Welcome to Future of Finance, where Fortune asks prominent people at major companies about their jobs, how their firm fits into the crypto ecosystem, and what it all means for how we use money.
Blackrock was born in 1988 and so was its proprietary tech platform, Aladdin, which is short for Asset, Liability, and Debt and Derivative Investment Network. Sudhir Nair joined the firm in 2000 as an analyst, and he’s now a senior managing director and member of Blackrock’s Global Executive Committee. He’s also the global head of Aladdin, which is used by more than 1,000 clients and organizations worldwide to manage trillions of dollars in assets.
In a recent conversation with Fortune, Nair discussed what first drew him to the firm, how Coinbase benefits from Blackrock’s technology, and what it’s like opening up a whole new world of financial possibilities to the more than 130,000 Aladdin users in 70 countries.
(This interview has been edited for length and clarity.)
Can you walk me through what it was like starting at Blackrock and how the industry’s evolved since you got there?
I joined July 10, 2000, so almost 23 years ago to the day. I came to Blackrock after focusing in school on both finance and information systems, always being interested in this intersection of capital markets and technology, and really having an appreciation for how the founders of the firm have thought about that intersection—really since day one.
If you listen to Larry [Fink] and the others, a lot of Blackrock was built on this thesis that managing client portfolios and client money is really all about information processing. Effective information processing and turning data into information is all about having the right technology. So, when I joined, we were really in the beginning phases of taking what was then our internal technology, Aladdin, and building a commercial service-oriented business out of it. And I was fortunate enough to be one of the first employees that got involved there, really implementing Aladdin at our first large third-party client.
Over the years, I've had the experience of wearing a variety of different hats and helping to support the growth of Aladdin, but also the commercial business. Currently, in my role as global head of Aladdin, it gives me the opportunity to oversee all aspects of the commercial, the product, and the engineering teams responsible for its delivery—both for Blackrock, as the operating system we use to run the company, but also for the Aladdin community, the third-party clients who leverage the technology in a similar fashion.
Do you get to take any credit for the name? How did “Aladdin” come about?
There's actually a funny story behind it. There are certain things we're good at. One of the things we're not great at is naming things. And I could give you a whole bunch of examples…but the name Aladdin actually came from a user of one of our clients. They had, internally, held a contest, for lack of a better word, for what to name the technology, and one of their employees contributed to the creation and evolution of that name.
What else can you tell me about its early days?
On the sell side, we were very accustomed to using computers to understand the valuation of securities, the risk of securities, creating new securities, and then marketing them and taking them to the buy side. So the thesis behind Blackrock was: Could we use that same type of technology, not to create and structure different and new security instruments, but to build and manage more effectively portfolios, as a fiduciary on behalf of clients?
So Aladdin, in its beginning days, began as a risk-management technology, helping to understand the answers to very basic questions like: What do I own? And where do I own it? And what is the performance of this asset relative to the benchmark. And it just grew and grew. And the more you can keep all of your employees on the same page, using the same data, collaborating on the same technology, the more effectively you can serve your clients and the more efficiently you can operate.
What we found was that many of our asset management clients who came to Blackrock, even in the mid 1990s, were trying to solve the exact same data challenges and process challenges that Blackrock was using Aladdin for. And so, the ask, apart from managing their money, was, "Can we use the same technology that you’re using? Would you deliver it to us as a service?"
How do you benchmark its success? Is it how many of your clients are using it now vs. five years ago? Because it’s just such a broad, all-encompassing product, which you’re also using?
It is broad, but it's also not one-size-fits-all, right? If you really look at the organizations that leverage it today, they're all leveraging the same technology, but they’re all a little bit different, reflecting the fact that these organizations are at different parts of their own digital journey.
How many of your clients are blockchain or crypto companies? And are there plans to add more functionality for them directly into Aladdin?
Great question. I mean, when we think about it, from a strategy perspective, we're solving for the whole portfolio. We have a multitude of clients who have different investment perspectives, and, over the past few years, you know, blockchain and crypto assets have for many of these clients become increasingly important, and increasingly important parts of their overall asset allocation.
I think it's also reflective of how we've thought about expanding and opening Aladdin to drive more partnerships with third-party partners who can enhance Aladdin’s value proposition. For example, with Coinbase, we've established an integration partnership such that clients who want to trade and manage crypto assets, starting with Bitcoin, have the ability to leverage Aladdin in conjunction with Coinbase’s capabilities in order to do that. So we're not building them out natively ourselves—we're working with who we feel are industry-leading partners and participants to integrate with Aladdin on behalf of our mutual clients.
Let’s say I ran a crypto exchange—a legit one—and came to you and said, “Hey, I want to use Aladdin to make it better.” What are two or three use cases where it could really turbocharge my business?
The role we would play would be similar to what we're doing with Coinbase to build that deep integration that makes it seamless and easy for a portfolio manager to manage client portfolios, to access the markets and liquidity via that exchange. So for an organization that’s managing that exchange, that can be quite valuable, because it provides deeper and closer productivity and connectedness with some of their largest clients.
Blackrock has been in the news lately over its proposal for a spot Bitcoin ETF. Perhaps you can’t speak directly to that, but compared with where crypto started, more of a Wild West ethos, what do you make of so much recent TradFi interest in the space?
We have been, and continue to be, invested in the space, continuing to explore opportunities to leverage either the technology or crypto as an asset class, to support clients. It’s not my role to have a view on any asset class, good or bad. It's my role to make sure that we're providing the technology, data, and analytics to help support those asset classes and clients. But, without a doubt, as you’ve mentioned, we continue to see many institutional clients interested in the asset class, so our focus has been on making sure Aladdin supports that.
What’s next for Blackrock, and for the future of finance?
There's no shortage of stuff that we're working on. I would say probably the biggest area of focus, when we think about the future, is the portfolio of the future. We believe it will be very different from the portfolio of today—much more personalized, much more customized, much more holistic. It will blend active and passive, public and private, it will have elements that are tax aware and tax efficient, it will manage and maintain individual sustainability preferences, it will have all sorts of aspects and characteristics that, quite frankly, will put a lot of strain and challenge on much of the existing infrastructure and ecosystem. So when we think about our strategy, and what's next, it's all about preparing BlackRock and our clients to be able to build, manage, and distribute that portfolio of the future at scale.
Another piece would be sustainability, which continues to be of high importance for many of our clients. One of the areas where I think we’re in a really pioneering position is around climate. We've created a capability called Aladdin Climate, which allows you, within a client portfolio, to begin to understand risk sensitivities—both physical risks and transition risks to a variety of different assets—and recognize how a series of different scenarios around climate change may play out.
We're optimists, and we tend to be excited about the future. And there probably hasn't been a more dynamic and fast-paced industry than technology. Even in the last year, the amount of change and energy going toward something like A.I. has been significant. And we think that’s going to be just one example of a catalyst for some of this change.
