Hey Monkeys,
A story just broke out that BlackRock is cutting bonuses due money flowing into passive funds. Many of us choose roles in Asset Management for increasing out skill set,exit opportunities , and (a very important part of overall comp) the bonuses. Curious to see what others think about current/future IB & AM roles(Analyst to VP)? Are there more banks and AM managers slashing bonuses?
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That sux
sad trombone
I feel like a lot of these articles on here that are just hearsay and bloomberg article reference rather than actual firsthand knowledge.
A reduced bonus doesn't sound so bad when other managers are laying off entire investment teams (eg. GMO, Putnam). I know that people say that a bear market will drive flows back to active but why would it? Look at SPIVA scorecards for 2001 and 2008, passive outperformed.
Don't know about other regions, but passive ETF's are where it's at right now with my clients and I have a personal affinity for their ishares ETF's. I don't use anything actively managed from BlackRock, though maybe someday this will change.
Given a client just wants a typical 60-40 or 70-30 portfolio and they listen to CNBC, the Bogleheads, Marketwatch, etc. it's becoming harder by each passing quarter to justify a mutual fund with a 1.1% fee (for example) that's underperformed the S & P nearly every year and still call myself a fiduciary. The rare exception is when they have a specific request/sector they wish to invest in i.e. socially responsible investing or something-- and even then, there's usually a cheap ETF that can do the same thing.
I believe that many funds will close in the near to mid-term. However, many funds also opened in recent years. One could infer that what we have seen in recent years reflects that rent on private information (quality research) has gone down due to an overcrowded active industry. As more money leaves the active side i firmly believe that we will see rent on private information increase and flows to level off or even reverse. I cannot imagine that rent on private information forever will be near zero.
Adding to my above point, most people who argue for underperformance among active managers forget that it doesn't imply underperformance among ALL active managers. In the distribution of fund alphas tails are thick - key problem is identifying and getting access to the managers that actually have skill.
Is BlackRock the largest asset passive manager or the second largest? Gotta be up there with iShares.
The bigger question is if bonuses dropped, how was the reduction shared amongst the various divisions?
DickFuld iShares ETF's are managed by BlackRock.
BlackRock has about $1 trillion of passive assets whereas Vanguard has $2.7 trillion. Nobody else is close.
sl55amg They have almost $2T in passive assets not including iShares so I would assume that their share of passive assets is much higher than your stated amount of $1T
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