The firm has now come to the conclusion that it is difficult for human managers to beat the market with traditional bets on large U.S. stocks, so the company has shifted its focus and plans to overhaul its actively-managed equities business to put a greater emphasis on computer models that inform investments.
BlackRock is expected to offer up Main Street customers lower-cost quantitative stock funds based on data and computer systems to make predictions, a process typically associated with large institutional investors.
Active management continues to be challenged as indexing and passive ETFs gain momentum and assets at the expense of traditional open-end mutual fund strategies. Investors are no longer paying up for poor performance. Consequently, more money managers and fund providers are changing their way of thinking – If you can’t beat the market, why not buy the market?
By shifting to artificial intelligence or robo-based stock picking strategies, Blackrock does four things: Provides a more disciplined strategy to stock picking that may not have be adhered to by their portfolio team. Keeps future performance more in line with benchmarks. Reduce cost and head count for portfolio management. Increase savings, which will be passed on to shareholders in the form of lower expense ratios.
The days of the portfolio manager are numbered.
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