group in Asia-Pacific is Katherine Cheung in Hong Kong.
With the acquisition of BGI, perhaps BlackRock's most important project will be to integrate BGI's technology.
At the heart of BlackRock's business model is its analytics, which are housed in the firm's BlackRock Solutions technology division. This unit develops BlackRock's analytics and maintains its databases, and delivers these capabilities through Aladdin, an enterprise investment-management, operations and risk-management system.
Although it is the largest user of the Aladdin platform, BlackRock collaborates with more than 100 large organisations that use the analytics and risk tools, and the firm has built up a technology infrastructure to support it. In addition to models and analytics, Aladdin includes the infrastructure needed to manage orders, capture trades, run compliance checks and manage trade settlement.
BlackRock will tap BGI's expertise to build the platform's equity and equity-trading functionality. BlackRock will also tap BGI's automated trading and technology for transaction cost analysis.
Bhagat says the combined firm is focused on rewarding its employees based on providing better advice and solutions to clients rather than on product sales.
With an individual salesperson able to cover the range from passive to high-alpha strategies, the structure has to ensure the right product -- not necessarily the high-margin one -- gets to the client, he says.
Client-relation managers are expected to focus on understanding their clients, while the investment and product specialists convey the detail about their product set and work with the client-facing people to innovate and address client challenges.
"Incentives are based on the success of the client and the success of the firm, not on what product gets sold," Bhagat says.
In the meantime, he says, the risk to the new firm's operation is to ensure against a decline in client service as the integration progresses. The senior management has tried to address this by moving quickly to decide management positions, systems and other points of uncertainty.
Bhagat says he put his hand up for the chairman job because of his Indian heritage and Asian experience. Although his career has been largely in America, he set up and developed the India operation for The Boston Consulting Group and served on its Asia leadership team.
In addition, as global COO at BGI, he has experience with managerial matrices and can appreciate the intricacies, delicacies and necessity to report to a CEO in the US from an overseas market.