BlackRock expects alternatives boost from wealth channel

The investment giant estimates capital commitments from private wealth investors will make up close to a fifth of its alternatives assets by year-end, says alternatives chief Edwin Conway.

BlackRock expects inflows from private wealth investors into its alternatives arm to almost double by the end of the year.

BlackRock - Edwin Conway
Conway: the burden is on the alternatives industry to educate DC participants

In a virtual fireside chat hosted by Bank of America on Monday, Edwin Conway, senior managing director and global head of BlackRock Alternative Investors, said: “We would approximate the wealth channel for the first time ever [to be] 15-20 percent of our flow in alternatives. And that goes back to right jurisdiction, right level of information, right amount of education, and really helping and holding the hands of these investors as they migrate [to] a fund structure that can be three, five, seven, 10, 12 years.”

Conway said that BlackRock manages approximately $230 billion of alternative assets, around 10 percent of which comes from the wealth channel.

Alternative investments, including private equity, generated 9 percent of BlackRock’s second-quarter revenues despite accounting for just 3 percent of its $7.32 trillion of assets, according to its latest earnings materials.

The firm manages about $25 billion in private equity across its direct, evergreen vehicle Long Term Private Capital, as well as through secondaries, co-investments and fund commitments.

Asked about the potential opportunity around the inclusion of private equity in 401(k) plans, Conway noted the development was critical, but that “the reality is there is so much that needs to be learned”.

The US Department of Labor letter guides defined contribution plan fiduciaries to offer professionally managed asset allocation funds with a PE component. However, Conway said that the means of doing so “are not fully baked and defined as yet”.

“The first step is the willingness to think about private markets exposure as a critical ingredient to help all kinds [of investors],” he said. “Not just those in defined benefit, not just those that are ultra-high-net-worth, but to give everybody the ability, depending on where they are in the retirement life cycle […], to access alternatives.”

This will play out over quarters, if not years, he added.

Conway noted that the burden is on the alternatives industry to educate and provide information to DC participants on what investing in PE could look like and what that could do to the outcome of their total portfolio.

Other private equity giants have weighed in on recent developments in the US’s DC market. Blackstone president and chief operating officer Jonathan Gray said on the firm’s Q2 earnings call that DC money will first go to real estate and secondaries, before moving to traditional private equity. EQT chief executive Christian Sinding, meanwhile, noted that although it was early days, the firm has a strategic team working on this channel.