A few weeks into the new year, BlackRock staff received an email from CEO Larry Fink and President Rob Kapito.
“Today we are announcing a series of changes,” the memo began. These weren’t changes at the portfolio management level or any major overhaul in investment philosophy. Instead, the email detailed a large restructuring of the firm, complete with leadership changes and business expansions.
In summary, according to Fink and Kapito: “A deliberate and consistent approach to reshaping our organization to maximize the full power of BlackRock.”
“It’s an outcome-based world now. The demands investors are making are less tied to specific products.”Not a month later, TIAA—then TIAA-CREF—issued a press release announcing a reorganization of its own: A spin-out of its real estate, agriculture, timber, infrastructure, and energy teams into a single, standalone real assets division.
“This model will allow us to more effectively develop all aspects of our real assets business so that we can best leverage our distinct expertise in this space and better serve our investors,” said Jose Minaya, the newly appointed president of the unit.
Then in April, Fortune reported another major asset manager was undergoing a makeover: Bain Capital. Though firm spokespeople remain tight-tipped about the restructuring, Bain’s website reflects the changes: A rebranding of subsidiary funds under the Bain Capital name, along with a reorganization of firm leadership.
Three examples, as the journalism cliché goes, make a trend story—but are these three reorganizations actually indicative of a larger pattern?
“It is a trend that we’ve noticed,” said Jeff Stakel, partner at investment management consulting firm Casey Quirk.
As an industry consultant, Stakel said he has seen several revamps take place recently—including at some of the managers his firm advises. This wave of reorganizations, he explained, is reflective of another change taking place in the industry: A shift in the needs of investors.
“It’s an outcome-based world now,” he said. “The demands investors are making are less tied to specific products.”
Pension plans, for example, want to invest in a way that will ensure liabilities are met. The means to that end—the individual strategies and funds that make up the larger portfolio—are important, yes. But asset owners are more interested in how managers will help them achieve their mission than they are in any single product.
“The notion of saying you’re a leader in a specific sector or strategy doesn’t resonate as much,” said Keith Brown, managing director at Accenture Asset Management. “Managers are essentially taking a more holistic look and delivering solutions and capabilities that address what investors are looking for.”
Bain Capital logos past and presentHow firms become more holistic in their approach varies by manager. In some cases, it can mean a simple rebrand—Bain renaming Sankaty Advisors and Brookside Capital as Bain Capital Credit and Bain Capital Public Equity, for example.
“It makes marketing sense for many large global asset managers who have multiple brands to consolidate and support one strong global brand,” said Bill Haynes, CEO of financial services marketing firm BackBay Communications. “And by reorganizing around the master brand it may help to foster internal collaboration, to enable a greater ability to address a range of client investment needs, and to cross-sell products.”
BlackRock took its rebrand a step further, condensing its offerings into more concentrated units. Fundamental and quantitative equity strategies combined into a single active equity platform, while infrastructure and real estate businesses became a single real assets group—just as they did at TIAA.
“These changes will create more opportunities for collaboration across strategies and regions,” Fink and Kapito wrote.
Another way firms can target “collaboration across strategies”? A management overhaul.
At Bain, Global Head of Private Equity John Connaughton and Bain Capital Credit CIO Jonathan Lavine were promoted to co-managing partners, giving them oversight of the firm as a whole in addition their individual units. Private equity managing directors Josh Bekenstein and Steve Pagliuca also became co-chairs, taking on a similarly expanded leadership role while retaining their investing responsibilities.
“Managers are rethinking the structure they have to face off to the market,” Stakel said. “They reorganize so the professionals facing off can speak to more capabilities than a single specialty item.”
But whatever a reorganization entails, all restructurings come down to the same purpose: To better serve the needs of investors.
“It’s truly driven by the desire for a better relationship,” Stakel said. “Branding and marketing work well in some channels—but if there’s not a credible investing story, a strong brand won’t make a firm a winner. The shifts are truly driven by changes in the market.”
Related: TIAA-CREF Reveals Reorganization & The New-Look BlackRock: All Change for Equities, Bonds, Real Assets