What does it mean when banks outsource asset management?

When banks outsource asset management, they transfer the responsibility of managing client investments to specialised firms like BlackRock. Instead of handling portfolio management in-house, banks partner with expert asset managers who have the technology, expertise, and scale to potentially deliver better results for clients whilst allowing banks to focus on their core banking services.

Why is the Citi-BlackRock partnership significant for investors?

The £80 billion asset transfer from Citi to BlackRock represents one of the largest outsourcing deals in wealth management history. It signals a major industry shift where banks are recognising the value of partnering with specialised firms rather than trying to manage everything internally. This trend could create significant growth opportunities for asset managers and financial technology companies.

What types of companies benefit from this outsourcing trend?

Two main types of companies benefit: large asset managers like BlackRock who can win these massive outsourcing contracts, and financial technology firms that provide the infrastructure, analytics, and platforms that make these partnerships possible. This includes companies offering portfolio management software, risk analytics, and advisory technology solutions.

What is an asset manager and how do they make money?

An asset manager is a company that invests and manages money on behalf of clients, including individuals, pension funds, and institutions. They make money by charging management fees (typically a percentage of assets under management) and sometimes performance fees when they achieve strong returns. The more assets they manage, the more revenue they generate.

Is this outsourcing trend likely to continue?

Many industry experts believe this trend will accelerate as banks face pressure to reduce costs, improve efficiency, and focus on their core competencies. Managing investments requires significant technology investment and specialised expertise that many banks find more cost-effective to outsource rather than build internally.

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Banking's Big Outsource: What Lies Beyond This Move

Citigroup is partnering with BlackRock, transferring $80 billion in wealth assets to be managed by the world's largest asset manager. This move signals a broader industry trend of major banks outsourcing investment management, creating opportunities for specialized asset managers and financial technology providers.

Han Tan | Market Analyst

Updated today | Published at September 5