Blackrock bets big on power of machines to trump fund managers
A surge in passive investing, such as exchange-traded funds and index funds, has changed the investment world forever, and is leaving traditional stock pickers behind. BlackRock announced it is replacing around 15% of its stock pickers with algorithms and mathematical models, marking the most direct action by a major fund management company in reaction to the exodus of investors from actively-managed stock funds to cheaper funds that track every variety of index and investment theme. It also signals an end to the cult of brainy mutual fund managers that were popularised in the 1980s and 1990s.
Score one for the machines.

The largest fund company in the world, BlackRock, has faced a thorny challenge since it acquired the exchange-traded-fund business from Barclays in 2009.

These low cost, computer-driven funds have exploded in growth, leaving in the dust the stock pickers who had spurred an earlier expansion for the firm. The rise of passive investing — exchange-traded funds, index funds and the like — has revolutionized the investment world, providing Main Street investors with greater opportunities at lower fees while putting pressure on even Wall Street’s biggest money managers.

Now, after years of deliberations, Laurence D. Fink, a founder and chief executive of BlackRock, has cast his lot with the machines.

On Tuesday, BlackRock laid out an ambitious plan to consolidate a large number of actively managed mutual funds with peers that rely more on algorithms and models to pick stocks.