Blackrock Reorganizing, Cuts Job as ETF Growth Slows Amid Volatility

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BlackRock

In its latest report on U.S. listed Exchange Traded Funds (ETF) and Exchange Traded Notes (ETN), National Stock Exchange (NSX) reported total assets under management (AUM) of $1.06 trillion at the end of November 2011. [1] Though the total shows an increase of 12% over last year’s AUM, ETFs saw around $238 million net cash outflows during the month, the first time in eight months. BlackRock (NYSE:BLK), State Street (NYSE:STT), Vanguard and Charles Schwab (NYSE:SCHW) made up 85%, or $886.64 billion, of the total AUM reported for 1,150 funds. Assets under Blackrock’s iShares and State Street’s SSgA declined by less than 5% this month compared to October 2011 while Vanguard and Schwab saw around 1-2% increase in their assets.

Earlier, Blackrock almost halved its ETF market outlook for 2011 to 10%-15% asset growth due to volatility in equity markets. Refer our article BlackRock Says ETF Demand Will Soften with Euro Crisis.

See detailed analysis for Blackrock’s stock here

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In another development, Reuters reported on the reorganization of BlackRock’s marketing division that will result in a reduction in headcount.  [2] Difficult economic conditions have led the firm to focus on core areas, trim down expenses, and streamline its processes. Many executives have also left the company recently as it tries to rid itself of the burden of underperforming operations. [3]

Blackrock, along with Mellon Capital Management and Rogge Global Partners, was appointed by Chile to manage a part of the nation’s $4.5 billion pension savings. [4] The company will manage the corporate fixed-income portfolio and equity portfolio of the fund.

We believe streamlining and concentrating on key areas will benefit the company as it tries to improve its EBITDA margins and earnings through the prevailing uncertainty and insecurity in the economy.

Our price estimate of $195 for Blackrock is around 15% ahead of the current market price.

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Notes:
  1. NSX Releases November 2011 ETF/ETN Data Reports, NSX News & Views []
  2. BlackRock reorganizes marketing; cuts jobs, Reuters []
  3. BlackRock investment executives exit, Reuters []
  4. Blackrock, Mellon, Rogge to Manage Chile Sovereign Wealth Fund, Bloomberg []