BlackRock cuts about 3% of its 20,000 global workforce as the industry experiences rapid technological change.
In a memo shared with CNN, CEO Larry Fink and President Rob Kapito of BlackRock, the largest global asset manager, stated the industry's rapid change, citing "new technologies are poised to transform our industry."
Plans to Reallocate Resources in 2024
Various business units within the firm plan to reallocate resources in preparation for the anticipated unique landscape in 2024. In their memo, Fink and Kapito mentioned that exchange-traded funds (ETFs) are preferred for delivering index and active investment strategies.
Decreasing Need for Analysts Due to ETFs
ETFs, created to follow an index like the S&P 500, can be automated. This passive approach decreases the need for large teams of analysts as it involves less active decision-making. Despite the announced job cuts, the New York-based company anticipates having more employees at the end of the year to support key growth areas.
Challenges in Market Declines and Higher Interest Rates
The asset-management industry faced challenges in the last two years due to market declines in 2022 and concerns about higher interest rates from investors. Fink stated that clients are earning a real return in cash and can afford to wait for more policy and market certainty before taking on more risk for the first time in almost two decades.
BlackRock strives to become a comprehensive solution for investors, providing a range of funds and strategies, including equity, bond, and money-market options. It offers clients tech, data, analytics, and financial markets advice to tap into the expanding market to double the revenue from private markets in the next five years as an alternative.
Prior Cuts
BlackRock and prominent money managers like Wellington Management and T. Rowe Price Group Inc. have responded to these challenges by cutting jobs and reallocating budgets.
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2.5% of BlackRock's workforce was revealed to be laid off in January, equating to 500 employees. Later in June, less than 1% of the staff had been affected as additional cuts were announced. Attaining $9.1 trillion in client assets as of September 30, the company will report fourth-quarter earnings on Friday.
BlackRock also reported its first quarterly outflows in October, where clients withdrew $13 billion from long-term investment funds, including actively managed products that usually have higher fees than index strategies since the pandemic began in 2020. The company received over $186 billion in new assets for Exchange-Traded Funds (ETFs) and $16 billion for index mutual funds last year.
BlackRock's shares declined by 1.8% this year, following a 15% increase in 2023, where most of the gain occurred later in the year as investors speculated that the Federal Reserve would cease raising interest rates and might even cut them in the coming year.
