NEWS UPDATE
B U Y- S I D E REGULATION
Aladdin and eFront takeover
drives 30% surge in BlackRock
technology revenues SEC grants three-year
extension to MiFID II
relief period
BlackRock completed its acquisition of
eFront in May, combining the platform
with Aladdin to bolster the system’s
alternative investment capabilities. The US securities watchdog has extend-
ed the relief period to July 2023, after
stating it needs more time to evaluate
the impact of unbundling under MiFID II.
G U
rowth in investment operations platform Aladdin and the
impact of the $1.3 billion takeover of alternative risk ana-
lytics provider eFront have driven a 30% surge in technology
services revenue at BlackRock.
BlackRock acquired Paris-based eFront in May and com-
bined its platform, which offers technology for due diligence
and portfolio planning, performance and risk analytics, with
Aladdin. The move bolstered Aladdin’s end-to-end processing
capabilities in various alternative asset classes, providing
clients a holistic view of their portfolio.
“eFront gives us a greater ability to penetrate in terms of
illiquid alternative sales,” Laurence Fink, CEO of BlackRock,
said on the asset manager’s third quarter earnings call. “The
combination of eFront with Aladdin further reinforces Alad-
din’s value proposition as the most comprehensive invest-
ment operating system in the world.”
BlackRock’s technology services revenue increased 30%
year-on-year in the third quarter, totalling $259 million com-
pared to $200 million last year. Total expense over the period
at BlackRock increased 1% compared to last year, driven by
higher compensation and the eFront acquisition.
“Our technology services revenue grew 30% year-over-year
as more clients are looking for holistic and flexible technology
solutions to operate their businesses more effectively and
more efficiently,” Fink added. “For institutions, Aladdin is an
enterprise investment and risk management systems that
power the entire investment process on one single platform.”
Gary Shedlin, chief financial officer at BlackRock, also com-
mented that the asset manager will continue to invest in cer-
tain areas of the business in order to deliver more consistent
growth organic revenue growth across market cycles.
“We remain focused on thoughtfully investing in our
business for the long-term and capturing growth in areas of
highest client demand. "We remain focused on thoughtfully
investing in our business for the long-term," he said.
10 // TheTrade // Winter 2019
S brokers will be able to continue charging clients
separately for research and analysis, as imple-
mented under MiFID II in Europe, for another three
years.
The US Securities and Exchange Commission (SEC)
issued an extension to its ‘no-action letter’ – first pub-
lished in October 2017 and due to expire in July 2020
– until July 2023. The move means that broker-dealers
will not be faced with enforcement action for receiving
payments in hard dollars or through research payment
accounts from clients that are subject to MiFID II.
Chairman of the US securities watchdog, Jay Clayton,
commented that the SEC needs more time to evaluate
the consequences of MiFID II and the extension allows
it to continue monitoring its impact.
“The impacts of MiFID II are evolving, as EU author-
ities and regulators in individual EU member states
evaluate its effects and consider whether to modify
their rules,” Clayton said. “[The] extension will allow
our staff to continue to monitor the evolving impact of
MiFID II and evaluate whether any additional guidance
or Commission action is appropriate.”
MiFID II forced payments for execution and research
from third-parties to be separated, or unbundled,
across Europe. The rules have not been enforced in
other regions, but many large asset managers have
opted to implement the regime across their business
globally.
A survey by TABB Group of US equities asset man-
agers found that of 92 heads of desks polled, only
33% of large firms are still bundling execution and
research payments. The analysis also suggested that
the buy-side in the US are increasingly in favour of the
rules, with many highlighting greater transparency and
clarity around research requirements.