Andy Sieg, the head of Citigroup’s wealth division, stated that they are not in a position to expand this platform significantly as they are not as well-equipped as they will be by collaborating with BlackRock.
Citigroup Inc. has decided to give BlackRock Inc. the responsibility to manage tens of billions of dollars in client investments. This means it has to effectively shut down its last in-house asset management division and outsource its wealth management offerings to an external partner.
In this partnership, BlackRock will manage the assets of thousands of wealthy clients who were working with Citi Investment Management, according to statements from both companies. BlackRock, which was already managing a portion of Citigroup’s $635 billion in client assets, will now take responsibility for the remaining $80 billion that the bank handles independently.
Andy Sieg, the head of Citigroup’s wealth division, stated that they are not in a position to expand this platform significantly as they are not as well-equipped as they will be by collaborating with BlackRock.
Although Citi Investment Management, which is part of the bank’s wealth unit, will continue to operate, the bank’s last proprietary asset management team, led by Robert Jasminski, will be moved to BlackRock. According to bank representative Mark Costiglio, less than 100 Citigroup employees will be part of this transition.
As part of the deal, BlackRock will earn management fees, while Citigroup will retain advisory fees from clients, who will be informed about the changes in the months ahead. The transition will be finalized by the end of the year.
The plan is a crucial step for Citigroup as it streamlines its wealth business. The company has turned its focus to servicing wealthy clients and aims to differentiate itself in a crowded market to capture high-net-worth customers. That is the key target for Chief Executive Officer Jane Fraser, who previously managed Citigroup’s private banking division and has developed a long-term plan to boost profits.
In recent times, both banks and private equity firms have been exploring ways to expand into the wealth management space through partnerships with asset management firms to increase their presence in this sector. Earlier on Thursday, Goldman Sachs Group Inc. announced that it will invest up to $1 billion in T. Rowe Price Group Inc. as the two firms join forces to market private-market products to a broader range of retail investors. This news significantly boosted T. Rowe’s stock price.
The assets of Citigroup Investment Management belong to clients from the bank’s Wealth at Work division, which serves professional services firms and their employees, as well as its private banking clientele. Approximately 50% of these assets are held by clients located outside the United States and will continue to be under the bank’s custody, managed by BlackRock.
Jaime Magyera, head of US wealth at BlackRock, remarked that this is a pivotal moment for the industry, as wealth management companies expand, they might partner with other companies that can help across the investment and technology sector.
The outsourced assets will eventually be accessible to clients of Citigold, an investment platform designed for wealthy clients who do not qualify for the firm’s private banking services, as explained by Keith Glenfield, Head of Investment Solutions at Citi Wealth.
According to Rob Fairbairn, a vice chair at BlackRock, Citigroup’s private bank is one of the few banks that can support asset management clients globally through its international bankers.
The firms stated that this deal can provide BlackRock with a platform for managing private market assets, stocks, and bonds on behalf of Citi’s wealth management clients. Over the past year, BlackRock invested $25 billion to buy Global Infrastructure Partners and private credit manager HPS Investment Partners. The company has set an ambitious target of raising $400 billion in private capital by 2030.
Since the announcement, Citigroup shares have increased by 1.4%, and BlackRock by 0.4%.
