BlackRock Faced with Catastrophic Loss Worth 100's of Billions, Smashes Industry Records
BlackRock Inc. is the world’s largest asset manager, controlling trillions in assets. It is one of the great, if not the greatest, financial giants of the globe.
But this year, BlackRock has set a new record by losing the largest amount of money a single firm has ever lost over a six-month span, Bloomberg reported.
Just in the first half of this year, BlackRock lost $1.7 trillion of clients’ money.
Overall, as of December 2021, BlackRock manages about $10 trillion of other people’s money. That’s more than the gross domestic product of every country in the world, except for the U.S. and China, Insider reported.
So losing $1.7 trillion is a significant blow.
Considering that BlackRock has a hand in the assets of so many major markets and even has ties to government finances, this loss is significant and could affect millions of people.
To give a snapshot of just how powerful BlackRock is, how much money it controls and how its losses can affect so many, here are just some of the things that BlackRock manages, or has a hand in.
Most of the firm’s money comes from handling investments, which includes managing money for institutions like public pension plans, endowments and foundations.
BlackRock also runs a massive technology platform called Aladdin that oversees at least $21.6 trillion in assets.
This platform is used by investors and major corporations all over the world.
“Vanguard and State Street Global Advisors, the largest fund managers after BlackRock, are users, as are half the top 10 insurers by assets, as well as Japan’s $1.5tn government pension fund, the world’s largest. Apple, Microsoft and Google’s parent firm, Alphabet — the three biggest US public companies — all rely on the system to steward hundreds of billions of dollars in their corporate treasury investment portfolios,” a 2020 Financial Times article outlined.
BlackRock has even had a hand in helping out the Federal Reserve in 2020.
“The FMA unit, which is effectively BlackRock’s consulting arm, separate from its investment management operations, had a significant role to play in the U.S. government’s coronavirus pandemic response,” Insider reported.
So BlackRock has had a hand in the American economy staying afloat.
Thus, when BlackRock loses this many trillions of dollars, it’s a big deal.
However, the firm was quick to blame its losses on the overall troubled market.
On his earnings call, Chairman and Chief Executive Officer Larry Fink said 2022 “ranks as the worst start in 50 years for both stocks and bonds,” Bloomberg reported.
The collapse, particularly in the bond market this year, shook money out of active fixed-income funds, which BlackRock relies on.
“BlackRock saw clients pull more than $20 billion during the first half of the year in a rout that has seen over $200 billion leave the industry,” Bloomberg reported.
It is undeniable that much of the income and money for BlackRock is tied to the market.
But the company has announced that about half of taxable fixed-income assets are performing above their benchmark on a one-year view, compared with about a third of traditionally managed equity assets.
So BlackRock is trying to stay optimistic, even in the face of market carnage.
Fink said he is also expecting some major transformations in how people will be investing fixed income in the future.
“This is the early days of a major transformation of how people invest in fixed income,” said Fink last week, Bloomberg reported. “We expect the bond ETF [exchange-traded funds] industry will nearly triple and reach $5 trillion in [assets under management] at the end of the decade.”
However, many say that though BlackRock may be predicting growth in the coming year, it will still remain firmly tied to the market.
With as much money as it manages and the ties that it has to important markets, public pensions and even government financial reactions, BlackRock‘s losses will not go unnoticed.
“BlackRock Inc. is used to breaking records. The world’s largest asset manager was the first firm to break through $10 trillion of assets under management,” Bloombegr wrote. “But the bigger they are the harder they fall.”
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