What could this mean for investors?

Black Rock(NYSE:BLK)’s acquisition of the private markets data provider earlier this week could change the way people invest in private markets.

BlackRock, the world’s largest asset manager with $10.5 trillion in assets under management, has acquired London-based Preqin, which provides private markets data and analytics to institutional investors.

Private market investments, included under alternative investments, consist of private companies and are not traded as stocks on public markets. Two examples of large private companies are Fidelity Investments and the candy maker Mars.

The $3.2 billion acquisition announced on June 30 could open up the market beyond hedge funds and institutional investors to more mainstream investors. Here’s how.

Private markets will reach $40 trillion by 2030

Preqin is a key acquisition for BlackRock because it allows the asset manager to reach the vast and rapidly growing private markets on a much larger scale. According to EY, there is currently about $24 trillion invested in private markets. In fact, that total is expected to grow to $40 trillion by the end of the decade.

As private markets grow, so does the demand from institutional investors for the data and analytics Preqin provides. The company covers 190,000 funds, 60,000 fund managers, and 30,000 private market investors.

Preqin’s data reaches more than 200,000 users, including asset managers, insurers, retirees, wealth managers, banks and other service providers. The company has grown its revenue by 20% annually over the past three years and is expected to generate $240 million in revenue this year.

However, this is just a fraction of the $8 billion private data market that is expected to grow at 12% annually to be worth $18 billion by 2030.

Once this deal closes by the end of 2024, BlackRock will incorporate Preqin’s private market data into its Aladdin platform, which fund managers and institutional investors use to manage their portfolios. Preqin will give them even more data and transparency on these private companies so they can build even better portfolios.

“Together with Preqin, we can make investing in private markets easier and more accessible, while building a more connected platform for investors and fund managers,” said Sudhir Nair, Global Head of Aladdin. “This represents a significant opportunity for Aladdin to bridge the transparency gap between public and private markets with data and analytics.”

However, the benefits of the merger could extend beyond portfolio management to retail investors.

Fink on transformational acquisition

During a conference call following the acquisition announcement, BlackRock CEO Larry Fink provided a broader picture of what the acquisition could mean for investors.

“This acquisition is designed to drive evolution and growth in private markets by measuring them, understanding the drivers of performance and making them more attractive to investors,” Fink said on a conference call.

Fink believes that data, benchmarking and risk analysis have helped transform public markets. They can play the same role in private investing.

“Our goal is to deliver all of these goals in the much less mature data analytics and index sector for all private markets,” he added.

Specifically, BlackRock plans to index private markets, which may involve developing private market indices or benchmarks and creating funds and ETFs that invest in them.

“Just as indexes have become the language of public markets, we anticipate that we can bring indexing principles, even iShares, to private markets,” Fink added. “We believe that indexes and data will be important future drivers of democratization across all alternatives, and this acquisition is key.”

Of course, iShares is BlackRock’s market-leading ETF family. If this acquisition brings benchmark ETFs to clients, it could be a huge revenue opportunity for BlackRock and make private market investing much more accessible to retail investors.