Citi Wealth has appointed BlackRock to manage approximately US$80 billion in client assets currently managed by Citi Investment Management ( CIM ).

Under the agreement, BlackRock will manage a range of core, opportunistic, and thematic investment strategies across equities, fixed income, multi-asset class strategies and, over time, private markets.

While Citi is outsourcing the portfolio management of about $80 billion in client assets to BlackRock, it is retaining the core client advisory and relationship role, according to analysts.

The agreement also means that Citi will benefit by strengthening its client offering, enhancing scale, and freeing up resources so it can double down on advisory and relationship. However, there is also the risk that Citi could become more dependent on BlackRock, which may weaken its investment identity, and it could also face perception or margin challenges, analysts say.

Citi has also selected BlackRock’s Aladdin Wealth technology platform, which features advanced risk, portfolio management and data insight capabilities, for deployment to the bank’s private bankers and investment professionals.

A new portfolio offering will be introduced for Citi Wealth clients – Citi Portfolio Solutions powered by BlackRock.  The offering will combine the bank’s strategic investment advisory and planning capabilities with the investment management and technology strengths of a top-tier asset manager.

Customized portfolios

According to Citi, this enhanced investment offering will provide its clients with access to a wide range of investment options and strategies, leveraging BlackRock’s leadership in portfolio construction and the management of customized portfolios.

“We want to bring best-in-class advice, solutions, and service to our clients, and we want to serve more of the world’s changemakers,” says Andy Sieg, head of wealth at Citi. “With this offering, we can accomplish both. It brings together the sophisticated relationship-driven and market-based advice of our bankers, backed by the insights of our own Chief Investment Office, with the renowned investment expertise and innovative technology capabilities of BlackRock.”

Citi Wealth clients with assets to be managed by BlackRock are domiciled in nearly 100 countries. They will continue to maintain a primary relationship with their Citi private banker, who will advise on their overall wealth approach, including strategic asset allocation, establishment of long-term financial goals, and selection of investment strategies.

Subject to Citi Wealth’s ongoing review and monitoring, BlackRock will be responsible for managing and implementing specific investment strategies tailored to meet the objectives of Citi Wealth clients.

Staff transfers

As part of the agreement, certain members of CIM will join BlackRock, where they will continue to serve as portfolio managers on existing strategies for Citi clients. In due course, Citi and BlackRock will also develop new products and solutions for the bank’s clients by leveraging the scale, infrastructure, and capabilities of BlackRock.

“We’re excited to be selected by Citi to bring BlackRock’s extensive suite of investment solutions and innovative financial technology to clients, enabling Citi to deliver customized portfolios and strong investment outcomes across wealth,” says BlackRock vice chairman Robert Fairbairn. “As investor appetite grows for custom-built, whole portfolio solutions, BlackRock continues to invest in our global investment platform to stay at the forefront of clients’ evolving needs.”

Jaime Magyera, head of BlackRock’s US wealth business, notes that the firm has long enjoyed a business relationship with Citi, and it looks forward to working even more closely with the bank’s wealth business under the Citi Portfolio Solutions arrangement.

"For nearly four decades, BlackRock has helped lead the evolution of customized portfolio management, continuously adapting to meet the needs of individuals for tailored, tax-optimized investment strategies underpinned by cutting-edge asset allocation and portfolio construction capabilities,” Magyera says. “Today, these investors and their advisors are reimagining the entire portfolio experience across public and private markets. By working alongside Citi and its clients, we are well-positioned to deliver the breadth, precision, and innovation their clients and investors worldwide require.”

The agreement is expected to begin in the fourth quarter, subject to customary approvals and conditions. It is not expected to have a material impact on Citi’s previously disclosed revenue or return targets.