BlackRock and Blackstone are two of the most successful asset management companies on Wall Street. As former colleagues, they have very different views on investment strategies and management methods. BlackRock focuses on passive index funds with low fees, while Blackstone relies on active management and high leverage to pursue excess returns. By comparing their business scale, founders’ personal wealth, wealth created for clients and shareholders, as well as external influence, we can see that BlackRock’s passive strategy has brought better long-term performance and market dominance.
BlackRock’s AUM is twice as large as Blackstone’s, with higher average profits and shareholder returns
In terms of business scale, BlackRock has a market value of $86 billion, which is double of Blackstone’s $43 billion. Measured by sales, profits and cash returns to shareholders, BlackRock is on average 31% larger than Blackstone over the past decade. BlackRock has also raised seven times more client assets than Blackstone since 2009. The huge size provides economies of scale for BlackRock to reduce operating costs.
BlackRock’s low-cost passive funds have created more wealth for clients than Blackstone’s leveraged investments
Although hard to quantify precisely, BlackRock’s clients are estimated to have made $2.9 trillion profits over the past decade, in contrast to $200 billion gains for Blackstone’s clients. For both firms this gain is about 80% of their average AUM. While the booming market lifted all boats, BlackRock’s passive investing approach provided better and more reliable returns for asset owners.
BlackRock’s passive strategy focusing on low-cost index funds has fueled its AUM expansion and delivered good long-term results. Though Blackstone’s active approach produced huge personal wealth for its founders, it did not benefit clients as much on an aggregate basis.