BlackRock, a large investment management firm, has announced its intention to launch a separate business line targeted at the asset management community in BlackRock Solutions, through which it will actively market, implement and manage its proprietary investment management tools as an ASP provider.
BlackRock developed its Risk Management Services Bureau and Investment Management Enterprise systems a number of years ago when, according to BlackRock President Ralph Schlosstein, the company could not find software designed for "running money on a very tightly controlled risk-management basis" in the open market. Schlosstein says BlackRock employees got to work and built it themselves. Once word of their successful technology got out, Schlosstein says firms started coming to BlackRock, looking to gain access.
The Enterprise Investment System integrates risk analytics and a trade processing system to deliver what is just short of straight-through processing. But, according to Schlosstein, when dealing with some institutions there is no way BlackRock can make transactions totally paperless. "The only reason it is not complete straight-through processing is because part of our process is to interact with custodial banks, and some of them are electronically enabled and some of them aren't so electronically enabled," says Schlosstien. The Risk Management Services bureau allows clients to capture data on assets, liability and produce risk management information at the security, portfolio and enterprise levels.
Before they knew it, BlackRock had 20 clients for its software and a burgeoning business with room for expansion. "We believe, based on a fair amount of work that we've done over the last three months, that there's a significant business opportunity out there and a market for the products that we have," says Schlosstein. "So we felt it would be important to create a brand name under which we would really build this business as a second major business for BlackRock."
The decision to offer the systems on an ASP basis went hand-in-glove with the complexity of the software--much training is required to fully leverage the technologies--and the changing nature of the capital markets, says Schlosstein, that makes keeping in touch with customers on a regular basis essential.
Though some institutions that decide to use the systems may be BlackRock competitors, Schlosstein says, BlackRock Solutions might as well get the business and provide it in one integrated system, much different from the way firms are satisfying their technology needs today. "They are buying somebody's compliance system, they are buying somebody's trading system, and they're buying somebody's back-office system, and their piecing them together," says Schlosstein. "Somebody is going to sell them an operating system, so why not have it be our business?"
Schlosstein says that companies that sign on will pay a monthly fee based on the number of portfolios they manage and the aggregate assets of the institution--contracts will usually run a minimum of three years. Schlossetin adds, "Our biggest challenge, to be perfectly blunt, is to queue up the interested parties that we have, because we have more interest today that we have capacity to implement immediately."