The management at BlackRock financial advisers alerted the company in a memo last week that it would make its third round of layoffs in the last 12 months, pointing to significant changes in the asset management industry.
BlackRock’s decline the past few years has been speculated as being attributed to the company’s Environmental Social Governance (ESG) investing policies. "ESG investing policies cause investment funds to be directed toward public companies that promote carbon footprint reduction and diversity initiatives," according to American Military News.
Larry Fink, BlackRock's chief executive, and Rob Kapito, the firm's president, said the firm would lay off three percent of employees, or about 600 people, from its workforce of about 20,000.
BlackRock expects to have a larger workforce at the end of 2024 as it continues "adding people and building capabilities to support key areas of growth," they said in the memo. The New York-based firm is experiencing growth in "a wider range of markets around the world than ever before" across Europe, the Middle East, India, and other Asian markets, they continued.
Fink and Kapito also said they are considering "new technologies" and how they can help BlackRock operate more efficiently, like adding new capabilities to the Aladdin tech business. Fink has discussed the possibilities of artificial intelligence technology, which firms across financial services and other industries are starting to use in different ways.
"We're spending a huge amount of time on it right now, and what it's going to do, and how we're going to reshape the firm," he said during a conference last year. "We spend a lot of time with different technologists who know a lot more about this than I do. They believe things like it will increase productivity by 30%."
BlackRock laid off some 500 employees, or about three percent of the workforce, in January 2023. It laid off another one percent of staff last June. Fink has said the firm is seeking to execute a "transformational" deal as it prioritizes areas of the business like private-market investing, tech, and Aladdin.
Fox Business reported that a source familiar with the matter described the layoffs as a routine operation of the money management company.
According to Fox Business, BlackRock shares increased by six percent in 2023 after decreasing by 21% in 2022. The financial investment firm is also anticipating the Securities and Exchange Commission will approve the company’s proposed spot bitcoin exchange-traded funds as BlackRock continues to expand its investment portfolio.
BlackRock’s third-quarter report showed that the company was responsible for managing roughly $9 trillion. The company has seen a major decline in assets under management after reaching over $10 trillion in 2022.
Sources close to the financial investment firm said the savings BlackRock would create due to the expected job cuts will be used for "technology and alternative product investments."
Pointing to the company’s recent attempts to distance itself from ESG initiatives, BlackRock founder and CEO Larry Fink told Fox Business that he no longer mentions ESG due to the heightened political controversy surrounding the policies.
Here is the full text of the memo Fink and Kapito sent to employees and contingent staff on Tuesday:
"Thank you for all that you've done this past year in a rapidly changing environment. Clients have entrusted BlackRock to manage more assets than any other manager in the world, and it is clear clients want to do even more with us. Adapting to seize opportunities is what has made BlackRock an industry leader.We enter 2024 with significant momentum. Our client relationships have never been stronger.
"More and more of our clients are looking to consolidate their portfolios with BlackRock. As rates stabilize, we are seeing clients re-risking and repositioning portfolios as we have long anticipated. We are delivering strong investment performance and that, combined with our unique technology and operational excellence, is generating momentum across our private markets, OCIO, ETF and Aladdin businesses, among others.
"At the same time, we see our industry changing faster than at any time since the founding of BlackRock. Thanks in large part to the outstanding work of our iShares team – ETFs are becoming ubiquitous as the preferred vehicle for delivering both index and active investment strategies. Growth is coming from a wider range of markets around the world than ever before – across Europe, the Middle East, India, and other markets in Asia.
"And, perhaps most profound, new technologies are poised to transform our industry – and every other industry. They will help us to find new sources of alpha, enhance service to our clients, create additional growth engines for Aladdin, and achieve significant efficiencies in how we operate. All of this presents us with unprecedented opportunities.
"As a growth company, it is vital that we continually challenge ourselves and ask how we can best prepare for those opportunities. We must have the best talent in the industry. We need to be agile and efficient in how we serve our clients and how we manage our resources. We must leverage technology, and we must redeploy people and resources where the client needs are greatest and the opportunities for growth the most promising.
"As we prepare for 2024 and this very exciting but distinctly different landscape, businesses across the firm have developed plans to reallocate resources. These changes will result in about 3% of our colleagues leaving BlackRock. These departures include valued friends and colleagues who have made important contributions to the firm, and we wish them our best for the future.
"Even with these changes, by the end of 2024, we expect to have a larger workforce as we continue adding people and building capabilities to support key areas of growth. Saying goodbye to colleagues is hard, especially when many are friends as well. But it is done with the important purpose of best positioning the firm for a new environment and serving the evolving needs of our clients.
"We are proud of all that BlackRock achieved in 2023 and excited about what lies ahead for us in 2024. By remaining ambitious in how we evolve to serve our clients and operate the firm, we will continue to win even more client trust and create growth opportunities for our people."
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