Major deals, but no big pivot
As Larry Fink took to the stage at RBC’s Global Financial Institutions conference, BlackRock was in the headlines for its consortium’s purchase of 43 ports from Hutchison, including two major ports along the Panama Canal.
The firm also made recent news for big acquisitions in the infrastructure and private credit markets. But Fink believes the most significant buy will prove to be a deal that received relatively little attention: the purchase of Preqin, the private markets data solutions provider.
BlackRock plans to combine the capabilities of this acquisition with its existing Aladdin and eFront solutions, to deliver better information, transparency, and liquidity. The result could be new products, including for retail, and “a transformational change for the industry”.
Together, all these moves have been viewed as a major shift in the company’s focus but Fink doesn’t see it that way.
“Much of it is based on the needs of clients – we’re not making a pivot,” he says. “We just see the blending of public and private markets happening faster than I ever envisioned.”
Short-term turmoil but positive outlook
Fink accepts that consumers and corporations have hit the pause button amid the policy changes of the new U.S. administration and the “reimagining” of global trade. Mass deportations might lead to labor shortages in the agricultural industry and food price inflation, he warns.
However, while he expects “a rocky year” in 2025, he predicts net positive effects for the U.S. in the longer term, and perhaps some unlikely results: “Could all this negativity and noise produce a good, positive outcome with a great trading agreement between the U.S. and China?”
In the area of 10-year Treasuries, in particular, Fink believes the markets are currently getting it wrong: “We’re going to have a steeper yield curve,” he predicts.
“The European leadership is now taking responsibility and trying to focus on how to grow their economy, instead of how to control it.”
Larry Fink, Chairman and CEO, BlackRock
Europe can seize its opportunity
He also sees current geopolitical events as an opportunity for Europe to break free from what he terms overregulation.
Having seen its equity valuations suffer in comparison to their U.S. peers for a decade, Europe is currently enjoying a market rebound. Fink approvingly cites European countries’ move to bolster defense budgets, and recent commitments by the French and Italian governments to major AI data center projects.
“The European leadership is now taking responsibility and trying to focus on how to grow their economy, instead of how to control it” he says.
At the same time, the U.S. needs to wake up to the reality of its deficits and launch more public-private investing for infrastructure. That should include power for increased data center demand: “Where is that investment going to come from? The reality is that’s going to be the role of capital markets.”
Tech delivers efficiency and competitive edge
BlackRock has had Stanford academics supporting its big data analytics since 2017, and Fink hails the results to date and the potential of AI for the industry’s future.
In 2019, he points out, BlackRock had $7 trillion of assets under management. Today that figure is $11.6 trillion, yet the number of employees is virtually unchanged at around 20,000, an achievement he attributes largely to tech.
“So much of the success of BlackRock is on the foundational basis of our technology,” he says. “We do spend a great deal of time investing in it for operational efficiencies, but now we’re spending a significant amount on trying to get unique and differentiated information for investing.”
“To be a leader of a company today, if you’re not a dreamer, you’re probably going to fail.”
Larry Fink, Chairman and CEO, BlackRock
AI set to boost progress and valuations
On a wider level, Fink believes tech will have a deflationary impact over the next two or three years and in the longer term. “I believe we’re getting set up for a big economic boom, and a lot of it will be related to new technologies,” he says.
He points to the benefits in sectors such as manufacturing of new abilities to overlay AI with visual technology and the fast-developing tensile dexterity of robotics.
“The one issue is that AI right now is still the domain of larger companies, because the cost is extraordinary,” he adds. “When we bring down the cost of AI, and these models are far cheaper, then we could democratize it much faster.”
“But it’s clear to me that the U.S. technology advantage is going to be drive higher stock prices over the next five years and will continue to drive opportunities for investors.”
Government will need to work with businesses to temper disruptions in the labor market, but technologies will lead to “more dreamers, more opportunities”, Fink adds – a cadre he sees as critical to success.
“To be a leader of a company today, if you’re not a dreamer, you’re probably going to fail,” he concludes. “You have to inspire your workforce and you cannot be afraid to fail.”
