(Bloomberg) -- Laurence D. Fink used at least half a dozen acquisitions to expand BlackRock Inc. from a boutique bond shop to the world’s biggest money manager. Now the firm, which invests $3.7 trillion for clients around the world, faces a new challenge: Growing on its own.

Susan L. Wagner, who led BlackRock’s growth by overseeing purchases including the fund units of Merrill Lynch & Co. and Barclays Plc, retired last month, signaling an end to the acquisition spree and underscoring that future expansion will have to come from attracting investor deposits. With performance at actively managed stock and bond funds trailing peers, BlackRock has restructured its fixed-income unit and replaced equity chief investment strategist Robert Doll, 57, who said last month he was leaving.

“Size makes growth difficult,” said Lucas Montgomery, a research analyst who covers assets managers at Sanford C. Bernstein & Co. in New York. “Growth is predicated on them winning market share and that requires a combination of distribution and performance.”

Wagner’s departure leaves BlackRock with three of the eight co-founders in an active management role, including Fink, who is chairman and chief executive officer, and Robert Kapito, the president. As founders left, Fink added top executives such as Philipp Hildebrand, the former head of the Swiss central bank, to help expand relationships with institutional clients overseas, and Linda Robinson, who joined as head of marketing and communications last year to oversee a five-year branding campaign.

Treasury Role

Fink himself, in private conversations with other Wall Street executives, hasn’t ruled out that he would be interested in the position of Treasury Secretary, should Obama get re- elected, said a person familiar with the matter who asked for anonymity because the conversations weren’t public. Treasury Secretary Timothy Geithner has said he doesn’t expect the president to ask him to stay in office if he wins a second term.

Fink hasn’t said publicly whether he would be interested in a government role if nominated. He told a senior member of his management team this month that he has the best job in the world at BlackRock, according to the person.

Lauren Trengrove, a spokeswoman for BlackRock, declined to comment.

The most-senior executive at BlackRock after Fink is Kapito, who is responsible for day-to-day oversight of the firm’s operating units, including portfolio management, alternative investments, the global client group, risk and quantitative analysis and the BlackRock Solutions advisory business. Kapito is also a director of iShares Inc., the firm’s exchange-traded fund unit, and worked with Fink at First Boston before joining him to start BlackRock in 1988.

Remaining Founders

BlackRock’s remaining co-founders apart from Fink and Kapito are Bennett Golub, chief risk officer, and Barbara Novick, the firm’s head of government relations. Novick isn’t a member of BlackRock’s 14-person global executive committee.

Wagner, who in more than two decades at BlackRock has served at various times as chief operating officer and head of corporate strategy and led the alternative-investments business, will join BlackRock’s board of directors in October. She’ll continue to serve as a director of DSP BlackRock Investment Managers, the firm’s joint venture in India.

BlackRock’s growth through acquisitions culminated in the 2009 purchase of Barclays Global Investors, which was an unprecedented attempt to merge an active fund company, whose managers pick individual stocks and bonds, with a manager of passive funds such as exchange-traded funds, which track broad market benchmarks.

Barclays Deal

Since BlackRock announced the BGI deal on June 12, 2009, the stock has returned 6.4 percent, compared with a 16 percent return for the Standard & Poor’s 500 Index of asset managers and custody banks. This year, the shares have fallen 0.8 percent, including reinvested dividends, while the asset manager index rose 13 percent through July 3.

Barclays, which took a stake in BlackRock at the time of the transaction, in May said it would sell its entire 19.6 percent holding in the asset manager amid tighter capital requirements. As part of the transaction, BlackRock bought back $1 billion of shares.

Earnings Growth

BlackRock has 11 buy recommendations from analysts who cover the shares, while eight recommend holding the shares and two recommend selling. BlackRock’s shares trade at 13.1 times estimated earnings, making the shares cheaper than publicly traded peers such as Legg Mason Inc. and T. Rowe Price Group Inc., which trade at multiples of 14.2 and 19.1, respectively, according to data compiled by Bloomberg.

BlackRock’s breadth of offerings makes it a competitor to a variety of asset-management firms. On the fixed-income side, its biggest rival is Pacific Investment Management Co., the money manager owned by Allianz SE. Pimco, led by Bill Gross and Mohamed El-Erian, drew $60 billion in net deposits across its products last year, compared with net withdrawals of $13.7 billion for BlackRock.

While ETFs generally carry lower fees than active mutual funds, the BGI takeover shielded BlackRock as investors abandoned active stock funds industrywide following the 2008 credit crisis and Europe’s sovereign-debt woes. Clients pulled a combined $40 billion from BlackRock’s active stock and bond funds in 2011, while putting in $52 billion into its iShares stock and bond ETFs, according to the firm’s quarterly earnings reports.

Trailing Peers

In the three years ended June 30, BlackRock’s actively managed U.S. mutual funds trailed 54 percent of peers on an annualized basis, according to data compiled by Morningstar Inc. in Chicago. Only about 6 percent of BlackRock’s assets are in actively managed U.S. retail funds, according to the firm.

As BlackRock tries to woo investors back into its active strategies, it has made changes to boost performance. Chris Leavy, who joined BlackRock as chief investment officer of U.S. fundamental equity in October 2010 from OppenheimerFunds Inc., has taken over the responsibility of BlackRock’s large-cap portfolios from Doll. The large-cap series at BlackRock account for about $22 billion of the $110 billion in U.S. active strategies.

Doll said he was stepping down to devote more time to his family, faith and philanthropic interests. Under Doll, BlackRock’s Large Cap Core Fund has declined at an annual rate of 2.9 percent over the past five years, trailing 92 percent of peers, according to data compiled by Bloomberg.

Doll, Rice

BlackRock in January changed the description of the investment process for three stock mutual funds run by Doll to show the funds use models from third-party providers that are then adjusted. The prospectuses had previously described the model as proprietary.

The change was made in the regular process of keeping the fund board up-to-date on its management and to provide more detail about the investment model and methods used to construct the portfolio, BlackRock said last month.

In a separate incident related to disclosure, BlackRock’s Daniel Rice, who helped manage five energy and natural resource mutual funds, last month stepped down to avoid the appearance of a conflict of interest. Rice is one of the founders of Rice Energy, a company with a subsidiary that has a joint venture with one of his mutual fund’s top holdings.

Greater Autonomy

In actively managed fixed-income funds, where BlackRock saw investor withdrawals last year while bond funds industrywide had deposits, the firm has started to give unit heads greater autonomy and accountability, according to an internal memo sent to some employees. Previously, the day-to-day business management was handled under a single unit.

Under the new structure, Rick Rieder, who serves as CIO of fundamental fixed income, will head credit, rates and alternative strategies; Kevin Holt, CIO of model-based fixed income will lead the multi-sector area; Tim Webb is in charge of Europe, the Middle East and Africa as well as the Asia Pacific region; and Peter Hayes heads tax-exempt strategies.

“BlackRock continually makes adjustments within the organization to adapt to changing environments and better meet the evolving needs of our clients, and the firm will continue to aggressively pursue such changes,” Brian Beades, a spokesman for BlackRock, said in an e-mailed statement.

Alternative Assets

With investors still shying away from the stock market, and bond yields at or near record lows, BlackRock is tapping other areas of growth. Fink said in a March 2012 letter to shareholders that BlackRock is investing in alternative assets such as hedge funds, retirement-oriented strategies and products that allocate money across multiple asset classes.

Under Matthew Botein, head of BlackRock’s alternatives unit, the firm has expanded by adding businesses, including the acquisition of the private equity and infrastructure fund-of- funds unit from Swiss Re Ltd., announced this week.

BlackRock has also stepped up sales efforts across the globe. Hildebrand, who resigned as head of the Swiss National Bank in January, is joining as vice chairman to oversee relationships with institutional clients outside the U.S. He will report directly to Fink.

Hildebrand, who worked for hedge fund Moore Capital Management LLC in the late 1990s, joined the Swiss central bank in 2003, becoming its youngest ever policy maker. He left on Jan. 9 over the purchase of $504,000 by his wife Kashya Hildebrand in August, three weeks before the SNB imposed a currency cap. A probe concluded in April that Kashya Hildebrand’s transactions didn’t breach any regulations.

Marketing Campaign

To make the BlackRock brand better known with individual investors, Fink embarked on a marketing campaign, telling clients how to invest in an uncertain market. He and other BlackRock executives have spoken publicly about how investors can be harmed by staying in cash-like products and focusing on short-term investing.

In May of last year, he named Robinson to the newly created position of global head of marketing and communications. Robinson, who founded communications firm Robinson Lerer & Montgomery in 1986, is reporting directly to Fink.

“One of our most important jobs for the future is going to be the continuation of building our brand,” Fink said last year. “This is going to be a big and aggressive campaign over the next five years.”

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