Good Day at BlackRock

By Hal Clifford

Not long ago, Keith Anderson ’83 visited the headquarters of one of his clients, an industrial company in the Midwest. Among his tasks, Anderson oversees the management of $7 billion of that company’s money. “You have always done what you have said you would do,” the company’s treasurer told Anderson. “There have been no surprises.” In the rarefied world of fixed income investment management, that is high praise indeed. Surprises are unwelcome, and delivering on promises requires the mastery of an often opaque, sometimes baroque financial world.

Anderson, 43, is one of the founding partners of BlackRock Inc., a New York asset-management firm he started in 1988 with seven partners. Today, he is managing director and chief investment officer for fixed income, which comprises the bulk of the firm’s assets under management: $196 billion of the $286 billion that BlackRock invests, mostly for institutional investors. The company is highly respected by its competitors and its clients, says Jill Foote, a lecturer of management at the Jesse H. Jones Graduate School of Management and a 13-year veteran of Goldman Sachs. BlackRock, she says, is very sophisticated.

The firm gained that reputation by being true to its bedrock principles, one of which is to control risk. Anderson—who may have learned a little about risk during his monthly grad school poker games with Professor Ed Williams—is deeply methodical and puts enormous effort into quantitative analysis of holdings and markets. The firm’s commitment to limiting risk is a conservative strategy that has been its attraction. In its short life, BlackRock has come to manage funds for seven of the top 10 Fortune 500 companies.

“One of the things rich people want to do is stay rich,” Anderson says, “and I think that’s the case with institutions. They want to earn a little extra on their investments, but they don’t want to do it with the risk of significant loss. We’re not going to be the No. 1 portfolio manager in the world because we don’t take enough risk to do that, but we’re going to consistently add value.”

Anderson’s recognition of his clients’ desire to preserve capital and to grow it and his ability to satisfy that desire consistently have contributed to his reputation as one of the most talented fixed-income portfolio managers on Wall Street. His field isn’t particularly sexy. You probably won’t read about him on the front page of People magazine. But he and his company have delivered where it counts, generating average annual portfolio returns of 27 percent during the past five years.

It’s not an easy task. Bonds go up when interest rates go down, and fluctuations can keep fixed-income managers awake at night. A small change in interest rates leverages a big change—in the opposite direction—in the value of bonds. At BlackRock, Anderson’s role is to see the big picture, to help his team of 30 portfolio managers develop their strategies within the macro world of, well, the world, and to execute them. Trades of hundreds of millions of dollars are common. The objective: outperform the benchmarks.