In sales revamp, BlackRock targets buy-and-holders

BlackRock Inc. this week combined its mutual fund and exchange-traded-fund sales teams to create the largest sales force in the asset management industry. The sales juggernaut of 275 will be a mix of generalists who focus on combining actively managed mutual funds and passive index ETFs in an asset allocation mix, and specialists who will focus on a particular area such as ETFs and alternatives. Financial advisers are “using both mutual funds and ETFs, and what they want is to have a more wholesome conversation about how to use both in their asset allocation,” said BlackRock president Robert Kapito during the firm's third-quarter conference call Wednesday. “There's an unmet need in the market for a firm to help advisers build portfolios combining active and indexed strategies,” he said. “This newly combined sales force will be able to fill that gap.” The size of the sales force also will allow BlackRock to cover more ground and reach more advisers, Mr. Kapito said. “We'll have a greater outreach because it takes more time to have those wholesome dialogues,” he said. “And in order to expand our reach, we want to have more people in the field having those direct conversations.” As part of the transition, BlackRock is also taking a stronger approach toward wooing advisers who are less tactical and have a longer time horizon. The centerpiece of that new initiative is a new series of 10 “core” iShares ETFs that cover the basic building blocks of a portfolio such as U.S. large-cap stocks, international stocks and the Barclays Aggregate Bond Index. With more than $525 billion in ETF assets, iShares has long been the leading provider of ETFs. State Street Global Advisors and The Vanguard Group Inc., the next-two-largest providers, combined have about the same level of ETF assets as iShares. iShares has enjoyed success with institutional investors and tactical advisers attracted to its focus on liquidity and trading costs. But the company is losing market share among buy-and-hold investors attracted to the relatively lower expense ratios charged by other firms such as Vanguard. Market share is down to 40% of the $1.3 trillion ETF market, from 48% in 2009, according to Morningstar Inc. These new products are aimed directly at addressing that hole in the iShares lineup, Mr. Kapito said. “ETFs are not one-size-fits-all,” he said. “To be the leader in all investment segments, we need to tailor products and services to different clients' needs. Because investors that seek core portfolio products to buy and hold for the long term value price over other attributes, we have created a suite of products tailored just for them.”