BlackRock’s acquisition of Preqin confirms and illustrates the direction of financial markets, wrote SP Angel, a UK-based corporate finance specialist.
“BlackRock appear to be following the money and are moving into areas where greater returns and fees can be generated away from the regulatory cost and administration of public market regulators,” the broker wrote.
One of the commentary points noted that “short selling, while sometimes aiding liquidity, is seen as damaging listed equities with the growth of expert short sellers and death-spiral convertibles.”
SP Angel noted that:
- The £2.55 billion ($3.2bn) deal for the private markets valuation and information provider gives BlackRock a commanding position into the growth of ‘unquoted’ companies.
- BlackRock also acquired Global Infrastructure Partners in January for $12.5 billion. GIP invests directly in infrastructure assets along with GIP Atlas, a SEC-registered investment adviser.
- Fund management fees have seen a race to the bottom with zero or near-zero fees on index and passive funds.
- The cost of increasing regulation and reporting requirements on funds is pushing managers into ‘unquoted’ companies
- Regulatory and administrative costs are also forcing more companies away from IPOs and listed markets.
- Valuations can be ‘managed’ away from regulatory oversight. This is particularly evident in the Pharmaceutical sector where valuations are shaped higher while fishing for M&A.
- Regulatory focus on reducing risk for portfolio managers continues to reduce the funds available growth companies.