BlackRock pushes deeper into private markets with purchase of ElmTree

BlackRock (BLK) pushed deeper into private markets Monday with another acquisition.

The world’s largest asset manager said in a release it struck an agreement to buy commercial real estate firm ElmTree Funds, based in St. Louis. The purchase price wasn't disclosed, but the deal is expected to close within the next three months subject to regulatory approvals.

The deal gives BlackRock a firm that has $7.3 billion in assets under management and leases over 250 commercial properties to single tenant renters across the US. It specializes in "build-to-suit" industrial real estate facilities.

It is the latest attempt by giant money manager to broaden its holdings of private assets as CEO Larry Fink seeks to diversity and remake his New York financial institution.

BlackRock in the last year has spent more than $28 billion on related acquisitions, including infrastructure investment firm Global Infrastructure Partners, private markets data provider Preqin, and private credit firm HPS Investment Partners. The HPS acquisition closed last week, on July 1.

The money manager said it will tie ElmTree into its new private finance solutions unit formed with the HPS purchase.

“Structural shifts in the real estate sector are creating new opportunities for private capital," Scott Kapnick, CEO of HPS and chairman of BlackRock’s private finance solutions unit, said in a statement.

Fink has touted BlackRock’s shift to private markets as a strategy aiming to give its customers better returns than the traditional 60/40 stock and bond portfolio.

“The future standard portfolio may look more like 50/30/20 — stocks, bonds, and private assets like real estate, infrastructure, and private credit,” Fink wrote in his annual shareholder letter back in April.

Along with its push into private markets, BlackRock is also among a number of big Wall Street money managers now pushing for private assets to be added into retirement savings accounts.

Last month, the money manager announced plans to launch a target-date fund holding private equity, credit and other investments that will be offered by Great Gray Trust.

More recently, the US Securities and Exchange Commission’s Office of the Investor Advocate said in a report it will look into the use of private equity and other alternative investments in retirement accounts.

BlackRock estimates that its emerging approach to offer 401(k) holders private assets could deliver 15% more money in those savers' accounts over 40 years, according to a June paper.

When compared to BlackRock's major business of offering investors public stocks and bonds through low-cost mutual funds, analysts see private asset management as generating higher margins.