The “repositioning” of funds will impact $30bn of the firm’s assets under management, 11% of its total active equity AUM, and fees will be cut.
Job losses in the active equity teams will result in a $25bn cost to the firm in the first quarter, it confirmed on Wednesday.
The changes come amid growing pressure on the active business from the increasing use of indexing and ETFs.
Its equity teams will be merged to increase scale and resources, the firm said, and will be led by Mark Wiseman, who joined BlackRock as head of active equities last year.
He said the “active equity industry needs to change”, and added: “Traditional methods of equity investing are being reshaped by massive advances in technology and data sciences.
At the same time, client preferences are shifting, focusing not just on outcomes but on how both performance and fees impact value.”
BlackRock’s equity offering will be split into four new categories and a new product range, Advantage, will be launched as a core alpha product and is expected to include nine mutual funds.
Wiseman said: “Clients have moved beyond just active and passive techniques. They are choosing from a variety of products that incorporate multiple investment strategies, return targets, levels of risk and cost expectations.
“We are evolving our product offerings to ensure we stay ahead of those changing client desires.”
The core alpha product range will offer lower risk for “consistent alpha”, alongside a further three categories, High Conviction Alpha for risk-seeking investors, Outcome Oriented with a focus on income and a Country and Sector Speciality range.
The changes, announced on Wednesday, follow the development of BlackRock’s ETF offering and expansion of its active fixed income platform to combat low interest rates.
Laurence D Fink, chairman and CEO, said: “When we hired Mark Wiseman last year, we announced we would similarly review active equities in anticipation of changes in the investment landscape and client preferences.
“We are acting now to leverage our unique business model to lay the foundation for what we believe will be the future of active equity management.”
BlackRock reported a 3% fall in revenue in the third quarter of 2016 as compared to the same time in 2015 as it struggled to stop cash flowing from active products into its iShares ETF business.
Net outflows for active equity was $3.9bn between July and September last year, while ETF equity saw net inflows of $25.5bn.
