These days non-listed family businesses of a certain size and profitably are among the most valued assets in the world. Investors like private equity houses and family offices can’t get enough of them. And now asset managers like Blackrock, known as a low-cost index tracker of public equity markets, wants to invest in them as well.
The US investment group has launched a new fund called BlackRock Long-Term Private Capital that plans to buy private businesses and hold onto them for more than 10 years, according to a Wall Street Journal report. BlackRock is looking for minority stakes in these businesses and wants to raise $10 billion from institutions and family offices, say reports.
Sounds a bit like a Berkshire Hathaway play, but BlackRock’s new fund wants to raise just $10 billion, whereas Berkshire has at least $100 billion at its disposal to make acquisitions. Berkshire also has a long history of doing such deals and arguably the best deal maker in the world at its helm, Warren Buffett.
And why would family offices be interested in giving BlackRock their money as limited partners for a long lock-up period when many can do direct deals themselves, or be a limited partner in a fund launched by one of the proven private equity houses and see returns in five years? But one benefit of the BlackRock’s fund is little or no conflict of interest with its other products - this is the first one of its type the asset manager has launched. That lack of conflict of interest can’t be said of many of the funds launched by the big private equity houses, as argued in this Bloomberg comment.
But BlackRock will have to prove it can find good companies to invest in and that will take a few stellar in-house deal makers to ensure those deals happen.
One thing is for sure is the fund will add to even more demand for successful privately run businesses, many of them, family owned. That will push up their valuations even further and inevitably squeeze investors’ margins.
So it looks like family businesses will be the biggest beneficiary of BlackRock’s new fund.