Yahoo Finance Why did Blackrock just spend billions on a data company?
Blackrock, the largest asset manager in the world, revealed this morning it would be spending £2.6bn in cash on Preqin, a private markets analytics and research provider. Why?
Simply, private markets are the hot new thing within asset management. As good companies stay private for longer due to fewer companies floating on the London Stock Exchange, investors want to get a stake of unlisted assets.
“Private markets are the fastest growing segment of asset management,” BlackRock said following its purchase of Preqin, stating that the market is expected to reach almost $40 trillion by the end of the decade.
Meanwhile, the company estimated that private markets data alone currently has a market of around $8bn, and predicted that this could hit $18bn by 2030 with the current growth rate of 12 per cent a year.
Preqin itself is growing quickly. The £2.6bn buying price is approximately 13 times the company’s forecasted 2024 revenue of $240m, but this has surged at a 20 per cent compound annual growth rate over the last three years.
The returns from private markets have been strong too, mostly exceeding the performance of public stocks or bonds, leading almost every asset manager around to dip their toe in the private market water.
Blackrock and private markets
Blackrock has made it clear they are eager to take a piece of the private markets pie, as their core business has always been in indexing products for public markets.
Earlier this year, the company bought out Global Infrastructure Partners, the one of the world’s biggest infrastructure investments for about $12bn.
“This transaction, along with the pending GIP, position the company well to capitalise on the growing opportunity within private markets,” said analysts from Jefferies.
However, those wanting to get into private markets have a problem in that they’re notoriously murky with their data, and for good reason: They’re private.
A paper this year showed the unreliability of private equity numbers, revealing that they regularly shift reported losses and profits in funds to smooth overall returns.
That’s where Preqin comes in. The company brings “high-quality benchmarks for asset allocation, performance monitoring, and investment” to Blackrock, according to Jefferies, gifting it a key advantage among its competitors.
“As clients increasingly evolve their focus from choosing products to constructing portfolios, this shift requires technology, data, and analytics,” said Rob Goldstein, chief operating officer at Blackrock.
“We see data powering the industry across technology, capital formation, investing, and risk management.”
With Blackrock, Preqin can “accelerate our efforts to deliver better private-markets data and analytics to all of our clients at scale,” the company’s founder Mark O’Hare added.
Blackrock also has a successful track record in its acquisitions, integrating two different tech platforms in Efront and Aperio, with the former doubling average contract value growth since it was bought in 2019 and the latter growing its assets 23 per cent since acquisition.
The new Preqin business is planned to complement Blackrock’s tech business Aladdin, improving its ability to “oversee risk management and analytics”, the Jefferies analysts said.
“The combination of Preqin with Aladdin and Efront will allow Blackrock to integrate private markets investment workflows with proprietary data that touches all aspects of private markets including fundraising, deal sourcing, portfolio monitoring, accounting, and performance,” they added.
