Sample of Academic Work- BlackRock


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  • acclerating BlackRock’s evolution as a global enterprise with a considerably more diversified business, and broadening its product lineup to include more equity and alternative strategies.
  • acclerating BlackRock’s evolution as a global enterprise with a considerably more diversified business, and broadening its product lineup to include more equity and alternative strategies.
  • 32% AUM growth in 07; 11 billion in equity flows, mostly retail; no proprietary trading, only invest as a fiduciary with their customers
  • Sample of Academic Work- BlackRock

    1. 2. <ul><li>Ticker (BLK) NYSE </li></ul><ul><li>Asset Management & Custody Banks </li></ul><ul><li>Steve Murray </li></ul>BlackRock, Inc.
    2. 3. Team Recommendation <ul><li>Our one year target price is: $218 </li></ul><ul><li>Appropriate purchase price (rationale): $200 </li></ul><ul><li>Top 3 reasons to purchase </li></ul><ul><ul><li>Recent Strategic Acquisitions </li></ul></ul><ul><ul><li>Strong Risk Management Products </li></ul></ul><ul><ul><li>International Expansion </li></ul></ul>
    3. 4. Company Description <ul><li>BlackRock is a premier provider of global investment management services </li></ul><ul><li>As of September 30, 2007, BlackRock manages $1.36 trillion across fixed income, equity, liquidity, asset allocation/balanced, real estate, and alternative strategies for institutional and retail clients worldwide </li></ul><ul><li>BlackRock serves clients from offices in 19 countries, maintaining a major presence in North America, Europe, Asia-Pacific, and the Middle East </li></ul><ul><li>BlackRock employs approximately 5,100 employees, including more than 550 investment professionals worldwide </li></ul>
    4. 5. Business Units/Segments <ul><ul><li>Fixed Income Asset Management </li></ul></ul><ul><ul><ul><li>At the end of 2006 fixed income products accounted for 41% of total assets under management, equity products 35%, money market or liquidity products 20%, and alternative investment products 4% </li></ul></ul></ul>
    5. 6. Business Units/Segments
    6. 7. Key Drivers-Acquisitions <ul><li>Merrill Lynch Investment Management (MLIM) </li></ul><ul><ul><li>Expands global presence and diversifies business </li></ul></ul><ul><ul><li>Revenues reached a record $2.1 billion, and diluted earnings per share increased 32% to $5.33 for 2006 </li></ul></ul><ul><ul><li>Alternative platforms were expanded with private equity fund of funds, international real estate and equity hedge funds </li></ul></ul><ul><ul><li>The merger substantially expanded their capabilities, propelling equity assets to $392.7 billion or 35% of total assets under management </li></ul></ul><ul><ul><li>Fixed income assets under management increased to $455.9 billion and their platform was enhanced with euro, sterling, U.S. tax-exempt and distressed investment expertise </li></ul></ul>
    7. 8. Key Drivers-Acquisitions <ul><li>Quellos Group </li></ul><ul><ul><li>Funds-of-Funds business </li></ul></ul><ul><ul><li>Added $22 billion in assets under management </li></ul></ul><ul><ul><li>$7 billion of private equity AUM and $20 billion of hedge fund AUM </li></ul></ul><ul><li>SSRM Holdings </li></ul><ul><ul><li>State Street Research & Management, State Street Research & Management Co. (SSR) and SSR Realty Advisors, from MetLife, Inc. </li></ul></ul><ul><ul><li>Added $52 billion in assets under management </li></ul></ul>
    8. 9. Key Drivers <ul><li>Strong Risk Management </li></ul><ul><ul><li>BlackRock Solutions’ business has become increasingly well-diversified across products and clients </li></ul></ul><ul><ul><li>BlackRock Solutions’ revenues from system outsourcing, risk management, advisory and transition management services grew by 20% to $148.0 million in 2006 </li></ul></ul><ul><ul><li>Aladdin®- risk analytics, portfolio management, compliance and operational processing </li></ul></ul><ul><ul><li>Riskier environments lead investors to less volatile markets like money market funds </li></ul></ul><ul><ul><li>$30 billion moved into BlackRock’s liquidity products </li></ul></ul>
    9. 10. Key Drivers <ul><li>International Expansion </li></ul><ul><ul><li>$383.3 billion of their assets international investors in more than 50 countries </li></ul></ul><ul><ul><li>3 rd Quarter- $9.9 billion in inflows (24%) </li></ul></ul><ul><ul><li>MLIM added their industry leading international mutual fund platforms </li></ul></ul><ul><ul><li>48% of equity and balanced AUM were managed for U.S. investors and 52% for international clients </li></ul></ul><ul><ul><li>In the 4 th quarter, nearly 50% of pre-tax income came from international clients </li></ul></ul><ul><ul><ul><li>International clients typically invest in riskier funds with higher returns and higher fees </li></ul></ul></ul><ul><ul><ul><li>Plans to open 5 new offices outside the US within the next year </li></ul></ul></ul>
    10. 11. Key Drivers <ul><li>International Expansion </li></ul>
    11. 12. Competitive Landscape <ul><li>Franklin Resources Inc. (BEN)- The Investment Management and Related Services segment provides investment management and fund administration services, and other related services, The Banking/Finance segment provides retail-banking and consumer lending services, including automotive lending related to the purchase, securitization, and servicing of retail installment sales contracts; consumer credit and debit cards; real estate equity lines; and home equity/mortgage lending. It offers its services to individuals, foundations, and institutions worldwide </li></ul><ul><li>T. Rowe Price Group Inc. (TROW)- provides its services to corporations, corporate, public, and Taft-Hartley retirement plans, foundations, and endowments. Through its subsidiaries it manages separate client-focused equity, fixed income, and balanced portfolios; common trusts, and institutional mutual funds, and advisory services </li></ul><ul><li>Ameriprise Financial Inc. (AMP)- provides financial planning, asset management, and insurance services to individuals, businesses, and institutions </li></ul><ul><li>Fortress Investment Group LLC (FIG)- provides its services to pension funds, endowments and foundations, financial institutions, funds of funds and high net worth individuals. It manages hedge funds and publicly traded alternative investment vehicles </li></ul><ul><li>Legg Mason Inc. (LM)- provides investment management and related services to institutional and individual clients, company-sponsored mutual funds, and other investment vehicles worldwide </li></ul>
    12. 13. Current News- 4q07 Earnings <ul><li>1/17- BlackRock Inc.'s fourth-quarter earnings jumped 90% from last year </li></ul><ul><ul><li>$75 billion of net inflows in their cash management products in 2007, its conservative funds and its alternative investment products </li></ul></ul><ul><ul><ul><li>$22.2 billion increase in money market funds, 72% of total net flows in 4 th quarter </li></ul></ul></ul><ul><ul><li>Net income rose to $322.4 million, or $2.43 per share, from $169.4 million, or $1.28 per share, a year earlier. Revenue surged 42 percent to $1.44 billion from $1.02 billion last year </li></ul></ul><ul><ul><ul><li>Analysts were expecting $2.15 a share with $1.31 billion in revenue </li></ul></ul></ul><ul><ul><li>Investment and advisory fees rose 34% to $1.16 billion, and advisory performance fees nearly quadrupled to $153 million </li></ul></ul><ul><ul><li>Equity and balanced products saw record net inflows of $10.8 billion </li></ul></ul><ul><ul><li>$4 billion in fixed income outflows* </li></ul></ul>
    13. 14. Current News <ul><li>1/30- Raised $28 billion in liquidity, money market, assets ytd in 2008 </li></ul><ul><li>1/16- BlackRock Inc. announced the appointment of John Thain, CEO of Merrill Lynch, to the company's Board of Directors </li></ul><ul><li>1/15- Merrill Lynch agreed to issue $6.6 billion of mandatory convertible preferred stock to long-term investors (Korean Investment Corporation, Kuwait Investment Authority, and Mizuho Corporate Bank) </li></ul><ul><li>6/26/07- Acquired Quellos Capital Management </li></ul><ul><li>9/29/06- Acquired Merrill Lynch Investment Managers (MLIM) </li></ul><ul><li>1/28/05- Acquired State Street Research Management </li></ul>
    14. 15. Company Strategy <ul><li>BlackRock offers a wide range of investment solutions reflecting the varied needs and preferences of their clients. They have fixed income portfolios with exposure to global bonds, but they also manage bond portfolios denominated in U.S. dollars, sterling, euros, yen and Australian dollars. In equities, in addition to U.S., international and emerging market offerings, they manage equity portfolios with strategies specific to the UK, Europe, Japan and Australia. They manage sector-specific mandates across asset classes as well as multi-asset class strategies. Their strategies are tailored to appeal to both taxable and tax-exempt investors with diverse appetites for return and risk </li></ul>
    15. 16. Comparables
    16. 17. Comparables
    17. 18. Financial Ratios
    18. 19. 5-Year Summary
    19. 20. Projections
    20. 21. Valuation
    21. 22. Biggest Threats/Concerns <ul><li>Potential challenges associated with integrating the MLIM and Quellos businesses with its existing business, including risk of losing key personnel  </li></ul><ul><li>Ability of BlackRock to effectively manage the former MLIM and Quellos assets along with its historical assets under management </li></ul><ul><li>Changes in the interest rate environment, financial and capital markets </li></ul><ul><li>Increased foreign exchange rate risk as a result of MLIM transaction </li></ul><ul><li>Increased competition </li></ul>
    22. 23. Stock Chart
    23. 24. Team Recommendation <ul><li>Our one year target price is: $218 </li></ul><ul><li>Appropriate purchase price (rationale): $200 </li></ul><ul><li>Top 3 reasons to purchase </li></ul><ul><ul><li>Recent Strategic Acquisitions </li></ul></ul><ul><ul><li>Strong Risk Management Products </li></ul></ul><ul><ul><li>International Expansion </li></ul></ul>
    24. 25. Questions?