BlackRock (ticker: BLK) was founded in 1988 by bond trader Laurence Fink.
Relationship with Blackstone Group
In 1988, the predecessor of BlackRock – Blackstone Group Financial Asset Management was established. In 1992, BlackRock became independent from Blackstone Group (ticker: BX) and changed its name to BlackRock.
For Blackstone, please read my article “How Does Private Equity Giant Blackstone Make Money?“
Key M&A History
Merged with PNC Asset Management in 1995 and began issuing mutual funds.
In October 2006, BlackRock merged with Merrill Lynch Investment Management and was named BlackRock Group. On June 12, 2009, Barclays sold its asset management arm, Barclays Global Investors (BGI), to BlackRock for US$13.5 billion.
BGI was once the largest asset management company in the world, with an asset scale of US$1.5 trillion, while BlackRock managed approximately US$1.3 trillion (approximately HK$10.1 trillion) in assets. After the merger of the two companies, the assets under management are close to 3.19 trillion US dollars (approximately 111.7 trillion Taiwan dollars and 24.7 trillion Hong Kong dollars), becoming the world’s largest investment management company.
On November 4, 2015, BlackRock agreed to acquire Bank of America’s $87 billion money market fund business in order to expand its business scale to meet new regulatory requirements. The merger would boost BlackRock’s money management business to $372 billion.
The world’s largest index company
How big is the scale
In mid-2023, passive funds such as BlackRock’s index trackers and ETFs accounted for about 64% of the more than $9 trillion in total assets under management at BlackRock.
Since ETF and passive fund investment are irreversible mainstream investments in the world, it is expected that the assets managed by BlackRock will become larger and larger in the future.
Importance of BlackRock
BlackRock plays an important role in the industry in the fields of stocks, fixed income, cash management, alternative investment, real estate consulting strategy and so on. BGI, acquired by BlackRock through mergers and acquisitions, is famous for its various index-tracking products. BGI’s ace index ETF iShares has a share of nearly 50% of the U.S. exchange-traded fund (ETF) market .
Doubts about monopoly
BlackRock is known as the largest shadow bank in the world due to its strength and the size and scope of its financial assets and activities. BlackRock invests the money of its clients, such as owners of units of iShares exchange-traded funds, in numerous publicly traded companies, some of which compete with each other. Because of the size of BlackRock’s money, the firm is one of the top shareholders of many companies, including the world’s largest.
Although BlackRock said that these shares are ultimately owned by the company’s clients, not BlackRock itself. But BlackRock acknowledges that it can exercise shareholder voting rights on behalf of those clients, in many cases without client involvement. This concentration of ownership has raised concerns about possible anti-competitive behavior.
When it comes to shareholder voting, BlackRock has historically voted on behalf of its clients to advance their long-term economic interests. Given its sheer size, some believe BlackRock has too much leverage over large companies. In 2021, BlackRock will reportedly begin allowing some institutional clients to vote themselves at shareholder meetings.
Regarding ESG, please refer to my previous article “Should investors chase the ESG?“
BlackRock takes ESG into account
Europe launched an investigation in 2020, questioning the EU’s document awarding BlackRock a contract that incorporated environmental, social and governance risks and targets into EU banking rules. Members of the European Parliament questioned the impartiality of BlackRock given its investments in the sector.
U.S. states reject deal with BlackRock
West Virginia said in 2022 that BlackRock and five other financial institutions would no longer be allowed to do business with West Virginia because of its advocacy against the fossil fuel industry. In 2022, due to BlackRock’s strengthening of ESG standards and ESG policies, the Florida government will divest $2 billion worth of investments under BlackRock’s management. Louisiana withdrew $794 million from BlackRock in 2022, also due to BlackRock’s support for ESG and green energy.
Oil company exec on board
New York City slammed BlackRock’s decision in July 2023 to appoint the chief executive of the world’s largest oil company, Saudi Aramco, to its board. This decision by BlackRock has caused many people to question it, thinking that it is inconsistent with the ESG investment philosophy it advertises.
The internal friction of ESG has stopped
Despite a surge in ESG proposals from corporate shareholders, global asset manager BlackRock has backed fewer shareholder ESG proposals for the second year in a row, reluctance to support what the firm deems too moralistic or Unfocused proposal. Median support for ESG proposals fell to 15% this year, down from 25% last year and 32% the year before, according to BlackRock and proxy voting agency Institutional Shareholder Services (ISS).
BlackRock Investment Management issued a report in August 2023 stating that too many shareholders’ proposals are “too much, lack economic benefits, or are simply redundant.” BlackRock said shareholder proposals in the past year to June were a record, with proposals focused on ESG issues up 34 percent, but more were “too prescriptive” or “lack of economic merit.”
BlackRock CEO Fink said in June 2023 that he had stopped using the word “ESG” because it had become too political.
Vanguard (unlisted) is BlackRock’s biggest direct opponent in all aspects.
State Street (ticker: STT) is also one of several larger direct rivals of BlackRock in index and asset management. State Street Corporation is one of the world’s largest asset management companies and the second largest fund custodian bank in the world, providing comprehensive securities services.
Including retirement accounts, Fidelity (unlisted) is the largest U.S. brokerage with the largest number of investment clients.
If pension accounts are not included, Charles Schwab (ticker: SCHW) is the largest asset management company in the United States with the largest number of investment customers.
Regarding Charles Schwab Financial Management, please refer to the following content in my book “The Rules of Super Growth Stocks Investing“:
- Sections 1-5, 65 pages
- Sections 1-6, pages 70-73, a complete introduction of this dedicated section, and I will not repeat the content of my book here.
Companies with the Most U.S. Core Assets
Which company is it?
Our so-called American core assets, such as Apple (ticker: AAPL), Microsoft (ticker: MSFT), Google parent company Alphabet (ticker: GOOGL and GOOG), Tesla (ticker: TSLA), Nvidia (ticker: NVDA), Amazon (ticker: AMZN), Meta (ticker: META), UnitedHealth (ticker: UNH), etc., who holds the most? The answer may be unexpected. It is not the pension funds of the United States and certain high-profile national sovereign funds, nor is it Buffett, but BlackRock!
The picture below shows BlackRock’s portfolio holdings as of the end of the first quarter of 2023:
The firm’s top 25 holdings as of the first quarter of 2023 are worth more than $1 trillion, representing roughly 30% of BlackRock’s overall equity portfolio.
Technology stocks account for 39% of BlackRock’s top 25 holdings, and the second-largest sector will be healthcare, accounting for 13% of its total holdings by market value. None of BlackRock’s top 25 holdings has more than a 9% stake.
Moreover, BlackRock has established positions in these core assets in the United States very early, and the latest to establish positions is Alphabet, and nine years have passed so far.
The main reason is that BlackRock owns these super-large companies through the assets it manages for clients and the various ETFs it issues to track the U.S. stock market index; .
Performance during a bull market
Let’s see how it performed during the bull run from March 2009 to February 2020. BlackRock rose from about $108 per share in March 2009 to about $572 per share in February 2020, an annualized return of 18.3%. BlackRock surged above $900 per share in late 2021, returning 43% in 2020 and 27% in 2021.
In terms of such an annualized rate of return on stocks, BlackRock’s stock performance during the bull market did not lose to the well-known large technology stocks.
Performance During Bear Markets
A bear market that begins in 2022 with a 22% drop in 2022. At $722 per share in mid-July 2023, up about 2% from 2023 to mid-July.
The market value in mid-July 2023 is 109.03B, the price-to-earnings ratio is 22.58, and the dividend yield is 2.75%.
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