With the focus growing in Asia on the potential for digital distribution of funds, the world's biggest asset manager seems as well placed as any to benefit from this trend.
But despite its huge reach and deep pockets, even BlackRock would need to take careful consideration before taking the plunge into direct sales via online channels.
China's Tianhong Asset Management has shown what can be achieved via electronic means with the success of its Yu’e Bao money-market fund via the Alipay online payment platform. Sales of this single product catapulted Tianhong to the biggest mainland fund house within six months with $90 billion in AUM.
But while BlackRock, too, is looking to sell more funds electronically, it would be cautious about moving into direct sales, said Michael Marquardt, Asia-Pacific chief operating officer. That would require a huge investment and could mean disintermediating the firm’s strong relationships with distributors, he told AsianInvestor.
The fund house, with $4.5 trillion in assets under management, has already increased its operational headcount significantly in the five years since Marquardt took up his present role, due to business expansion.
Developments have ranged from setting up a platform to manage Hong Kong-domiciled funds in 2012, to building out its multi-asset and renminbi qualified institutional investor (RQFII) businesses, to acquiring private equity real estate firm MGPA in early 2013.
Changes at BlackRock and in the wider market – across areas such as compliance, technology, data and risk management, and accounting – have resulted in a rapid expansion of the Asian operations team to around 1,400. The biggest chunk of that headcount sits in India and has increased fourfold since 2010 to 900.
At the heart of the business is the Aladdin operating system, which incorporates risk analytics, portfolio management, trading and operations. It has to be considered from the outset when it comes to making changes, whether launching RQFII products or taking into account new tax rules.
“The key is to avoid manual processes such as the use of spreadsheets, wherever possible,” said Marquardt. “It’s about automation and scalability right from the outset. We’ve a large business. Complexity and manual processes are our enemy.”
He cited the example of the fund passporting initiatives being introduced in the region. “We spend a lot of time considering the operational implications of the different umbrellas, whether for Southeast Asia or Hong Kong-China mutual recognition.
“What we first consider from an operational perspective is how we put those activities into Aladdin and how we build out the right control and support framework from the start.”
* A full profile of Michael Maquardt appears in the latest (December) issue of AsianInvestor magazine.