Over the past year, BlackRock has cut deals to buy infrastructure investment firm GIP, private credit manager HPS and data provider Preqin

February 19, 2025 | 07:00am

How the world's largest asset manager is using nearly $28 billion of acquisitions to reinvent itself

Over the past year, BlackRock has cut deals to buy infrastructure investment firm GIP, private credit manager HPS and data provider Preqin

BlackRock has been on a buying spree that will change the makeup of the world's biggest asset manager. BlackRock announced last year a slew of high-profile acquisitions — including a $12 billion deal to buy private credit manager HPS Investment Partners (HPS), which is expected to close in mid-2025; a $12.5 billion purchase of infrastructure investment firm Global Infrastructure Partners (GIP), which closed in October; and a $3.2 billion agreement to buy alternative assets data provider Preqin, which is expected to come on board this quarter. "That's a real change in the complexion of BlackRock and kind of the leverage that we have to markets," BlackRock CFO Martin Small said at last week's Bank of America financial services conference. "It's a big change." The deals come at a time when BlackRock's portfolio of exchange-traded funds (ETFs) and other funds faces tough competition — highlighted by Vanguard announcing on Feb. 3 fee cuts for nearly 100 of its funds. That led to a slide in BlackRock's stock. We bought the dip — at the time, calling it overblown. Our view was amplified by Small who said the fee reductions won't have a material impact on BlackRock financials. "These three acquisitions will help BlackRock accumulate more assets," said Jeff Marks, the Investing Club's director of portfolio analysis. "The deals should strengthen BlackRock's earnings power and could help the stock re-rate to a higher price to earnings multiple." We have been slowly building a position in BlackRock since mid-October. BLK 1Y mountain BlackRock 1 year Looking at the merits of each deal, the HPS purchase will add $148 billion in assets to BlackRock's existing $89 billion private debt platform. It will also expand BlackRock's presence in the lucrative market of private credit in which companies or investors lend money directly to businesses — allowing them to bypass traditional banks or other parts of the public market. There's been a tremendous amount of growth in the sector over the past several years. In the aftermath of the 2008 financial crisis, regulators cracked down on banks by placing stricter requirements on lending. Private credit funds, in turn, stepped in to fill the gap. That's because it can cater to more diverse financial needs, helping borrowers access capital they might not get through public debt markets or bank loans. HPS is not BlackRock's first move into private credit, though. The firm has had a footprint in the market for years. BlackRock bought private credit manager Tennenbaum Capital Partners in 2018, which had some $9 billion in committed capital in late 2017 before the acquisition was completed. To be sure, that's a fraction of the asset size of the HPS deal, which reflects BlackRock's increasing interest in the space. Evercore analyst Glenn Schorr told CNBC recently that BlackRock decided that "there's too much growth [in private credit.]" He added, "It makes too much sense for their client base. They thought, 'We should be bigger in this,' so they decided to buy the biggest and best among the very biggest and best private credit managers that are out there. They just decided: 'Enough, let's go big.'" The CNBC Investing Club's other financial names Goldman Sachs and Wells Fargo have made strides to grow their private credit businesses as well. In January, Goldman Sachs announced a new division to focus on providing loans to corporate clients and financing larger deals in an effort to deepen its private credit presence. The division, dubbed Capital Solutions Group, combined three businesses under the company's global banking and markets unit. Before that, Goldman was also listed as the sole adviser to Intel 's $11 billion investment from private credit firm Apollo Global as well. CEO David Solomon has described the growth of private credit as "one of the most important structural trends taking place in finance." Reflecting on last week's conference and meetings with bank CEOs, Bank of America analysts on Tuesday reiterated their Goldman Sachs buy rating, in part, citing its private credit business. "Private credit has existed at GS since the 1980s, and GS continues to grow the alternatives business, which should drive economies of scale," the analysts wrote. Wells Fargo, meanwhile, has a partnership with money manager Centerbridge Partners since 2023 to provide direct lending to middle-market companies through Overland Advisors. Centerbridge and other investors provide the capital for this direct-lending fund, while Wells Fargo makes the loans to existing customers as an alternative to other financing options. "What that does is give us an opportunity to still be relevant for clients where it's not something we're going to put on our balance sheet, but we can offer them a solution," Wells Fargo CFO Mike Santomassimo previously said of the partnership. The Wall Street giant also lends directly to private credit funds. As of the third-quarter 2024, loans to asset managers and funds represented $57 billion, or 6% of Wells Fargo's total loans. Bank of America on Tuesday praised Wells Fargo for viewing "private credit as an opportunity as opposed to an existential threat." BlackRock's purchase of GIP, the world's largest independent infrastructure fund manager with over $100 billion in assets under management, adds to BlackRock's current $50 billion in client infrastructure money. We're assured by GIP's immense growth in assets in recent years — increasing its $22 billion in 2019 five-fold. Infrastructure, in particular, is forecasted to be one of the fastest-growing segments of private markets in the years ahead, according to BlackRock CEO Larry Fink. "A number of long-term structural trends support an acceleration in infrastructure investment such as increasing demand for upgraded digital infrastructure, like fiber broadband, cell towers, and data centers; renewed investment in logistical hubs such as airports, railroads, and shipping ports as supply chains are rewired; and a movement toward decarbonization and energy security in many parts of the world," BlackRock wrote in its GIP acquisition announcement. Bringing Preqin under the BlackRock umbrella will bolster the asset manager's existing Aladdin portfolio management platform — giving clients more insights into the opaque world of alternative assets. "Private markets are the fastest growing segment of asset management, with alternative assets expected to reach nearly $40 trillion by the end of the decade," Blackrock wrote in the Preqin deal release. Evercore's Schorr said each of these deals is a classic example of how BlackRock continues to cater to its clients' ever-growing needs while managing to rake in more and more assets. The firm had $11.6 trillion in assets last quarter, its highest level in history. "BlackRock's amazingly adaptive to the world. Think about it," Schorr said. "They were just mostly just a fixed income manager, and then they bought [Merrill Lynch Investment Managers] and got the equity side of the business. And then, they were mostly an active manager and then they bought iShares from Barclays." He added: "They are always seeing around corners, seeing where the world's headed, and then adapting." For now, however, there are no other big-name acquisitions on the table. BlackRock's Small said at the Bank of America conference that these deals "round out our near- to intermediate-term agenda for private markets, data, and tech." "What I'd emphasize is the BlackRock of today is not the BlackRock of the last three to five years," Small continued. "The BlackRock of today is going to have pro forma 20% of our revenue base in alternatives, private markets, and technology — secular areas that have less market sensitivity, more structural growth that I think should deliver more stability in earnings, more earnings diversification through the cycle." (Jim Cramer's Charitable Trust is long BLK, GS, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.Marquee at the main entrance to BlackRock headquarters building in Manhattan.Erik Mcgregor | Lightrocket | Getty Images

BlackRock has been on a buying spree that will change the makeup of the world's biggest asset manager.

This story originally appeared on: CNBC - Author:Morgan Chittum