Mark Wiedman, who oversees the world’s largest lineup of exchange-traded funds at BlackRock Inc., cut fees and forged a partnership with Fidelity Investments to attract more individuals to his iShares ETFs.
Now he’s courting insurers, pension funds and other large clients, offering the products as a simpler substitute for derivatives and single securities at a time when Wall Street’s retreat from trading reduces liquidity. That change, Wiedman says, will transform how institutions invest.
“That is where we have the most market transformation ahead,” Wiedman, a 43-year-old Long Island native and head of iShares since 2011, said in a May 28 interview at Bloomberg News’ New York headquarters. “It’s also the most intellectually interesting and disruptive.”
BlackRock, which burst into the $2.6 trillion ETF industry through its 2009 acquisition of Barclays Plc’s investment unit, is taking a different approach than competitors as it seeks to extend its dominance in the fastest-growing segment of the money-management business. Unlike Vanguard Group Inc., which focuses on low-cost ETFs for mom-and-pop investors, or State Street Corp., which targets mainly institutions, BlackRock’s iShares is the only ETF provider fighting for every major type of customer -- and some minor ones.
Wiedman, part of BlackRock’s global executive team of some two dozen leaders headed by Chief Executive Officer Laurence D. Fink, is chasing institutional investors who’ve been slow to warm to ETFs. He’s fighting back against Vanguard’s drive to dominate retail sales in the U.S. and U.K., and he’s targeting niche investors who’ve taken to more expensive, specialized products focused on narrow slices of the market. And that’s making iShares a bigger, more lucrative part of BlackRock.
Fee Growth
ETFs accounted for 21 percent of BlackRock’s $4.4 trillion in assets as of March 31, and 31 percent of investment advisory fees. That’s up from 16 percent of assets and 26 percent of fees in the quarter when he took over in September 2011.
Wiedman compares the advent of ETFs to the use of shipping containers back in the 1950s, which cut the cost to bundle and deliver goods worldwide. Investors are increasingly realizing how easy ETFs are to use, he said.
“Simplicity is seriously underestimated,” Wiedman said. “When you buy an ETF, one trade, you’re done.”
At the top of Wiedman’s target list are insurance companies, pension funds and banks that still buy individual stocks and bonds. He cites a client who recently dumped a fixed- income manager and replaced 2,200 individual bond holdings with positions in two ETFs. Another client, a French insurer, put $400 million in an ETF that invests in U.S. Treasuries, a trade it would normally do through an interest-rate swap.