market folly

We're posting up notes from Invest For Kids Chicago 2014.  Next up is the emerging manager panel featuring Tim Hurd of Blue Spruce Capital who pitched long Blackrock (BLK).


Tim Hurd's Invest For Kids Chicago Presentation


Idea: BlackRock (BLK)

•    They pursue a private equity approach to public markets.
•    Background is Madison Dearborn. Concentrated fashion, no more than 15 stocks with 3 year or more holding period.
•    Grinder – a company with high FCF that can do well over time.
•    Thesis – highly diversified company across clients, product, style and regions.
•    BlackRock wins regardless of what happens in the capital markets.
•    Mostly passive.
•    iShares franchise is the gem. Grown 20% - 30% range, thinks it can grow 11% or more. ETF business is an oligopoly. Return/scale business hard to break into.
•    BLK’s ETF franchise includes equity and fixed income ETFs.
•    Retail AUM growing.
•    Fee growth leads AUM growth. iShares and retail generate margin accretive growth.
•    FCF share has historically exceeded net income (excluding changes in trading investments).
•    Myths about BlackRock : too big to grow, ETF are low fee/low margin business, great rotation fears.
•    PIMCO is the gift that keeps on giving to BLK and other competitors. Pimco Total Return lost another $25B +, BLK and others benefiting.
•    ETFs gain incremental margins of 80% - 90%.  Some ETF products like HY carry 50 bps fee.


Be sure to check out the rest of the hedge fund presentations from Invest For Kids Chicago here.