Aladdin: BlackRock’s Fintech Genie must protect funds from groupthink

BlackRock is known as the largest asset manager in the world, with over $ 10tn of assets under management. But the company is also an under-the-radar fintech. Aladdin – the portfolio management technology platform – now uses many big names in the investment industry.

Aladdin’s steady growth and reliable revenue have contributed to Blackrock’s overall rise. Despite falling 18 percent this year, the stock has continued to trade at a premium to most financial services stocks.

Aladdin Finance Assets, Liabilities and Debt and Derivatives Investment Network. The business started out as an internal risk management tool. It has become an operating system that integrates risk analysis, portfolio management, trading and accounting tools. Users range from portfolio managers to compliance officers.

Aladdin accounted for the lion’s share of the 1. 1.3 billion in revenue reported by BlackRock’s technology services unit last year. The number nearly doubled from four years ago and represents about 7 percent of the total group.

BlackRock thinks the addressable market for Aladdin could be $ 10 billion. There is pressure on fund managers to flow. Technology costs are rising. Aladdin should benefit. It has further expanded its eFront acquisition capacity to 1.3 billion in 2019. It can now provide analytical tools to large organizations for both private and public holding.

Aladdin would be in danger if it became an industry standard system for US fund managers. If most large investors use the same risk metrics they may make the same mistake, increasing systemic instability.

This argument echoes the parallel critique of Blackrock’s own heft as the world’s largest asset manager.

BlackRock reposts that Aladdin can be easily customized. Unless a large number of users modify the system’s risk management structure to suit their specific needs, common errors should be minimized. Furthermore, the system should be a range of risk control.

However, people have an innate tendency for group thinking. The solution for BlackRock is to create enough chaotic choices between Aladdin to prevent pastoral behavior – and to enhance their games for competing system developers.