June 17, 2024
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A dumb simple way to think about the value of an asset-management firm is:

This is all crude and oversimplified in a lot of ways. But in this dumb model, the key inputs are (1) your assets under management and (2) the fees you can charge. Some kinds of asset managers run enormous piles of money and charge minimal fees: BlackRock Inc., which runs lots of low-fee index exchange-traded funds, manages about $10.5 trillion for investors and is worth about $116 billion, or a bit more than 1% of assets. Other kinds of asset managers run smaller piles of money and charge higher fees: KKR & Co., which runs lots of expensive private equity funds, manages about $578 billion for investors — about 5.5% the size of BlackRock — but is worth about $89 billion, or more than 15% of assets, almost as much as BlackRock. Intuitively — crudely, inaccurately, but intuitively — you could think “well, BlackRock probably charges about 10 basis points, so at a 10x multiple that’s worth 1%; KKR probably charges about 1.5%, so at a 10x multiple that’s worth 15%.”



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