BlackRock’s push to diversify into alternative investments has led it to talk with Warburg Pincus. The world’s biggest money manager is looking for a deal that will transform the $27tn industry of private funds.
Five people who were briefed about the talks say that BlackRock and Warburg Pincus began discussing a strategic partnership almost two years ago. However, this conversation stalled due to competing visions. BlackRock was looking to purchase a majority stake of a leading private equity manager. Warburg Pincus which manages $84bn did not wish to cede any control. The two companies then discussed joint products in the past year.
BlackRock has not reached an agreement in any of the discussions, but it is continuing to search widely for an acquisition that will bolster its position in private funds. This is similar to its purchase of BGI in 2009, which gave it a dominant role in passive investing. The talks show the ambition of the $9.1tn fund manager and its difficulty in finding a target.
BlackRock and Warburg Pincus have declined to comment.
BlackRock wanted to partner with Warburg Pincus as its chief executive Larry Fink identified alternative investments, which he considered a growth area for the company. Although the money manager is a major player in alternative investments, its products do not have the same cachet as Warburg Pincus or its Private Equity competitors.
People familiar with the conversations said that the discussions between the two parties were serious, but brief. They never got to the point where they discussed a price or formal structure. It was a date. One person in the room said, “It was a wonderful time, but there was no match.”
Asset managers like Franklin Templeton and AllianceBernstein have been rushing to acquire alternative providers such as infrastructure, private credit and private equity funds. These sectors are growing faster, and they charge higher fees than bond and equity funds. Disparities in culture and pay can complicate integration of such acquisitions.
BlackRock has a market cap of $120bn and manages assets worth $130bn. This includes hedge funds, commodities, currencies, and long-term alternatives funds. It sells technology that is used by thousands institutional investors and financial advisors around the world.
Fink made a public announcement about his desire to acquire companies earlier this year. He said he was searching for another “transformational deal”. Fink elaborated on these ambitions during BlackRock’s latest earnings call, in October. He said: “[If] You look back, when we did the large transactions, there were a lot market unrest and I think that there is a great deal going on right now. . . [We] look at different opportunities relating to technology and private markets. “We’re always having conversations but I challenge the team and myself, to think more widely and more openly about opportunities that we have.”
If BlackRock were to find the deal that would transform the private capital market, this would be a catalyst for even more change.
Other prominent firms, such as CVC and General Atlantic, are also preparing their plans to go public. In recent years, listed companies such as TPG, Brookfield, and KKR made ambitious acquisitions.
Warburg Pincus would have been able to make a significant shift in its strategy if it had partnered with BlackRock. Over the last decade, the company has resisted following peers such as Blackstone and KKR by listing their shares on the public stock market.