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BlackRock’s push into alternative investments led it to hold talks with Warburg Pincus as the world’s largest money manager seeks a transformational deal that could reshape the $27tn private funds industry.
The two investment groups began talking about a strategic partnership nearly two years ago but that conversation foundered over competing visions, according to at least five people briefed on the talks. BlackRock wanted to buy a majority stake in a top private equity manager, while Warburg Pincus, which manages $84bn, did not want to cede control. They then discussed developing joint products last year.
None of the talks led to an agreement, but BlackRock is still conducting a wide-ranging search for an acquisition to bolster its profile in private funds, much as its 2009 purchase of BGI gave it a dominant position in passive investing. The talks demonstrate the scale of the $9.1tn money manager’s ambition, and the difficulty it has had in finding the right target.
BlackRock and Warburg Pincus declined to comment.
BlackRock was interested in a tie-up with Warburg Pincus because its chief executive Larry Fink had identified alternative investments as a strategic growth area. While the money manager has a significant footprint in alternatives, most of its offerings do not carry the cachet of Warburg Pincus and its private equity rivals.
The conversations between the two were serious but shortlived and never reached the point of discussing a price or a formal structure, people familiar with the talks said. “It was a first date. It was a lovely time but there wasn’t a match,” said one person who was in the room for the talks.
Traditional asset managers such as Franklin Templeton, AllianceBernstein and T Rowe Price have been racing to snap up alternative providers, including infrastructure, private equity and private credit funds. These areas are growing faster and carry higher fees than public equity and bond funds. But discrepancies in pay and culture can make integrating such acquisitions complicated.
BlackRock, which has a market capitalisation of nearly $120bn, already manages a wide range of assets including roughly $130bn in long-term alternative funds and about the same in hedge funds, commodities and currencies. It also sells technology used by thousands of institutional investors and financial advisers worldwide.
Fink publicly signalled his interest in acquisitions earlier this year, saying he was looking for another “transformational” deal. He elaborated on his ambitions on BlackRock’s most recent earnings call in October, saying: “[If] you look back when we did the big transactions, there was a lot of market unsettlement and I think there is quite a bit going on now . . . [We] are looking at different opportunities related to technology, private markets. We’re always engaged in conversations, but I’m challenging the team and myself to think more broadly and more openly about the opportunities we have.”
Were BlackRock to find its transformative deal, it would likely set off even greater change within the private capital industry.
A number of other prominent firms such as CVC Capital and General Atlantic are also considering their own future and have prepared preliminary plans to go public. Meanwhile, listed groups including TPG, Brookfield and KKR have in recent years struck ambitious acquisitions.
A tie-up with BlackRock would have marked a dramatic shift in strategy for Warburg Pincus, which has over the past decade resisted the urge to follow peers like Blackstone and KKR and list its shares on public stock markets.
Additional reporting by James Fontanella-Khan and Ortenca Aliaj
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