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Lessons From the Brains at BlackRock

BlackRock (BLK ), the world’s largest investment company, has a “problem.” I put that word in quotation marks because compared to illness, hunger and all the other human afflictions that truly are problems, the issue that concerns this manager of $5 trillion in assets is rather trivial.

The “problem” is that a big chunk of the firm’s $5 trillion in assets under management sits in BlackRock’s iShares index funds, which you can check out here, so the company doesn’t earn big fees from managing the pot. Of course, when the pot is so enormous, even a tiny sliver in fees amounts to a lot of money. Last year, BlackRock’s net income was $3.2 billion, down about 3% from 2015.

Can BlackRock Beat the Market?

Like any other public company with shareholders clamoring for more, BlackRock management has to deliver. And since it can’t raise fees by much or at all in the ultra-competitive index fund market, it has tried to boost its active management business.

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