Hedging: Roots in the Mortgage Industry Help BlackRock Advise Servicers.(Brief Article)

BlackRock Solutions knows that sophisticated technology underpins the analytics that mortgage servicing managers need to effectively protect their investment.

But the firm also knows that first-hand knowledge of the mortgage world is as important as technology expertise.

BlackRock provides risk management services on $1.9 trillion of assets held by other parties and its asset management clients. Among its risk management clients: BlackRock has been involved with 10 of the top 20 mortgage banking firms. And BlackRock would like to extend its services to more midsize lenders, those that rank in the top 40 or so.

The firm also has deep roots in the mortgage business. Laurence Fink, CEO of BlackRock, was instrumental in creating collateralized mortgage obligations, now a widely used capital markets instrument.

Bennett Golub, a managing director and head of risk management at BlackRock, also played a role in the early development of the mortgage securities market with firms such as First Boston. Many of his colleagues share that experience.

"If you looked at the senior management of BlackRock today, and look at who came out of the mortgage business, you would see a very high correlation," Mr. Golub said.

Mr. Golub said that one of the reasons BlackRock has been successful as a hedge risk advisor is because of its technology. Many investors in mortgage assets did not have "sell side" technology for evaluating prepayment risk. BlackRock, which has developed its own technology to analyze prepayment risk, offers this "sell side" technology to the buy side of the market.