BlackRock, a New York-based global investment management and risk management provider best known for its fixed income expertise, is looking to grow its regional business beyond its beachheads in Hong Kong and Australia. The firm established its Hong Kong office three years ago under Stewart Carracher, and this summer Edward Troughton transferred from the firm's Edinburgh office to take responsibility for the region.
The firm has a separate business in Japan, a joint venture called Nomura BlackRock Asset Management, which was founded in 1999. In Australia, it has an alliance with BT Financial Group to sell its global fixed-income services to domestic institutions.
BlackRock manages $323 billion, of which $71 billion is sourced outside of the United States, and $7 billion from Asia and Australia (excluding Japan). Most of those assets are invested in US and global fixed income strategies, including mortgage-backed securities, a BlackRock specialty. Although the entire fixed-income investment team is in New York, the firm also manages international (ex-US) equities out of Edinburgh. The firm was acquired in 1995 by Pittsburgh, PA-based PNC Financial Services but is publicly listed.
Since Troughton arrived in Asia, the firm has opened an office in Singapore and is now in the process of registering as an investment advisor in South Korea. The firm already has a small business in those markets, as well as in Taiwan and the Philippines. It also has a modest retail funds distribution business in Taiwan.
"Asia is an absolutely essential part of our business strategy," Troughton says. The region accounts for most of the world's current account surpluses, 65% of global foreign reserves and most of its savings. Moreover, the region is a natural US dollar investor. "Asian central banks need more alpha without taking on more risk," Troughton says. "They are looking at other asset classes such as mortgage-backed securities."
The firm is also watching China's qualified foreign institutional investor regime for opportunities among its insurance companies and big banks, and intends to build relationships with Korea's leading institutions as well, including the yet-to-be-formed Korea Investment Corporation (a local version of Singapore's GIC).
BlackRock wants to play up not only its core fixed-income abilities, but also its alternative investment products and its risk management systems. The firm now manages $7 billion in alternative investments, including the gamut of fixed-income asset classes. Troughton believes that with US interest rates likely to rise, there will be increasing demand for alternatives.
BlackRock Solutions has also developed a proprietary risk management system and trading platform that is now utilized by $2.5 trillion worth of assets from clients such as Freddie Mac in the US. It provides services such as portfolio risk analytics, fund accounting and straight-through processing. Troughton's team is looking how to penetrate the Asian market with these services as well.
He is interested in hiring people with several years of industry experience, preferably those with Mandarin and Korea language skills.