BlackRock buys minority equity stake in Scalable Capital

Jun 20th, 2017 | By | Category: ETF and Index News

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European digital investment manager Scalable Capital has signed a €30 million funding round which sees BlackRock, the asset manager behind the iShares range of ETFs, become a significant minority stake owner in the firm.

Adam French, co-founder and co-CEO at Scalable Capital

Adam French, co-founder and co-CEO at Scalable Capital.

The funding round, conducted alongside existing investors HV Holtzbrinck Ventures and Tengelmann Ventures, is one of Europe’s largest for a digital investment manager to date, and brings Scalable Capital’s total funding to €41m.

The firm’s operational process involves an initial evaluation of its client’s risk tolerance, after which a tailor-made investment portfolio is constructed purely from ETFs, each targeting a specific asset class including equities, government bonds, corporate bonds, covered bonds, commodities, real estate and cash. The potential universe of ETFs invest in approximately 8,000 securities across 90 countries with each portfolio monitoring country and sector allocations to promote effective diversification.

Launched just 16 months ago in Germany, Scalable Capital (known informally as a robo-advisor) now has operations in both Munich and London and has gathered over €250m (£217m) of assets from over 6,000 retail clients. The firm states it is also receiving strong demand from institutions and corporates. Its offering provides a flexible multi-language and currency platform that can operate across multiple international tax and regulatory regimes.

Patrick Olson, BlackRock’s chief operating officer of EMEA, will join Scalable Capital’s supervisory board. He said: “The retail distribution landscape is evolving at a rapid pace, as consumers increasingly engage with their financial investments through technology. This trend is prompting strong demand from European financial institutions – including banks, insurers, wealth managers and advisory firms – for high-quality technology-enabled investment solutions. Our investment in Scalable Capital allows us to meet these evolving needs of our clients and their customers and to help shape their business models for the future.”

The investment in Scalable Capital complements BlackRock’s existing digital wealth management suite, which includes Aladdin Risk for Wealth, iRetire, iCapital and FutureAdvisor in the US.

Adam French, co-founder and co-CEO at Scalable Capital said: “BlackRock shares our vision that technology is not just a competitive advantage but a requirement for wealth management businesses to be successful in the future. Its investment in our firm is a fantastic validation of our work so far, opens up new growth avenues for our business and firmly establishes us on the digital wealth management map in Europe. BlackRock’s backing provides a huge opportunity for us to partner with their clients to help accelerate our business with financial institutions and corporates.”

Scalable Capital expects the changing regulatory landscape in Europe to result in the need for financial institutions to increase investor protection, value for money and transparency. Consequently, it believes firms will be seeking technological solutions to assist with portfolio construction, risk management, and digital distribution, allowing Scalable Capital’s platform to provide a practical solution for firms looking at technology to help shape their business models for the future.

Scalable Capital has assured its clients that BlackRock’s minority stake will not influence its independence in terms of product selection and asset allocation decisions.

The investment is subject to regulatory approval and is expected to close in the third quarter of 2017.

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