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.
But BlackRock is still experiencing huge demand for its iShares ETF family, despite market turmoil.
IShares ETFs are more popular than ever
“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.
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.
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 .
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.