BlackRock keeps its foot on the private-markets pedal with another acquisition

🗝️ Key Points

• BlackRock's new acquisition pushes the asset manager one step deeper into private markets.
• The news The asset management giant on Monday announced an agreement to buy ElmTree Funds, a real estate investment firm that manages roughly $7.3 billion in assets.
• ElmTree, which leases commercial properties to single-tenant renters, will be integrated into BlackRock's new group called Private Financing Solutions.

BlackRock’s new acquisition pushes the asset manager one step deeper into private markets. The news The asset management giant on Monday announced an agreement to buy ElmTree Funds, a real estate investment firm that manages roughly $7.3 billion in assets. ElmTree, which leases commercial properties to single-tenant renters, will be integrated into BlackRock’s new group called Private Financing Solutions. The PFS unit is home to private credit manager HPS Investment Partners, which officially Became part of BlackRock last week following the closure of the $12 billion acquisition . “Our specialized bricks-and-mortar expertise will be augmented by HPS’s ability to provide financing and other solutions that fuel the corporations and developers driving the economy forward,” ElmTree founder and CEO James Koman said in a statement. HPS CEO Scott Kapnick added that, “Structural shifts in the real estate sector are creating new opportunities for private capital.” The acquisition is expected to close in the third quarter of 2025 and is subject to regulatory approval. BlackRock shares rose modestly Monday, hitting an intraday record high of almost $1,087 apiece, following the news. The stock was bucking the broader market, which dropped Monday after finishing last week at a record. Big picture This is BlackRock’s latest attempt to broaden its portfolio of private assets, one of the hottest areas of finance. For years, BlackRock has been known for its popular index business, which manages trillions of dollars and makes up a significant portion of its revenues. The firm has profited immensely as an industry leader for ETFs through its iShares family of funds, but management has been trying to reinvent BlackRock and diversify its revenues into other areas. Deals have been a big part of that. The company has spent over $28 billion on private-markets acquisitions since the start of 2024. In addition to HPS, BlackRock also bought alternatives data provider Preqin and infrastructure investment firm Global Infrastructure Partners . With HPS now finalized, all three firms are now part of BlackRock. During BlackRock’s investor day, President Rob Kapito described 2024 as one of the most “transformative” periods in the firm’s history. He also struck an optimistic tone about its future growth drivers such as private markets. “The best of BlackRock is still ahead of us,” Kapito told investors in June. By 2030, BlackRock aims for its private markets and technology businesses to account for at least 30% of its revenue, up from less than a fifth at the end of last year. BLK YTD mountain BlackRock (BLK) year-to-date performance Bottom line Acquiring ElmTree Funds isn’t a needle-moving deal for BlackRock’s bottom line yet — but we like what it says about the firm’s strategic focus. Consider: BlackRock manages over $11.5 trillion in assets, compared to ElmTree’s $7.3 billion in assets. (On the flip side, that means we’re not worried about any dilution from the all-stock deal either, given the size of the transaction.) Nevertheless, the venture underscores management’s push into the fast-growing world of private markets and, in particular, targets commercial real estate. We like the private market expansion because it diversifies BlackRock’s revenue streams further. It will be nice to see when BlackRock’s not quite as reliant on its ETF business, which is heavily influenced by stock market’s volatility. There are already signs that its other acquisitions are starting to pay off. Preqin, for example, added around $20 million to revenue in the first quarter of 2025 — in less than a month of ownership — and contributed to BlackRock’s 30% year-over-year increase in annual contract values. Investors will get an updated look at Preqin’s performance and BlackRock as a whole on July 15, when the asset manager reports second-quarter earnings before the opening bell. (Jim Cramer’s Charitable Trust is long BLK. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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