(Reuters) – BlackRock could start offering indexes and exchange-traded funds (ETFs) for private markets, the asset manager said on Monday, after it announced a deal to buy data provider Preqin for nearly $3.2 billion.
The move underscores BlackRock’s push to become a major player in alternative assets, which are fast becoming a bigger component of investors’ portfolios.
These assets encompass everything other than stocks and bonds and are collectively called private market investments – assets that are not traded on public exchanges or stock markets.
They are more appealing when public markets are volatile, but analyzing them is tougher due to limited transparency and inconsistent calculation methodologies.
Indexes offer a standard benchmark for investors to measure the performance of their portfolios, while ETFs provide access to a bunch of diversified assets. They are very popular among passive investors.
Typically, these products have only been available for investors looking for access to stocks, bonds or commodities, though some financial firms have begun to expand the pool recently.
Publicly traded fund Destiny Tech100 allows shareholders access to some of the hottest privately owned startups including Elon Musk’s SpaceX and Sam Altman’s OpenAI.
Bringing indexes and iShares – BlackRock’s ETF arm – into the private markets will help improve the industry’s transparency and attract more investments, the asset manager said.
Preqin will be integrated with eFront, an alternative investment management software BlackRock bought in 2019. It will be a part of BlackRock’s technology services unit, which accounted for 8% of the company’s total revenue in the first quarter.
Although a small business, the technology unit brings in revenue that is less sensitive to market fluctuations.
“We expect the deal to expand, diversify and accelerate BlackRock’s technology platform,” TD Cowen analysts wrote in a note.
It could also increase markets perception of BlackRock as a technology solutions provider, the brokerage added.
(Reporting by Niket Nishant in Bengaluru; Editing by Saumyadeb Chakrabarty)
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