Fund Giant BlackRock Is Out to Unite Public and Private Markets

Asset management has two great kingdoms. The purveyors of mutual funds and exchange-traded funds dominate the first and better-known one. They invest in public stocks and bonds, and their clients are increasingly sensitive to costs. Their most popular products these days are passive index trackers with razor-thin fees, often just a few hundredths of a percentage point of assets each year. But the money managers make it up on volume, selling funds to everyone from big institutions to ordinary people putting a bit of each paycheck into 401(k) retirement plans. The so-called Big Three—BlackRock, State Street and Vanguard Group—are the top holders of almost every stock in the S&P 500.

The second kingdom of asset managers invests in private markets. The markets are smaller and the clients more exclusive, but the fees are much, much higher—closer to 2% a year plus a fat share of profits. The longtime titans of leveraged buyouts, including Blackstone, KKR and Apollo Global Management, rule this kingdom. But now BlackRock Inc., the biggest of the Big Three with $11.6 trillion in assets under management, is making a play to be the first company to really bring these two kingdoms together. Its senior executives talk about becoming a “category of one”—a sort of everything store for money management.