BlackRock aims to double U.S. retail funds by 2014

* Largest money manager aims to double U.S. retail line

* Push is separate from $590 billion ETF line

* Independent advisers a major target of new effort

By Aaron Pressman

BOSTON, April 6 (Reuters) – BlackRock Inc may be best known
for its huge institutional bond accounts and iShares
exchange-traded funds, but the firm is planning a massive
expansion in old-fashioned mutual funds and related retail
offerings.

Already the world’s largest asset manager, New York-based
BlackRock (BLK.N: Quote, Profile, Research) wants to double its $300 billion U.S. retail
business by the end of 2014, Frank Porcelli, managing director
and head of U.S. retail, told Reuters.

“The firm has identified U.S. retail as a strategic
priority,” Porcelli said in a telephone interview. “We think we
can double our business from where it is now.”

The plan makes sense given BlackRock’s relatively smaller
profile in U.S. retail funds compared with some of its other
businesses, analysts said.

At the end of 2010, BlackRock’s $374 billion global retail
segment, including $300 billion in the United States, was
dwarfed by the firm’s $2.2 trillion institutional fund side. It
also trailed the $590 billion iShares ETF business, which
included $450 billion in the United States.

BlackRock ended the year with $3.6 trillion of total assets
under management worldwide — about double the amount its
nearest rivals such as State Street Corp (STT.N: Quote, Profile, Research) and Fidelity
Investments oversaw.

“Historically, it’s never been a big focus,” Greggory
Warren, an analyst at Morningstar in Chicago, said. “There is
definitely potential to expand there especially if they can
piggyback off ETF users who know the BlackRock name.”

After acquiring Barclays PLC’s (BARC.L: Quote, Profile, Research) investment unit in
2009 and Merrill Lynch’s in 2006, along with a series of
smaller purchases to fill in some gaps, BlackRock does not need
to introduce a lot of new funds aimed at different niches,
Porcelli said.

Instead, the firm will increase its marketing effort this
year with a 15 percent increase in staff working for Porcelli.
They will aim for greater sales to brokers and financial
advisers as well as workplace and education savings plans
including 401(k) and 529 plans.

“The 401(k) opportunity is a big one for them,” said Macrae
Sykes, an analyst at Gabelli & Co in Rye, New York. “There is a
chance to take market share from the major players.”

BlackRock will also look to create customized investment
programs that appeal to wealthy investors using separate
accounts instead of mutual funds.

Such efforts might be modeled on a program BlackRock
designed to create customized municipal and taxable bond
portfolios for wealthy clients of UBS. The firm also made an
actively managed asset allocation system using ETFs for clients
of LPL Investment Holdings (LPLA.O: Quote, Profile, Research).

Since BlackRock already has a strong presence at the
largest firms like Merrill, now owned by Bank of America
(BAC.N: Quote, Profile, Research), and Wells Fargo (WFC.N: Quote, Profile, Research), much of the new effort will
focus on the hundreds of thousands of financial advisers
working in small firms or on their own, Porcelli said.

The marketing push could send one of the firm’s most
popular funds, the $53 billion BlackRock Global Allocation Fund
(MDLOX.O: Quote, Profile, Research), to new heights. The fund was the seventh
best-selling mutual fund last year, taking in a net $8.7
billion, according to market researcher Financial Research
Corp.

The fund is overseen by Dennis Stattman, a former
investment officer at the World Bank who came to BlackRock in
the 2006 acquisition of Merrill Lynch’s investment unit. The
fund has gained an average 8.86 percent a year over the past
decade, almost double the return of the FTSE World Index and
two percentage points a year better than the average similar
fund.

“People used to be looking for a large cap value fund and
large cap growth fund and all the other areas,” Porcelli said.
“Now the movement is to unconstrained mandates.”
(Reporting by Aaron Pressman, editing by Maureen Bavdek)

BlackRock aims to double U.S. retail funds by 2014