BlackRock Integrates Private Markets Software with Aladdin

BlackRock is continuing to integrate eFront, the alternative investment management software and solutions provider that it acquired a year ago, with the aim of providing clients with the ability to manage portfolios and risk across public and private asset classes on a single platform.

The integration project involves three streams, said Sudhir Nair, global head of BlackRock’s Aladdin business, was speaking during the Morgan Stanley Virtual US Financials Conference on June 10.

First, the firm will continue to sell eFront as a standalone offering for private markets-focused clients. Second is the technical integration of Aladdin, BlackRock’s flagship trading platform, with eFront for clients that want to buy both, Nair said. 

“We have created something called the ‘whole portfolio’ view, which is really a risk management view that blends risk exposures and performance, and public and private assets in one place. It brings the data from eFront together with the risk-modeling capabilities of Aladdin. That’s a capability that’s out in the market today—we have clients using it actively,” he said.

The third area of focus involves leveraging eFront within BlackRock itself. Nair said it is important that the asset manager is not only the provider of the technology, but also its largest user. To that end, the company is implementing eFront across its private markets business.

“Clearly, the data associated with private markets is behind that of public markets. And we think there is an opportunity to make that easier by creating a flow between GP [general partners] to manage investments with LP [limited partners] to invest, and having Aladdin and eFront sit in the center of that ecosystem,” he said. In a private equity context, GPs refer to private equity firms, while LPs are investors such as pension funds and high-net-worth individuals.

Nair said that over the past few years, as investors have faced lower yields and diminishing asset-return profiles, asset managers have seen increasing demand for allocation to alternative assets.

“This allocation went from 5% to 15%, and in some cases closer to 40%. We saw the trend of alternatives becoming more mainstream. And we just feel that alternatives are all of a sudden becoming less alternative.”

However, he said the market has lacked a platform that could integrate public and private assets and allow asset managers to run portfolios on behalf of clients with visibility, transparency, consistency, and scale.

“Aladdin’s roots were in public markets, supporting an end-to-end investment process across risk and portfolio construction and operations for fixed income equities, OTC derivatives, and currencies. Admittedly, the capabilities as it related to alternatives were limited at best,” Nair said, which was why the asset manager acquired eFront.

Aladdin Studio

Robert Goldstein, chief operating officer and head of solutions at BlackRock, said the addition of eFront allows clients to gain a holistic view of their portfolio across liquid and illiquid public and private market instruments.

He added that BlackRock is seeing demand for interoperability with asset servicers, trading venues, and market data providers. “We are seeing that demand continue to grow on this ever-aspiring quest for true straight-through processing, consolidating the number of systems that people use to do their jobs to manage their processes, and, importantly, to maintain optionality in their counterparty relationships,” he said.

One way Aladdin was meeting the demand for increased interoperability was through Aladdin Studio, a suite of tools focused on integration and collaboration. Goldstein said this allowed clients to build apps directly on top of Aladdin.

“These Aladdin APIs, as they’re used by developers at BlackRock [and] our clients within the Aladdin community, are providing building blocks to create custom applications and integration tools for solving what may be their own idiosyncratic workflows,” he said.

It also allows BlackRock to embed content from Aladdin and other applications directly into the platform, Goldstein added.