Equity Analysis

To start things off I would first like to talk about the Industry. According to the S&P Stock Report Blackrock belongs to Asset Management and Custody Banks sub-industry of Investment Services Industry. The Asset Management Industry includes organizations that manage pools of savings. The sub-industry employs 160,000 people in USA which is at a high after the financial market crisis. About a third of these employees are highly educated professionals working in fund management. Another third provide investor services, about a quarter are in sales and marketing while 10% are in fund administration. Fund administration is believed to have a big future growth as it is more related to accounting and compliance. According to the Industry Survey the outlook is positive as AUM has increased from $10 trillion in 2008 to $14.8 trillion in 2008. Of this $14.8 trillion, 49% of mutual funds are stock funds, bond funds are 20% and the remaining 20% are in money market funds.

Here are some pros and cons for the asset management sub-industry. Low cost and index tracking ETFs have grown in importance to investors. In 2013 Market reacted favorably to agreements on US fiscal budget. Also, there is an upside potential for asset managers with solid reputation better than average fund performance. However, in my opinion the sub-industry is marketweight as the volatility for equities and bonds is rising. SEC has been keeping a close eye on the industry, and there has been an increase regulation scrutiny. Also slowdown in global economy is another reason to worry for investors.

Now a little bit about Blackrock. Blackrock is one of the leading investment management companies founded in 1988. As of 2013, Blackrock has $4.3 trillion in AUM which makes it the biggest investor in the world. Blackrock was acquired by PNC Financial Services Group in 1995 which took Blackrock public in 1999, which increased the company’s visibility and reputation. Blackrock has a diversified product line of...