Will BlackRock's Private Markets Push Continue in 2025? Let's Find Out

BlackRock (BLK) has recently captured attention as its shares soared to an all-time high of $1,082.45. This shares surge has prompted discussions about whether BlackRock's aggressive expansion into private markets will persist in 2025.

Throughout this year, BlackRock's stock has appreciated by 31.3%. This climb is notable when compared to the overall performance of the Zacks Investment Management industry, which has risen by 51.8%, and the S&P 500 Index, which has shown a 28.6% increase.

Acquisitions Driving BlackRock’s Private Markets Push

BlackRock has been active in securing acquisitions in 2023. Notably, this month, the company announced a significant agreement to purchase HPS Investment Partners for approximately $12 billion. Earlier in October, BlackRock completed its acquisition of Global Infrastructure Partners (GIP), a premier infrastructure management firm, a deal that was first disclosed in January.

In addition to GIP, BlackRock also agreed to acquire London-based Preqin in June, a respected provider of data within the private markets milieu, spending around $28 billion total on these initiatives this year. These acquisitions serve to expand BlackRock’s Aladdin technology framework into the burgeoning field of private markets data.

Furthermore, back in May, BlackRock purchased SpiderRock Advisors LLC, enhancing its offerings with option overlay-based strategies for separately managed accounts (SMAs). This acquisition complements the earlier Aperio acquisition from 2021, enhancing BlackRock's SMA offerings to better meet diverse client needs.

Strengthening iShares and ETF Operations

The broad range of products, diverse revenue channels, and improving assets under management (AUM) position BlackRock for continued revenue growth. The company’s strategy of growth through acquisitions has been instrumental, resulting in a five-year AUM growth rate of 10.9% from 2018 to 2023.

During the same timeframe, BlackRock's revenues have seen a compound annual growth rate (CAGR) of 4.7%. This positive trajectory is anticipated to continue, fueled by BlackRock’s bolstered iShares and ETF operations, including approvals for spot Bitcoin and ether ETFs, alongside a greater emphasis on active equity strategies.

Moreover, the Federal Reserve's anticipated interest rate reductions are expected to support BlackRock's organic growth goals. Recent excitement regarding Bitcoin, especially in the aftermath of elections, has also played a significant role in fueling growth, with inflows into the company’s spot Bitcoin exchange-traded fund (ETF) helping the iShares Bitcoin Trust surpass $40 billion in assets merely ten months after its launch in January.

Analysts Show Optimism for BLK

Analysts are projecting a positive outlook for BlackRock, as indicated by increasing earnings estimate revisions for both the current and subsequent years. These upward revisions reflect a confidence in the company’s future performance.

BlackRock's Valuation Concerns

Despite the impressive rise in BLK shares, the stock appears overvalued compared to its industry peers. Currently, BlackRock trades at a forward 12-month price-to-earnings (P/E) ratio of 22.27, which surpasses the industry average of 19.18, indicating a potentially stretched valuation.

Opportunities in Private Markets

Looking forward, BlackRock anticipates significant growth in the global private credit market, currently estimated at $1.5 trillion, expected to grow to $4.5 trillion by 2030.

Once the acquisition of HPS Investment wraps up in mid-2025, it is projected that BlackRock will manage around $220 billion in private credit assets. Competitors in the alternative asset management industry, such as Apollo Global Management, Blackstone, and Ares Management, have significantly more substantial operations in this space, with AUM figures as of September 30, 2024, showing $598 billion at Apollo, $335 billion at Ares, and $432 billion at Blackstone.

As BlackRock taps into this sector, it aims to uncover substantial growth potential while delivering unmatched data and analytics solutions. The integration of HPS Investment, Preqin, and GIP data with BlackRock’s alternative asset management platform eFront is anticipated to enhance revenue opportunities considerably.

Additionally, BlackRock's solid balance sheet, healthy AUM figures, and strategic expansion alongside collaborative partnerships provide a robust framework for future growth. With expected interest rate reductions from the Federal Reserve, the company is poised to enhance its AUM through diversified offerings.

However, potential investors should approach BlackRock with caution due to its elevated valuation and carefully monitor how its private markets strategy unfolds over time. Presently, the stock holds a Zacks Rank #3 (Hold).

BlackRock, Acquisitions, Growth