{"id":1565718,"date":"2022-07-22T06:00:08","date_gmt":"2022-07-22T10:00:08","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1565718"},"modified":"2022-07-22T07:49:44","modified_gmt":"2022-07-22T11:49:44","slug":"oh-no-blackrock-loses-1-7-trillion-in-six-months","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/oh-no-blackrock-loses-1-7-trillion-in-six-months\/","title":{"rendered":"Oh No: BlackRock Loses $1.7 Trillion in Six Months"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">18<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Foh-no-blackrock-loses-1-7-trillion-in-six-months%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1565718&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><header class=\"_2mvD4\">\n<div class=\"_2YAR2 _1dnWn\"><\/div>\n<\/header>\n<section class=\"_3OhA4 Lspjx\">\n<div class=\"_2h56q\">\n<div class=\"_3J1te\">\n<h5 class=\"_3-xPQ\">By <span><span data-testid=\"byline\">Marc Rubinstein<\/span><\/span><\/h5>\n<div class=\"\"> <span class=\"_2xetH\"><time class=\"_2_zR-\" data-testid=\"datetime\" datetime=\"2022-07-21T00:01:00+10:00\">July 21, 2022 \u2014 12.01am<\/time><\/span><\/div>\n<\/div>\n<\/div>\n<div class=\"_2CSKo noPrint\">\n<div class=\"_1KqZ_\">\n<div class=\"_2Cn91\">\n<div class=\"_2KkCz\"><button class=\"_30X7v _2-NUy\" data-ffx-event-action=\"cta click\" data-ffx-event-category=\"component\" data-ffx-event-label=\"font size normal\" data-ffx-event-value=\"0\" data-ffx-hittype=\"event\">Normal text size<\/button><button class=\"_3Rq_0\" data-ffx-event-action=\"cta click\" data-ffx-event-category=\"component\" data-ffx-event-label=\"font size large\" data-ffx-event-value=\"0\" data-ffx-hittype=\"event\">Larger text size<\/button><button class=\"_3VkdU\" data-ffx-event-action=\"cta click\" data-ffx-event-category=\"component\" data-ffx-event-label=\"font size extra large\" data-ffx-event-value=\"0\" data-ffx-hittype=\"event\">Very large text size<\/button><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<section class=\"_1Rw6X\" data-testid=\"article-body-top\">\n<div class=\"_1ysFk\" data-testid=\"article-body\">\n<div>\n<div class=\"_1665V _2q-Vk\" data-testid=\"body-content\">\n<p>BlackRock Inc. is used to breaking records. The world\u2019s largest asset manager was the first firm to break through $10 trillion of assets under management. But the bigger they are the harder they fall. And this year BlackRock chalked up another record: the largest amount of money lost by a single firm over a six-month period. In the first half of this year, it lost $US1.7 trillion of clients\u2019 money.<\/p>\n<p>BlackRock\u2019s management was quick to invoke the first-half market carnage when revealing the investment performance last week. \u201c2022 ranks as the worst start in 50 years for both stocks and bonds,\u201d chairman and chief executive officer Larry Fink said on his earnings call.<\/p>\n<figure class=\"_3ujPS _3x3-4 RMwbY _2XZQH\" data-testid=\"image\">\n<div aria-label=\"enlarge image\" class=\"_1lwW_\" role=\"button\" tabindex=\"0\"><source media=\"(min-width: 1024px)\" \/><source media=\"(min-width: 768px)\" \/><\/div><figcaption class=\"_3CZmy\">\n<p><span class=\"_2Li3P\">BlackRock\u2019s Larry Fink has added much more nuance to previous messages to investors and shareholders about the superior returns from ESG investing.<\/span><cite class=\"ojLwA\"><span class=\"_30ROC\">Credit:<\/span>Bloomberg<\/cite><\/p>\n<\/figcaption><\/figure>\n<p>While few firms are able to avoid what the market throws at them, some at least try to overcome it. BlackRock is increasingly giving up: At the end of June, only about a quarter of its assets were actively managed to beat a benchmark &#8212; rather than track it seamlessly as passive strategies are designed to do. That\u2019s down from a third when BlackRock acquired Barclays Global Investors in 2009 to become the leading player in exchange-traded funds.<\/p>\n<p>Within the equities business, the divergence is especially pronounced. Across the industry, assets have leached away from active strategies and into passive. In BlackRock\u2019s case, around $US21 billion has flowed out of active equity in the past decade, with $US730 billion flowing into indexed equity. The firm\u2019s passive equity holdings are now 10 times larger than its active business, although it does operate some active multi-asset and alternatives strategies that narrow the gap.<\/p>\n<\/div>\n<div class=\"_1665V _2q-Vk\" data-testid=\"body-content\">\n<p>For portfolio managers on the fixed-income side, the evolution of the business portends an ominous future.<\/p>\n<p>BlackRock\u2019s roots lie in active fixed income. Fink founded the company in 1988 around strategies that \u201cemphasize value creation through security selection\u2026and are implemented by a team of highly qualified portfolio managers employing a strictly disciplined investment process,\u201d according to the 1999 listing prospectus.<\/p>\n<p>Although the firm also launched the first US-domiciled bond ETF in December 2002, it didn\u2019t catch on the way stock ETFs did. In BlackRock\u2019s case, $US280 billion has continued to flow into active fixed income in the past 10 years. Fixed income is the biggest slug of what\u2019s left of the firm\u2019s active-management businesses \u2014 it had $US954 billion of actively managed bond funds as of June 30, compared to $US393 billion of actively managed stocks. Passive has grown, but it\u2019s only 1.5 times bigger than active in fixed income \u2013 a much smaller gap than in equity.<\/p>\n<p>All that may be about to change. The collapse in bond markets this year has shaken money out of active fixed-income funds. BlackRock saw clients pull more than $US20 billion during the first half of the year in a rout that has seen over $US200 billion leave the industry.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<div class=\"_1FVfK\">\n<div class=\"adWrapper _2UMq- noPrint\" data-testid=\"ad\"><small class=\"_3ToRr\">Advertisement<\/small><\/div>\n<\/div>\n<section class=\"vPaWe\" data-testid=\"article-body-bottom\">\n<div class=\"_1ysFk\">\n<div>\n<div class=\"_1665V _2q-Vk\" data-testid=\"body-content\">\n<p>Some of that is rolling into passive funds, in particular ETFs, where BlackRock is picking up more than its fair share. So far this year, it has gained $US39 billion of new money in ETFs and $US25 billion in other indexed strategies. The shift toward passive that started in equity is now accelerating in fixed income.<\/p>\n<blockquote class=\"Zfkcv\" data-testid=\"pull-quote\">\n<p>The challenges associated with high inflation to rising interest rates are attracting more first-time bond ETF users.<\/p>\n<p><cite>Blackrock chair and CEO, Larry Fink<\/cite><\/p><\/blockquote>\n<p>Until recently, bond ETFs were viewed with suspicion. Back in 2015, investor Carl Icahn, sitting alongside Fink on TV, called BlackRock \u201can extremely dangerous company.\u201d His rationale was that the firm\u2019s ETFs embed illiquid bonds in unsuitably liquid wrappers. \u201cThey are going to hit a black rock,\u201d he said.<\/p>\n<p>Yet during the panic of March 2020, when bond markets froze, ETFs performed efficiently. They moved to a discount to the value of the underlying bonds, but that didn\u2019t lead to a fire sale of the securities.<\/p>\n<p>Rather than transmitting stress, bond ETFs absorbed it while providing investors with much-needed liquidity. This real-life stress test validated the structure, and now that bonds are sagging, money is flooding across.<\/p>\n<\/div>\n<div class=\"_1665V _2q-Vk\" data-testid=\"body-content\">\n<p>On his earnings call, Fink explained the benefits. He observed that investors are using ETFs to quickly and efficiently gain exposure to thousands of global bonds and recalibrate their portfolios.<\/p>\n<p>\u201cThe challenges associated with high inflation to rising interest rates are attracting more first-time bond ETF users and prompting existing investors to find new ways to use ETFs in their portfolios,\u201d he said.<\/p>\n<p>For now, BlackRock\u2019s fixed-income portfolio managers are mounting a solid defence. Unlike their colleagues in equities, their performance has been relatively strong. In the first six months of the year, the funds they oversaw declined by 10.6 per cent, marginally better than the firm\u2019s fixed-income ETFs. According to the company, 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.<\/p>\n<p>But if fixed-income follows the path of equities, the divergence between passive flows and active flows will only grow. \u201cThis is the early days of a major transformation of how people invest in fixed income,\u201d said Fink last week. \u201cWe expect the bond ETF industry will nearly triple and reach $US5 trillion in AUM at the end of the decade.\u201d<\/p>\n<p>By then, BlackRock could be a lot larger, but its fortunes will remain firmly tied to the markets.<\/p>\n<\/div>\n<div class=\"_1665V _2q-Vk\" data-testid=\"body-content\">\n<p><em>This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.<\/em><\/p>\n<p><em>Marc Rubinstein is a former hedge fund manager. He is author of the weekly finance newsletter Net Interest.<\/em><\/p>\n<p><strong>Bloomberg L.P.<\/strong><\/p>\n<p><b><i>The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion.<\/i><\/b><a href=\"https:\/\/www.smh.com.au\/newsletter-signup?newsletter=business-briefing\"> <b><i>Sign up to get it every weekday morning<\/i><\/b><\/a><b><i>.<\/i><\/b><\/p>\n<\/div>\n<\/div>\n<div class=\"_22FRK _2spQv\">\n<section class=\"aKWhn noPrint\" id=\"endOfArticle\"><\/section>\n<div class=\"noPrint\">\n<section aria-busy=\"true\" aria-live=\"polite\" class=\"_2zaYr n422E\">\n<header class=\"_2qhpu\">\n<h2 class=\"_2qhpu\">Most Viewed in Business<\/h2>\n<\/header>\n<\/section>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>By Marc Rubinstein July 21, 2022 \u2014 12.01amNormal text sizeLarger text sizeVery large text sizeBlackRock Inc. is used to breaking records. The world\u2019s largest asset manager was the first<\/p>\n","protected":false},"author":1,"featured_media":1574997,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1565718","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1565718","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1565718"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1565718\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1574997"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1565718"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1565718"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1565718"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}