BOSTON • BlackRock, the world's largest asset manager, is shaking up its struggling stock-picking unit by cutting jobs, reorganising funds and lowering fees.
The revamp, which embraces quantitative strategies, moves US$8 billion (S$11.1 billion) of the US$201 billion run by traditional stock pickers into cheaper offerings, with some fees cut by about half in one class of funds, according to a person familiar with the matter.
More than 30 employees, including fund managers and analysts, were let go, the person said.
Chief executive officer Laurence D. Fink, who has re-jiggered BlackRock's active-equity business before, and his rivals face mounting pressure from investors over fees.
Clients are moving to cheaper index-tracking exchange-traded funds (ETFs), which benefits BlackRock's ETF business while hurting its active managers. The lower fees will reduce annual revenue by about US$30 million, the New York-based company, which manages US$5.1 trillion, said in a statement on Tuesday.
"There is fee compression in the US, which is being driven by technological advances and by the successful and continued growth of ETFs," Mr Mark Wiseman, BlackRock's global head of active equities, said in an interview.
"We are in a regulatory environment that is pushing hard on the traditional active-equity model. We want to play offence, not defence."
BlackRock is also moving assets from active-equity funds to an income series that produces higher dividend yields, with US$2 billion impacted by fee cuts of as much as 21 per cent, the person said.
Two other groups of funds - one that will make higher risk, concentrated bets and another focusing on specific countries and sectors - round out the reorganisation.
The layoffs in the active-equity unit, which has more than 400 employees, will contribute to a US$25 million charge for the first quarter.
Four of BlackRock's quant hedge funds posted the worst annual returns in their history last year. Its active-equity funds saw US$20 billion in net outflows last year, according to a regulatory filing. Meanwhile, its ETF business has been booming, with record inflows last year.
Mr Wiseman said his group plans over the next 18 months to hire about the same number of employees who were laid off. BlackRock is looking for people with deep research capabilities, technological and data analytics skills, and will put more emphasis on hiring in the emerging markets, especially Asia.