Wall Street Journal, May 9, 2018 article: "BlackRock Backs a Startup to Find Out What Young Investors Want | Acorns Grow works by rounding up the amount of a user’s credit-card purchase and investing the change" [Leading manager of institutional assets buying venture position to explore direct marketing to individuals]

Acorns Grow works by rounding up the amount of a user’s credit-card purchase and investing the change

May 9, 2018 8:28 a.m. ET

The world’s biggest money manager is buying a stake in a startup that invests its users’ pocket change, reinforcing a broader push by BlackRock Inc. to serve individual investors.

The investment in Acorns Grow Inc., part of a $50 million fundraising round that BlackRock is leading, is expected to be announced Wednesday, according to the two companies. It is using its own money instead of client funds for the investment. BlackRock manages $6.3 trillion in assets.

The Acorns stake is part of a larger strategy to broaden BlackRock’s appeal beyond big institutions to individuals and wealth managers.

Because BlackRock does not sell mutual funds or exchange-traded funds directly to retail investors, as rivals Vanguard Group and Fidelity Investments do, BlackRock lacks direct access to information about how individuals choose to invest over time and what younger people prefer when it comes to digital apps.

“We’ll get a better sense of the behaviors of this up-and-coming segment of the world,” said BlackRock Chief Operating Officer Rob Goldstein in an interview. The money manager won’t get access to Acorns’ customer data as part of the deal.

Acorns is a financial-technology firm that allows customers with balances as small as $5 to invest in groups of funds based on their risk tolerance. Users link their debit- or credit-card accounts to Acorns, and the firm rounds up the users’ purchases to the nearest dollar and invests the change on their behalf.

Since its founding in 2012, Acorns has raised around $100 million in venture capital from investors including Bain Capital Ventures, Greycroft Partners and PayPal Holdings Inc., which integrated its smartphone apps with Acorns’ last year.

BlackRock and Acorns also plan to partner on new investment options, pre-made clusters of exchange-traded funds called model portfolios and educational material on good financial habits. BlackRock sells risk and portfolio management technology called Aladdin to a growing number of firms across Wall Street, including wealth advisers.

BlackRock Chief Executive Laurence Fink has said the New York firm has a goal of having a third of its revenue being “enabled by technology” in the coming years.

Acorns and other so-called robo advisers have become an increasingly popular tool among young savers looking for simple ways to invest as they gather assets. Consulting firm Aite Group expects the number of customers investing through such advisers will rise to 17 million by 2021, from 1.8 million in 2016.

As of April, Acorns managed $803.7 million in assets across 1.9 million investment accounts in the U.S., according to its most recent regulatory filings. The company also counts more than one million users who have opened an account but have yet to invest through it.

The Acorns investment could help inform BlackRock’s efforts to draw in more business from networks of wealth managers. As part of the investment, BlackRock Chief Marketing Officer Frank Cooper will have rights to observe Acorns’ board meetings.

Acorns CEO Noah Kerner said in an interview that the capital infusion will help the startup expand more aggressively than it otherwise would have. Last month, it started offering individual retirement accounts to its users.

Two of the seven ETFs that Acorns includes in its portfolios are run by BlackRock, while the remainder are run by Vanguard. That could grow over time, executives for the two firms said, adding that they may also partner to create new funds.

Acorns is not the first robo adviser in which BlackRock has invested. In 2015, it purchased San Francisco-based FutureAdvisor, wrapping some of its technology into BlackRock’s wealth management tech push. That service, which previously sold funds directly to consumers though an app, no longer does.

Corrections & Amplifications
The chief executive of Acorns is Noah Kerner. An earlier version of this article incorrectly stated his last name.

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com and Sarah Krouse at sarah.krouse@wsj.com