BlackRock vs Blackstone

Investing is a complex science. While many private investors have success planning their own portfolios, others need more hands-on help. Some may turn to investment firms.

BlackRock and Blackstone are two of the largest investment firms in New York. Although they have similar names, they’re managed by different parties, and each has a unique service to offer clients.

Which investment firm is better for you? This post will break down the ongoing BlackRock vs Blackstone debate.

What is BlackRock?

BlackRock originated in 1988 as an asset management company for institutional investors.

At first, it was part of Blackstone Financial, according to Blackstone founder and CEO Steve Schwarzman. When Larry Fink decided to break his company out from under Blackstone’s name, he and Schwarzman came up with the name “BlackRock” with tongue firmly in cheek.

BlackRock is the biggest investment manager in the world. It serves institutional and individual investors. BlackRock originally specialized in fixed-income investments like bonds and mortgage-backed securities. It also owns and manages the iShares line of exchange-traded funds (ETFs).

Today, BlackRock also provides expertise on mutual funds, ETFs and alternative investments. The company prioritizes risk management, counseling its clients with sophisticated tools to limit adverse exposure. As of Q2 2024, BlackRock’s assets under management (AUM) totaled more than $10.6 trillion.

Pros of BlackRock

• Investor accessibility: BlackRock works with institutional and individual investors, meaning both professional and casual investors can benefit from its expertise.
• Diverse options: BlackRock covers the entire range of investment opportunities, including stock portfolios, mutual funds, ETFs and other vehicles. A diverse portfolio lessens overall risk for public and private investors.
• Focus on the long view: BlackRock’s experts concentrate on an asset’s long-term potential for growth. For clients, this heightens the possibility of increased profits via compounding returns.
• User-friendliness: With strong attention to client accessibility, BlackRock simplifies the investment process as much as possible. It provides easy-to-use tools for clients to manage their holdings.

Cons of BlackRock

• Limited focus on alternative investments: BlackRock earned its keep through traditional investment strategies like stocks, bonds and funds. It does have a division, BlackRock Alternative Investors (BAI), that covers some private investments. However, BAI works almost exclusively with institutional investors.
• Too big to ignore: BlackRock’s standing as the largest investment firm in the world may mean it has an outsized influence on the stock market. While that could work to its clients’ advantage, it may work against others.

What is Blackstone?

Blackstone was founded in 1985 by former employees of Lehman Brothers (including Schwarzman). Its original focus was on mergers and acquisitions. Blackstone has evolved into the world's biggest private equity firm and alternative investment strategy company.

Blackstone is one of the key drivers of private equity financing, having invested in healthcare, technology, energy, media and other companies. As the firm has grown, it’s expanded its holdings into commercial real estate, developed hedge fund solutions and provided loans through its credit division.

Working exclusively with private entities, Blackstone has more managerial and structural influence on the companies it invests in. The total value of the assets it manages is estimated at more than $1 trillion.

Until recently, Blackstone’s clients were exclusively institutional investors. In the last couple of years, however, the firm has shifted its focus to high-wealth individual investors.

Pros of Blackstone

• Alternative investment expertise: Blackstone’s experience with alternative investments is unrivaled. The firm has helped institutional investors find private opportunities that aren’t offered through the stock market.
• Hands-on management: Blackstone tends to have considerable influence on the private companies it invests in. Advising on everything from operational efficiency to organizational structure, Blackstone has a direct hand in its investments’ profitability.
• Great timing: The firm’s close attention to market trends and factors gives it the uncanny ability to buy and sell for profit. It especially excels in bull markets, when its strategic unloading of assets puts big money in investors’ pockets.
• Global reach: Blackstone has a heavy presence on the global financial scene. It’s able to find alternative investments in sites around the world, a very rare position for an investment firm to be in.

Cons of Blackstone

• Near-exclusivity to wealthy clients: After years of working with institutions, Blackstone only recently started working with individual investors. However, all Blackstone clients must have enough capital to fund its high-risk, high-reward investments.
• Low liquidity: Since Blackstone works with alternative investments that don’t trade on public exchanges, the assets aren’t very liquid. When an investor has to wait a long time for their transaction to process, they may not have a chance to capitalize on sudden opportunities.

Comparing BlackRock vs. Blackstone

How do these investment firms stack up? Let’s take a look.

Company Structure

BlackRock is headed by its Global Executive Committee, with its board of directors and leaders close behind. This group includes founder, long-time Chairman and CEO Larry Fink. BlackRock employs over 16,000 people across the world.

Blackstone divides its operations into four sectors: real estate, private equity, credit and insurance and hedge fund solutions. These divisions are run by senior managing directors, who are overseen by a group of six executives. One of them is company founder and CEO Steve Schwarzman.

Investment Strategies

BlackRock deploys several investment strategies, according to its website. Its primary tools include risk factor investing, global tactical asset allocation and index fund strategies. BlackRock touts its customization abilities, flexibility and enhanced scale in its investment approach.

Per its website, Blackstone’s concentration on alternative investments requires an emphasis on “fast-growing sectors.” These include tech, life sciences and sustainability-focused firms. Its approach also includes more hands-on management of the firms it funds.

Performance and Track Record

BlackRock's Q2 2024 Earnings Highlights:

• EPS: Reported diluted EPS of $9.99 ($10.36 adjusted).
• AUM: Total assets under management reached $10.6 trillion, a $1.2 trillion increase year-over-year.
• Revenue & Income: Revenue increased by 8% year-over-year to $4.805 billion. Operating income rose by 11% year-over-year (12% adjusted).
• Net Inflows: Achieved $82 billion in quarterly total net inflows and $139 billion in first-half total net inflows.
• Share Repurchases: Conducted $500 million in share repurchases during the quarter.
• Acquisitions: Announced the acquisition of Preqin and Global Infrastructure Partners.

CEO Laurence D. Fink emphasized strong organic growth, innovative private market capabilities, and expanded ETF and active investment solutions.

In comparison, Blackstone reported strong results for the second quarter of 2024, with:

• High Investment Activity: They saw nearly $40 billion in inflows and $34 billion deployed, marking the highest level in two years.
• Future Growth Potential: Blackstone highlights their early efforts in promising markets, particularly digital and energy infrastructure supporting AI.

Clientele and Target Markets

Traditionally, BlackRock and Blackstone have emphasized institutional investors — pension funds, insurance companies, endowments and so forth. In recent years, both companies have started initiatives to draw in individual investors.

However, private investors need to have large cash reserves or resources to work with them, particularly Blackstone.

Impact on the Industry

BlackRock and Blackstone are titans in the investment field.

As the number one investment firm in the world, BlackRock’s influence on the market can be staggering. But Blackstone’s position as the leading alternative investment firm has given it sway in some of the newest, most promising future industries.

BlackRock vs. Blackstone: Who Wins?

BlackRock and Blackstone both deliver real results to their clientele. Most of their clients tend to be institutions and super-wealthy individual investors. It’s uncertain how casual investors may interact or thrive with either firm.

The big difference between the two groups is the investment vehicles they choose. BlackRock works largely with traditional market vehicles like stocks, bonds and ETFs. Blackstone focuses on alternative investments that aren’t widely available to the public but could generate huge profits in the future.

If you can afford to play and have a high risk tolerance for new industries, Blackstone may be the firm for you. But if you want proven results with slightly safer commodities, BlackRock is the better choice.

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