BlackRock looks to expand Aladdin through accounting, data capabilities

BlackRock’s flagship investment management platform, Aladdin, has come a long way since its inception in 1999, and senior executives signaled their intention to increase investment and create even more capabilities within the software suite.

Speaking at BlackRock’s 2023 Investor Day on June 14, Sudhir Nair, global head of the Aladdin business, said the asset manager’s strategy for Aladdin is to bring clients an integrated platform in a way that no other tech provider or financial institution can.

“It will be risk management, it will be the investment book of record, it will be performance, it will be accounting, and it will be the data surface,” Nair said.

Aladdin’s accounting capability is currently being built out in response to what Nair called the need to bring together the information demands of the chief investment officer and the CFO through a single set of data.

Industry headwinds such as shrinking margins, inflation fears, and regulatory pressures are squeezing investment managers. At the same time, banks, asset managers and exchanges are all rapidly expanding into the cloud. On top of that, end-users are becoming increasingly comfortable with the idea of not just taking from the open-source community, but contributing to it. End-users and vendors are also increasingly embracing APIs as the preferred way to connect to data sources. So it is that data is easier to acquire, store and analyze, but providing actionable insights into that data—whether for trading, risk, settlement, or cyber—is becoming increasingly important. And it’s easier to provide context if systems are interoperable and if AI is used to help in these efforts, which can be seen by the rise of large language models and generative AI.

The convergence of these technological evolutions is leading trading firms to look for vendor solutions that can serve more as one-stop shops. BlackRock’s clients are looking to do more with less—and hopefully, said Nair, this strategy of continued expansion for Aladdin will satisfy that need, as well as capture more market share for the platform, which is used by more than 200 financial institutions already.

Even clients who already employ Aladdin for several trading functions have other complexities to manage, such as accounting books of record and data warehouses—which are expensive to build, maintain, and interoperate with other internal systems. Nair envisions Aladdin remedying these, as well.

“So much of the strategy with respect to accounting and data is all about just solving for more of that surface area,” he said. “And we see a world where having three books of record, three sources of truth, just isn’t going to work. It isn’t going to work in a world where everything is converging … [and] where markets are moving fast, and alpha is going to come by your ability to bring that data forward and put it in the hands of your investors.”

Nair also detailed Aladdin’s ongoing effort to pioneer new analytics in emerging fields such as climate risk. He cited the recent Canadian wildfires that turned skies as far south as Washington, DC, orange last week. Clients can now use Aladdin’s climate risk models to understand the potential impact on their portfolios’ physical assets as a result of the fires.

Getting by with a little help from friends

BlackRock also announced a new strategic partnership with Swiss banking tech provider Avaloq, which Nair said will be integrated with Aladdin Wealth’s portfolio management and risk technology to bring the wealth management industry a differentiated set of solutions powered by BlackRock Platform-as-a-Service. BlackRock took a minority stake in the fintech company.

With regards to M&A more broadly, Nair said Aladdin stays “very active” and that the world’s largest manager continues to be focused on creating new partnerships and searching for inorganic growth opportunities to round out its capabilities.