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CEO of Blackrock is optimistic about cryptocurrencies

Posted:Jul 15, 2023 13:44 Category: Americas , Crypto , Fintech , Posted by
Lea Hogg

Larry Fink, CEO of BlackRock, is optimistic about cryptocurrencies and their potential to increase accessibility to investing on a global scale. Fink specifically highlighted the growing interest among BlackRock’s clients in digital assets, indicating a rising trend in this field.

Cryptocurrencies bring unique value

Fink emphasized the unique value proposition that cryptocurrencies bring to investment portfolios, noting their advantages over other asset types. He underscored the international nature of cryptocurrencies, enabling them to transcend the limitations of a single currency, which adds to their appeal.

BlackRock is the world’s largest asset manager with a staggering (US) $8 trillion in assets across various investment products, his statements underscore the significance of cryptocurrencies and their potential impact on the future of global investing.

Fink further mentioned that BlackRock is actively engaging with regulators to ensure the safety and soundness of cryptocurrencies, recognizing the importance of establishing a secure framework in this emerging market.

While Fink expressed his positive view on cryptocurrencies, he refrained from commenting on BlackRock’s application for a Bitcoin exchange-traded fund (ETF) in the United States. The application is currently awaiting approval from the Securities and Exchange Commission (SEC).

ETF have transformative role

In the past, the SEC has rejected several applications for a Bitcoin ETF on the spot market. However, BlackRock’s filing has sparked optimism for potential approval, given the asset manager’s track record of successful ETF applications. Bloomberg Intelligence analysts Eric Balchunas and James Seyffart noted that out of the 550 ETF applications submitted by BlackRock, only one has been rejected.

Fink emphasized BlackRock’s commitment to democratizing investing, highlighting the transformative role of ETFs in the investment landscape. He noted that the industry is still in its early stages, with significant potential for growth.

BlackRock’s application has also paved the way for other asset managers, including prominent firms such as Fidelity, Bitwise, 21Shares, WisdomTree, and Investco, among others, who are eagerly awaiting potential approval from the SEC to file similar ETF applications in the United States.

Larry Fink’s bullish views on cryptocurrencies, along with BlackRock’s application for a Bitcoin ETF, indicate the growing recognition of digital assets in the investment world. The outcome of the SEC’s decision on BlackRock’s application could have far-reaching implications for the adoption and acceptance of cryptocurrencies within the traditional financial system.

BlackRock has also projected a surge in investment into bond funds once the US Federal Reserve concludes its interest rate hikes. The company exceeded earnings expectations and announced that its assets under management had recovered to a substantial (US) $9.4 trillion.

Fixed income investments on the rise

Investors have been flocking to money market funds to take advantage of rising interest rates, resulting in the total in US MMFs surpassing US $5 trillion. However, BlackRock believes that a significant portion of these funds will transition into fixed income investments once investors feel confident that yields will not be adversely affected by further actions from the Federal Reserve.

Rob Kapito, BlackRock’s chief operating officer, expressed optimism about the fixed income market

There is finally income to be earned in the fixed income market, and we are expecting a resurgence in demand. There are trillions that are ready, when people feel rates have peaked, to flood the market, and we need to position ourselves to capture that.” Rob Kapito, COO – Blackrock

While some analysts speculate that the Federal Reserve may pause after a quarter-point increase at its upcoming July meeting, BlackRock, along with its CEO Larry Fink, has consistently suggested that interest rates will need to remain elevated for a longer duration.

BlackRock has predicted that global bond exchange traded funds (ETFs) will triple their assets to (US) $6 trillion by 2030. This week, these ETFs surpassed US $2 trillion in assets, double the amount from just three years ago.

BlackRock’s profits soar

Despite a 1 percent year-on-year decline in overall revenue to (US) $4.5 billion and a 3 percent drop in operating income, BlackRock achieved (US) $1.4 billion in net income during the second quarter, marking a 27 percent increase from the same period last year. The recovery in the benchmark S&P 500 index, driven by a handful of major tech stocks, contributed to the growth in assets under management. Net inflows for the quarter reached US $80 billion, slightly below the expected (US) $92 billion, while BlackRock’s cash management products attracted (US) $23 billion in inflows.

While BlackRock’s profits soar, its competitors in the asset management industry struggle with compressed margins and heightened competition. Additionally, the company has faced criticism from Republican politicians in the US, who accuse it of pursuing a “woke” approach to investing. BlackRock has defended itself by highlighting the breadth of its offerings, ranging from index trackers to alternative investments. Despite this, BlackRock’s shares closed 1.6 percent lower in New York on Friday.

The company’s recent cost-cutting initiatives have allowed it to rebound, achieving an adjusted operating margin of 42 percent, nearly matching the figure from the second quarter of 2022. Analysts such as Michael Brown from KBW remain positive about BlackRock’s long-term growth story, despite the lower revenue. The company reported (US) $9.06 in diluted earnings per share, a 28 percent year-on-year increase, surpassing analysts’ expectations of (US) $8.41. Revenues from BlackRock’s Aladdin risk management system and other technology services rose 8 percent to (US) $359 million, exceeding analysts’ forecasts.

Superior technology

BlackRock has consistently attracted larger shares of spending from its 25 largest clients over the past five years, thanks to its superior technology and diverse asset class options. In contrast, many other asset managers are experiencing contraction, making BlackRock’s growth standout. T Rowe Price reported net outflows of (US) $20 billion for the quarter, although rising markets boosted its assets under management to (US) $1.4 trillion.

In conclusion, BlackRock’s robust financial performance, recovery in assets under management, and predictions of increased demand for bond funds position the company for continued growth and success in the asset management industry.

 

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