BlackRock, the American investment funds giant, has decided to make a move into the private markets.
The firm is raising a $10bn fund, the Wall Street Journal first reported, which will invest directly in unlisted businesses. It is understood that the investment period will generally be longer than an average private equity fund, and will be similar to Warren Buffet's Berkshire Hathaway.
Yet the move will still put BlackRock in direct competition with Wall Street private equity stalwarts such as Carlyle, Apollo Global Management and Blackstone, the firm it spun out from in 1994.
BlackRock has been far from unsuccessful during its own independent lifetime, as it crossed the $6 trillion assets under management mark at the end of last year.
Yet investment giants are being forced to innovate as they fight for client cash. Investors are increasingly demanding to do more business with fewer managers, meaning firms such as BlackRock must broaden their offering.
The boisterous play from BlackRock implies the firm has not become complacent, despite benefiting more recently from the rising popularity of cheap "passive" funds which simply track an index.
Choosing to reduce reliance on tracker funds may prove to be a canny move, especially given some market players' fears that – should a market downturn approach – investors will rush to active strategies and alternative asset classes such as private equity to beat the fall.
Sources told the Wall Street Journal that BlackRock is hoping to gather $10bn from sovereign wealth funds, pension funds and other "big investors". The new vehicle will likely take minority stakes in companies, and is being overseen by Mark Wiseman.
The firm has also hired Andre Bourbonnais, the chief executive of Canada’s Public Sector Pension Investment Board, to lead the new fund.
Unlike most private equity funds, BlackRock's will take investors' cash at the beginning rather than drawing down commitments over time, and will reinvest the proceeds to avoid completing further fundraisings.