BlackRock’s Ambitious Expansion into Illiquid Assets Raises Industry Doubts

Industry observers are casting doubt on BlackRock’s plans to expand the exchange traded fund industry into the world of illiquid private assets following its acquisition of Preqin. BlackRock’s acquisition of Preqin, a UK-based private markets data group, for $2.55 billion has raised concerns about the compatibility of illiquid private assets with ETFs, which offer daily and intraday pricing and liquidity. While the acquisition will aid in valuing private assets, the challenge of asset illiquidity remains unsolved.

Despite BlackRock signaling its intentions to bolster its private market offerings with acquisitions like Global Infrastructure Partners, skeptics in the industry remain unconvinced of the viability of incorporating illiquid assets into ETFs. Industry experts question the feasibility of translating Preqin data into ETFs and addressing concerns over liquidity mismatches in funds as regulators adopt a stricter stance.

A potential approach for BlackRock could involve using Preqin’s data to replicate the returns of private investment strategies with liquid, listed instruments. However, doubts persist regarding the practicality and cost-effectiveness of such a strategy, with concerns about diluted returns and additional layers of fees. The industry anticipates further innovation in the ETF space as firms explore new ways to package and monetize diverse investment strategies.