The traditional investment banks have long generated resentment by dint of their sheer power.

For big clients, there are choices among the top banks. But for some, the choices seem rather narrow at times. Over the years, we've heard lots of talk about setting up alternatives to traditional investment banks. The alternative investment industry has been out front on this. Big private equity firms such as Kohlberg, Kravis & Robert and big hedge fund firms such as Citadel have been making moves in this direction for years, with varying degrees of success. Big conglomerates like GE have also taken big steps toward bringing their investment banking in-house. But perhaps the most profound activity in this area comes from buy-side juggernaut BlackRock.

Institutional Investor offers a rigorous look at how the company is developing its capital markets and investment banking infrastructure. It has launched a capital market desk, a syndicate desk, an electronic trading initiative for bonds and has hatched plans for an internalized crossing network that will allow it to match trades in-house.

The idea of course is to gain access to products and services that deliver value in close alignment with its needs. BlackRock is now influential enough that it no longer has to choose from among off-the-shelf products. One BlackRock initiative is known as "originate to manage," which allows it to play a role in tailoring the specs of new securities. Keenly aware of the conflicts, the firm has erected a wall between the capital markets group and the "public securities" group to ring-fence information that shouldn't be given to traditional buyers.

Few companies have the clout to pull this off. It certainly constitutes a competitive advantage for BlackRock. It is going beyond what other buy-side firms, the likes of Fidelity and Vanguard, ever dreamed off.

For more:
- here's the article

Related articles:
BlackRock vs. Entire ETF industry