Asset management firm BlackRock (NYSE:BLK) is acquiring Aperio, which provides customized index equity separately managed accounts (SMAs) for individuals with ultra-high net worth and institutions served by private banks. The SMAs are based on clients' risk, tax, and personal values. That includes customized Environmental, Social, and Governance (ESG) portfolios.

The $1.7 trillion retail and wealth SMA market is growing at approximately 15% annually, and 35% among registered investment advisors. Aperio has approximately $36 billion in assets under management, and it has an average annual growth rate of roughly 20% over the past five years.

BlackRock, the world's largest asset manager, is a leading provider of SMAs for intermediaries focused on high net worth. It currently offers actively-managed fixed income, equity, and multi-asset SMAs. The acquisition expands its capabilities to include tax-managed broad market indexing and ESG options. It will boost BlackRock's SMA assets by approximately 30% to $160 billion.

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Aperio will operate as a separately branded unit within BlackRock's U.S. Wealth Advisory business. Aperio will retain its processes and leadership under Ran Leshem and Liz Michaels, co-heads of the Aperio team. Patrick Geddes, the current Aperio CEO, will become a BlackRock senior advisor and serve as chief tax strategist.

BlackRock bought the firm from Golden Gate Capital and Aperio employees for $1.05 billion in cash. The deal will close in the first quarter of 2021. It is funded from existing corporate liquidity and is anticipated to close in the first quarter of 2021.