All told, the deals will transform the company into a $600 billion manager of alternatives, exceeding the assets of Carlyle Group and entering the league of Apollo and KKR. Blackstone Inc., which BlackRock was spun out of decades ago, still manages almost twice as much in private assets.

Alternatives aren’t wholly new to BlackRock—it had about $300 billion in them at the end of 2023. But the deals fundamentally change the way BlackRock makes money. One of its biggest funds, the iShares Core S&P 500 ETF, also manages $600 billion in assets. But with a fee of only 0.03%, it brings in about $180 million in annual revenue. The $600 billion in alternative assets, once the HPS deal closes, is expected to bring in roughly $3 billion in annual investment advisory and administrative base fees. And this doesn’t include fees based on performance. Alternative revenue would account for more than 15% of the company’s annual total.

Private markets have always offered lavish rewards. So why is BlackRock buying now? A shift in private markets. For decades they’ve largely meant private equity—especially leveraged buyouts in which a PE fund takes control of a struggling company, loads it with debt and then tries to resell it in a few years. That’s a specialized business, and one that’s been less lucrative in recent years because of higher rates and few opportunities to exit investments. But private markets are increasingly encompassing credit and infrastructure—eating up a growing chunk of capital markets—and BlackRock wants a bigger piece of the action.

About two years ago, Chief Executive Officer Larry Fink and his lieutenants decided that BlackRock corporate strategy had to change. With a nod to the tech giants, the company started referring to itself as a “cloudlike platform” for investors, where they could connect to a wide variety of investments. Pensions, big insurers, governments and corporations were all moving deeper into private markets, especially infrastructure and private credit. Sovereign wealth funds across the Middle East were writing big checks, and competition was heating up. Fink and his team signaled they were open to buying—and not just building—a much bigger alternatives business.

Fink was returning to his old playbook of big-time mergers and acquisitions to transform his company. He co-founded BlackRock in the late 1980s as a bond specialist, with a particular focus on using technology to calculate and manage risks in the market. The company expanded through the ’90s, began offering its Aladdin technology system to clients and went public on the New York Stock Exchange in 1999, when it managed $165 billion. In 2006, BlackRock acquired a fund company from Merrill Lynch for more than $9 billion, creating a firm with about $1 trillion in assets. Three years later it bought Barclays Global Investors for $15.2 billion, just as the company’s ETFs were coming to prominence and investors were craving low-cost index products.

BlackRock’s scale and position in public and increasingly private assets have already worried some politicians and regulators. Senator Bernie Sanders, an independent from Vermont, opposed the GIP deal and said, “The asset management industry is quickly becoming a monopoly.” A commissioner at the Federal Energy Regulatory Commission supported the acquisition but nonetheless called for more scrutiny of BlackRock and big money managers owning companies such as power utilities that consumers need. “You do not need a Ph.D. in economics to see the potential for anticompetitive conduct and outcomes when an investment entity like a huge asset manager seeks to own generation assets that will be—or should be—competitors,” Mark Christie, the commissioner, wrote in September. BlackRock declined to comment.

More broadly, there’s something to be said for having different markets with different investors. “When there is trouble in one domain, credit can keep flowing through other mechanisms, reducing the impact on the real economy,” says Kathryn Judge, a professor at Columbia Law School who studies financial regulation. Blurring the borders between domains could allow financial shocks to spread in ways regulators don’t anticipate.

BlackRock has a big people-management task ahead. It’s bringing on board roughly 1,200 employees from GIP and HPS. Fink has sweetened the pot for the new talent: GIP’s 400 employees got a retention pool of about $650 million; HPS’s 800 employees will get a package of about $675 million. These executives, some of them now billionaires and among the largest individual shareholders of BlackRock, have a powerful perch. GIP CEO Adebayo Ogunlesi now sits on BlackRock’s board, and both he and GIP President Raj Rao are on its global executive committee. HPS CEO Scott Kapnick is slated to become an observer on the board and, along with governing partners Scot French and Michael Patterson, will join the same executive committee.

The GIP team, sitting in offices at BlackRock’s Hudson Yards headquarters in New York, now oversees its existing funds as well as the roughly $50 billion in preexisting BlackRock infrastructure funds. The HPS team will lead a new private financing division at BlackRock, overseeing asset-based finance, direct lending and private debt.

The moves are partially a corrective of years of not quite getting right the internal power dynamics of absorbing alternatives firms. BlackRock’s acquisition of Tennenbaum Capital Partners, which had about $9 billion of committed client capital at the time of purchase in 2018, wasn’t smooth. Several senior Tennenbaum partners have left. A well‑regarded trio of managers who buy PE fund stakes from others decamped to Apollo Global Management Inc. A standalone BlackRock Alternatives unit was mostly disbanded in favor of separate equity and private debt units. Then, as part of the announcement of the GIP acquisition, BlackRock’s head of equity private markets said he’d leave. Before the acquisition of HPS, the company started to revamp its private debt business in September and announced the departure of the two-decade veteran leading that group.

Some of the company’s own funds have struggled, too. A renewable power fund in its previous infrastructure business made ill-timed bets in two now-liquidating companies. Its Long Term Private Capital strategy, a type of private equity fund, fell short of its earliest fundraising target.

The future is about fundraising. The company is starting a $30 billion fund to invest in data centers for artificial intelligence technologies and the energy infrastructure to power them; it’s joining the ranks of KKR, Brookfield Asset Management and Blackstone in the data center expansion. GIP is nearing the close of its fifth fund that could raise $25 billion or more. The company’s chief financial officer, Martin Small, has talked about how much more private credit money the company might manage if its insurance company clients switched only 10% of their $700 billion in assets managed by BlackRock.

With his new acquisitions in hand, Fink has argued about the need to reconsider one of the most traditional types of portfolios, the 60-40 split of stocks and bonds. To really diversify, he says, investors should consider private markets, too. Right now that’s hard for everyday investors—to say nothing of the added risks and costs of private investing. But maybe indexes and other products could chip away at the wall. He’s not the only one thinking that way. Rivals Apollo from the private world and State Street Corp. from the public equity Big Three have teamed up to propose a private markets ETF. The two kingdoms may not be far apart for long.

Brush covers BlackRock and other asset managers for Bloomberg in New York.