The cryptocurrency is up over 700% from a year ago when a single bitcoin was below $7000. This year, bitcoin is up over 100% after a February rally brought the cryptocurrency over $50,000 for the first time.
“We started from negative 1%. The history of real rates, on average the last 25 years, the average has been about 1.5% positive and usually, when you get this sort of economic growth, you’re talking about real rates that go to 3%, 4%, 5% positive,” said Rieder. “We may get to zero percent real rates, so you still have an extremely accommodative environment.”
Economic data suggests that the US will see an “explosive growth rate,” and markets are anticipating that yields will have to move higher.
While this happens he anticipates there will be a “little bit of uncertainty” in the stock market and volatility may rise, but then stocks will “recalibrate.”
“I’m not that worried about equities,” Rieder said.
The bond chief added that there are some stocks with high-flying valuations that will likely pull back as yields move up. High-growth stocks like those in the technology sector are seen as particularly vulnerable to a move higher in yields. On Thursday the Nasdaq suffered over a 3.5% intraday decline.
Rieder mentioned that his team has been looking into specific areas of technology included AI and the semiconductor space, but they’ve also been adding outside the sector.
“We’ve added to financials. We like the cyclicals, we like the consumer space quite a bit. The adds have been bigger there than in pure technology,” Rieder said.
BlackRock, the world’s largest investment manager, has become an increasingly influential Wall Street player in Washington, DC as a poster child of the revolving door between finance and politics.
The firm has hired notable policy-makers over the years, and two executives with the New York-based asset manager on their resumes are now set to hold prominent roles in President-elect Joe Biden’s cabinet.
BlackRock investment executive Brian Deese is set to head Biden’s National Economic Council, effectively serving as his top advisor on economic matters. Biden has also tapped Adewale “Wally” Adeyemo, a former chief of staff to BlackRock chief executive and longtime Democrat Larry Fink, to serve as a top official at the Treasury Department.
1. BlackRock controls $7.8 trillion, making it the largest money manager in the world.
BlackRock manages a staggering $7.8 trillion in other people’s money. That’s more than the gross domestic product of every country in the world, except for the US and China.
For its largesse in investment management, it’s a new firm by Wall Street institution standards. BlackRock was founded in 1988 by Fink, who also serves as the chairman, and seven others, including BlackRock President Robert Kapito and Vice Chairman Barbara Novick.
BlackRock’s makes most of its money handling investments for outside clients, mostly institutions like public pension plans, endowments, and foundations.
As of September, 60% of its overall assets under management are for institutional investors, most of which is products linked to stock markets. It also has a $222 billion alternative investments business, managing products like private equity, private credit, and hedge funds.
2. It runs a massive technology platform that oversees at least $21.6 trillion in assets.
In 1999, BlackRock started selling Aladdin, which analyses and tracks investors’ portfolios, which can help professional money managers spot risks. Today, it is a juggernaut widely used in the money management industry and beyond.
“Vanguard and State Street Global Advisors, the largest fund managers after BlackRock, are users, as are half the top 10 insurers by assets, as well as Japan’s $1.5tn government pension fund, the world’s largest. Apple, Microsoft, and Google’s parent firm, Alphabet – the three biggest US public companies – all rely on the system to steward hundreds of billions of dollars in their corporate treasury investment portfolios.”
In February, $21.6 trillion in assets sat on the platform from just a third of its 240 clients, the FT reported, citing public documents verified with the companies and first-hand accounts. Firms try to replicate it as a product, but none have been able to do so at the same scale.
3. BlackRock has hired many former government officials into senior roles.
By the time Deese and Adeyemo got to BlackRock, they already had experience working in government. Deese was previously a senior advisor to President Barack Obama and served as deputy director of the National Economic Council, which he is now set to lead under Biden.
Adeyemo, who was appointed as deputy Treasury secretary in the Biden administration, had previously worked as Obama’s senior international economics advisor. While at BlackRock, one of his roles was Fink’s interim chief of staff.
Thomas Donilon, who is now chairman of the asset manager’s research arm, previously served as national security advisor to Obama. (Donilon’s brother, Mike, was Biden’s chief strategist during his presidential campaign).
BlackRock has hired other former policy-makers and regulators. Coryann Stefansson, who previously worked on bank supervision matters at the Federal Reserve Board and held senior positions at the Federal Reserve Bank of New York, joined BlackRock’s Financial Markets Advisory (FMA) unit in 2016. She left last year, according to LinkedIn.
4. The firm played a significant role in aiding the Federal Reserve this year.
The FMA unit, which is effectively BlackRock’s consulting arm, separate from its investment management operations, had a significant role to play in the US government’s coronavirus pandemic response this year.
After an analyst said on an April earnings call that investors viewed BlackRock’s mandate as a “bailout” for his firm or the exchange-traded fund industry broadly, Fink called the question “insulting.”
5. The Federal Reserve tapped BlackRock during the last financial crisis, too.
The investment manager had been there before, defending its connection to the Federal Reserve. During the global financial crisis of 2007-2009, the Federal Reserve Bank of New York asked BlackRock’s FMA division to handle assets of Bear Stearns and AIG, both on the verge of collapsing.
“They have access to information when the Federal Reserve will try to sell securities, and what price they will accept. And they have intricate financial relations with people across the globe,” Republican Senator Chuck Grassley told the New York Times at the time. “The potential for a conflict of interest is great and it is just very difficult to police.”
BlackRock has emphasized that the division handling Fed mandates, the FMA, is distinct from its core money management business to prevent conflicts.
6. Fink has been vocal on matters of climate change, urging other companies’ leaders to consider the associated risks.
“Climate change has become a defining factor in companies’ long-term prospects,” he wrote in his open letter to chief executives in January.
“Disclosure should be a means to achieving a more sustainable and inclusive capitalism. Companies must be deliberate and committed to embracing purpose and serving all stakeholders – your shareholders, customers, employees, and the communities where you operate,” he said.
The firm rolled out related initiatives, like exiting investments that carry sustainability-related risks and launching new products that screen for exposure to fossil fuels.
7. But his firm has been scrutinized for its record on supporting shareholder requests for climate-related disclosures.
In a September report, Morningstar, a firm that analyzes fund information, said it found support for those type of requests rose at asset management giants Fidelity, State Street Global Advisors, and Vanguard, but fell at BlackRock compared to the year prior.
“While 2020’s results mark a higher level of support than BlackRock had given such proposals from 2016 through 2018 – when its backing never made it to double digits – the 2020 level of ‘for’ votes was down to 14% from 25% in 2019,” analysts wrote of the 14 climate-related resolutions shareholders requested this year.
8. It has long been rumored that Fink himself will head to DC.
BlackRock Chief Executive Larry Fink was reportedly under consideration by 2016 presidential candidate Hillary Clinton to run the Treasury Department. He was also rumored to be under consideration for Biden’s administration.
But he has squashed that chatter. Last month, private equity founder David Rubenstein asked Fink during Bloomberg’s virtual New Economy Forum how he would respond to a request from Biden to serve in his cabinet.
“Thank you for that honor, but I’m very happy at BlackRock. I’ve committed to my employees and to my board and to my family already. I’m staying in New York for the time being,” he said, according to a transcript of the event.
9. BlackRock has made lots of acquisitions.
Think of BlackRock as a firm that has gobbled up lots of competitors in its path over the years.
The firm has purchased legacy businesses and fintech startups, looking to keep an edge as traditional money management isn’t as profitable or unique as it once was.
Last month, the firm said it would acquire a California-based investment provider called Aperio for approximately $1 billion in cash. Last year, BlackRock acquired eFront, a French startup that runs alternative investments management software, for $1.3 billion.
In 2009, BlackRock acquired Barclays Global Investors in a deal that included Barclays’ iShares ETF business; and three years before that, the firm acquired Merrill Lynch Investment Management.
President-elect Joe Biden campaigned on tackling climate change while simultaneously creating jobs – and one of the latest picks for his administration shows his intent to intertwine environmental policy with economic.
On Thursday, Biden tapped Brian Deese as director of the National Economic Council. The Obama administration alum has been at turns hailed for orchestrating the Paris Climate Accord, but also drawn ire from progressive groups for his work with BlackRock, one of the world’s largest investors in fossil fuels.
The position does not require Senate confirmation.
Like many other notable key appointees and nominees to the incoming Biden administration, Deese worked for the Obama administration as senior advisor for climate and energy policy.
Deese was previously a policy director for the Obama campaign, then later a member of the economic policy working group of the Obama-Biden transition team. He also held roles in the Obama administration as deputy director of the Office of the Management and Budget, and as the deputy director of the National Economic Council.
Robert Stavins, a professor of energy and economic development at Harvard’s Kennedy School of Government, where Deese was once a senior fellow, told Business Insider in a statement that Deese will bring “his abundant and diverse experience from the Obama administration to this new position as Director of the National Economic Council” and is an “excellent appointment.”
Though Biden didn’t fully embrace the progressive movement’s Green New Deal, this past summer he proposed to spend $2 trillion on climate-related initiatives, and listed climate change as one of the top priorities for the US.
Most recently, he announced a new position on climate change on the National Security Council, which former Secretary of State John Kerry will fill.
Environmental activists are skeptical of Deese’s decision to work at BlackRock
Biden noted in a video that Deese will be the first NEC director who is a “true expert on climate policy,” and said in a statement that Deese is a “trusted voice” to help “end the ongoing economic crisis, build a better economy that deals everybody in, and take on the existential threat of climate change in a way that creates good-paying American jobs.”
Deese echoed Biden’s sentiments, and said in a tweet that “the climate crisis, racial inequity, and our economic recovery are inextricably linked. Our government must reflect that reality-and that is the perspective I will bring to the National Economic Council.”
But some progressive groups have expressed concerns about Deese’s current role at BlackRock, where he has been the Global Head of Sustainable Living for three years.
BlackRock is the largest investment manager in the world. The firm, which manages $7.8 trillion, has been scrutinized for its investments in fossil fuel companies. Last year, the Institute for Energy Economics and Financial Analysis said in a report that the company “continues to ignore the serious financial risks of putting money into fossil fuel-dependent companies,” Business Insider’s Sinéad Baker reported.
Earlier this year, the CEO of BlackRock announced that the firm would emphasize climate change in its investment strategy. Noting that “investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk,” the firm said it would exit investment from thermal coal producers. While some environmental activists lauded the decision as progress, others were skeptical of real change, Business Insider previously reported.
“He went to BlackRock because of the resources they had to address problems he cares about,” a staff member on the Biden-Harris transition team told Business Insider.
A spokesperson for BlackRock told Business Insider in a statement that Deese “has been instrumental to helping investors around the world understand the risks that climate change poses to the economy and to their portfolios.”
Deese is getting mixed reviews from some lawmakers and activists
Environmentalists are split on whether Deese’s time at BlackRock should warrant concern.
The Sunrise Movement Political Director Evan Weber criticized “the revolving door between Wall Street and the White House,” and said in a statement that “there are many diverse, qualified people that can help Joe Biden and Kamala Harris Build Back Better who didn’t choose to work at predatory investment firms.”
When asked about criticisms expressed by the Sunrise Movement, the staff member on the Biden-Harris transition team told Business Insider that a lot of the criticisms were “things that fall outside of his portfolio.”
One petition campaign called “No Corporate Cabinet” urged Deese to not be included in Biden’s cabinet, and said it “seems clear that Deese doesn’t care about climate change or the future of our country at all.”
Meanwhile, Deese has received support from some lawmakers and activists.
Sen. Ed Markey, who alongside Rep. Alexandria Ocasio Cortez has been leading the push for a Green New Deal, said in a tweet on Thursday that Deese’s appointment meant there will be an “effective climate policy leader driving a climate-centered economic agenda.”
Bill McKibben, the founder of international environmental organization 350.org, said in a series of tweets that while he respects some of those who criticized Deese, that he himself did not think it’s “remotely correct” that Deese is “not progressive” or “doesn’t care about climate change.”
Deese did not immediately respond to Business Insider’s request for comment on this story.