BlackRock and a hard place

摘要

America's biggest broker outsources its investment management. As vexing problems go, Merrill Lynch has got rid of one that other asset managers would love to have. Its mutual-fund business was highly profitable and the performance of its funds had rebounded after a costly infatuation with the stock-market bubble in the late 1990s. In general, the firm's better returns were leading to better sales. Nevertheless, Merrill's top executives came to the conclusion that the prospects for distributing its proprietary products would always be limited. So the firm decided that it needs to look elsewhere for growth. On February 15th it handed its $544 billion fund operation to BlackRock, a firm that already managed $453 billion. In return, Merrill receives a stake of just under half of the combined firm.