BGI is also going to have a piece of BlackRock: once the deal is final, Barclays will own nearly 20% ofthe firm. Bank of America will own 34.2%, and PNC will own 24.6%. Both the CEO and president of Barclays will take seats on BlackRock’s board.
An Evolving Industry
BlackRock’s purchase of BGI’s asset management arm and iShares is another signal of the changing face of the ETF industry – we’re seeing more and more mutual fund giants entering the ETF space in some way. Last month, Pacific Investment Management Company (PIMCO) entered the ETF business with the launch of PIMCO 1-3 Year U.S. Treasury Index Fund (TUZ).
In the United States, retail investors are rapidly growing in both size and market activity, in terms of ETF transactions. That’s based on research by Deborah Fuhr, the global head of ETF research and implementation strategy at Barclays Global Investors. Fuhr says, however, that institutional investors still make up the majority of the business.
This could be changing as individual investors exit their cash positions and re-enter the markets when the recovery gets on more solid ground. Retail investors are a growing force that can’t be ignored, and it’s hoped that BlackRock will recognize that.
The $5 billion bid, investors feel, smacks of an expansionist mindset that opposes Vanguard’s core mission. Further, investors are upset that Vanguard didn’t communicate with shareholders about its iShares interest. Joe Morris for Ignites posits that perhaps Vanguard founder Jack Bogle was opposed to the bid as well. Bogle won’t say for sure, but he did say that he prefers to see Vanguard grow organically instead of by buying market share.
Vanguard is already a strong force in the ETF business. It’s the third-largest ETF provider with about $51 billion in assets (although its ETF business is just 5% of the firm’s total assets).