BlackRock is the new king of Wall Street as banks get beaten up

BlackRock is the new king of Wall Street as banks get beaten up

Black rock ((BLK) stocks rose 1% this year. It may not sound fantastic, but getting some gain in this environment is noticeable. the SPDR Fund Select Financial Sector ((XLF), an exchange-traded fund that holds most of the stocks of the big banks, has plunged nearly 30% so far in 2020.

The US Federal Reserve recently called on BlackRock to execute the central bank’s plan to invest in bad debt ETFs, a move that has raised eyebrows since BlackRock managed several large fixed income funds that have high yield corporate bonds.

The slowdown in mergers and initial public offerings is also bad news for the likes of Goldman sachs ((GS), JPMorgan Chase ((JPM), Bank of America ((BAC), Morgan Stanley ((SP) and Citigroup ((VS). These five stocks are all down between 20% and 45% this year.

But BlackRock is still experiencing huge demand for its iShares ETF family, despite market turmoil.

IShares ETFs are more popular than ever

The company announced in April it recorded $ 13.8 billion in net inflows to iShares ETFs in the first quarter. iShares now has $ 1.85 trillion in assets under management, nearly 30% of the $ 6.47 trillion in total business assets.

“The ETF activity continues to grow and feeds the entire company,” said Mac Sykes, analyst at Gabelli Funds, which has a small stake in BlackRock.

And even if the best regional bank PNC ((PNC)recently announced plans to sell its more than 20% stake in BlackRock, a move that could be a sign that PNC is on the lookout for an acquisition, BlackRock should make up for the cost by buying over $ 1 billion in his own actions.

BlackRock could therefore emerge from this market downturn as a company that will be able to report even higher earnings per share as it will have fewer shares outstanding.

The recent market crisis could also help BlackRock, as well as other large asset managers, now that the Fed plans to buy unwanted bond ETFs as part of its many recovery efforts.
Bloomberg highlighted in recent history that BlackRock will notify the New York Fed when it plans to invest in ETFs, but that it will not charge any fees for doing so.

Investing socially is not a fashion

However, BlackRock could also (somewhat controversially) generate additional fees from the ETFs it hosts for individual investors – especially socially responsible ETFs that BlackRock CEO Larry Fink has championed over the years .

The Institute for Pension Fund Integrity, a company that tracks public and local pension funds, said in a report this week that the IShares Global Clean Energy ETF ((ICLN) has an expense ratio significantly higher than its IShares Core S&P 500 ETF ((IVV).

Switching to so-called ESG (environmental, social and corporate governance) funds could be much more than doing the right thing.

“BlackRock’s ESG shift is actually about generating more money for the business. Pensions must be geared towards generating returns and BlackRock is moving in that direction, which undermines the low cost benefit of indexing “said the Institute for Pension Fund Integrity in a report.

“Over time, BlackRock will look less like an efficient and inexpensive index provider than a higher forecaster of economic and social trends, with a bias for stocks and bonds that respond to its new ESG bias” , added the firm.

Yet BlackRock is holding onto a trend that has captured the minds of many socially conscious investors.

“Asset flows to mutual funds and ESG ETFs have been stable for much of the past five years before skyrocketing in 2019,” said Brian Price, chief investment officer for Commonwealth Financial Network, in a report.

“There was no defining moment that caused this outbreak, but it did bring the industry up to speed. ESG investment had become anything but fashion and seemed, in fact, to have become a permanent feature of the landscape. investment management, “added Price. .

So even if investing in ESG isn’t just for selfless purposes, it’s an undeniably wise decision that should benefit BlackRock.


Recommended For You

About the Author: Ayhan

Leave a Reply

Your email address will not be published. Required fields are marked *