Since the 2008 financial crisis, BlackRock’s technology platform Aladdin has been the world’s most powerful risk management system for some of the largest players in the investment management industry, as well as non-financial companies.
But some have expressed concerns about how much power the platform could hold over the economy, especially with the country amid a pandemic.
Founded in 1998, Aladdin stands for asset, liability, debt and derivative investment network. According to an interview with Rob Goldstein, chief operating officer for BlackRock, “not only does it provide risk transparency, but it also provides an ability to model trades, to capture trades, to structure portfolios, to manage portfolio compliance — all of the operating components of the workflow.”
Last year, BlackRock acquired Paris-based eFront and combined its due diligence and portfolio planning platform with Aladdin, making it an even more powerful tool.
The last time BlackRock revealed any actual numbers for Aladdin was in February 2017, when it reached $20 trillion. Public documents show that $21.6 trillion currently sits on the platform from just a third of its 240 clients—equivalent to 10 percent of global stocks and bonds. Tech giants Apple, Microsoft and Google all use Aladdin.
“Aladdin has become a mainstay of the marketplace,” says Peter Kraus, chief executive of Aperture Investors and former head of AllianceBernstein.
Yet many have expressed concerns that any disruption to Aladdin—such as a cyberattack—could destabilize the financial system. And now with a global pandemic in the mix, some argue that the warnings sent out by Aladdin could lead to trillions of dollars reacting in the same way.
“Anything close to an oligopoly in risk management would be especially dangerous if there were any weakness in the system,” says Jim McCaughan, former chief executive of Principal Global Investors.
Goldstein disagrees, arguing that Aladdin’s risk tools are designed to support, rather than replace, portfolio managers.
In the meantime, other companies are working to compete with Aladdin. Charles River has partnered with State Street to create the “first-ever global, front-to-back, client servicing platform from a single provider.” In addition, Copenhagen-based SimCorp is expanding its own services into North America.