BlackRock — the rulers of the world
Over the years, when BlackRock was building its position on the global market, many conspiracy theories have grown around it. The reason for this may be the amount of contacts this corporation has around the world. Because, after all, BlackRock is the world’s largest shareholder. He has purchased shares of most companies that are listed on world stock exchanges. He trades trillions of dollars in other people’s assets. What’s more, he advises the governments of many countries: the United States, Canada, Israel, the European Union … The list goes on for a long time. It is not surprising, then, that the public perceives such enormous power concentrated in “one hand” as dangerous.
However, we will not fuel rumors and focus on the facts.
So let’s start from the beginning. How did BlackRock now have branches in 30 countries, clients in 100 countries and over $10 trillion in assets under management?
Larry Fink and his First Boston team of Robert S. Kapito, Susan Wagner, Barbara Novik, Ben Golub, Hugh Frater, Ralph Schlosstein and Keith Anderson wanted to provide asset management and risk management services to institutional clients. So in 1988, Blackstone Financial Management was founded, and at first it actually dealt with risk management and asset management belonging to the institution. While at First Boston, Fink lost $90 million, which spurred him to develop risk management and fiduciary practices. Fink found an investor in Pete Peterson, who gave him a $5 million loan in exchange for a 50% stake. The company started to generate income within a few months. By 1989, the company’s assets had grown to $2.7 billion.
In 1992, the company changed its name to BlackRock and since then the amount of assets it manages has been increasing year on year. In 1993, it was already 17 billion dollars. In 1994, the company split up and Fink became president and CEO of BlackRock. In 1999, the company went public in New York, and after a year its shares oscillated around $ 14 and the assets they managed amounted to about $ 165 billion.
In 2004, the company made a major acquisition by purchasing SSRM Holdings, bringing its assets to $325 million. Then in 2006 there was a merger with Marrill Lynch Investment Managers and the following year BlackRock took over Quellos Capital Management.
You might think that this is already a huge success, but as you know, the greatest publicity can be gained by signing contracts with the government. And that’s exactly what happened when the US government signed a deal with BlackRock to offset the 2008 financial crash. Vanity Fair wrote then that BlackRock was the best choice for the rulers to carry out this task. As a result of this deal, Fink’s firm would oversee $130 billion in debt with Bear Stearns and American International Group. A year later, BlackRock became the number one in the world among other companies in this industry. The year 2009 also brought further acquisitions and increases in the company’s assets.
In 2013, BlackRock was listed by Fortune magazine as one of the 50 most admired companies in the world. A year later, The Economist wrote that BlackRock is the world’s largest asset management company. And with $4 trillion under management, it has become bigger than the Industrial and Commercial Bank of China. Also in 2014, there was an incident that led to the British Financial Conduct Authority banning the company for failing a “fit and reputation” test. The case was that then-headmaster Jonathan Burrows paid £43,000 to avoid being prosecuted for unpaid rail fares. As a result, Burrows left the company and her comment only confirmed that such behavior is contrary to the principles and values it represents.
By mid-2015, Black Rock managed assets worth $4.721 trillion and 65% of investors were institutional investors. The year 2018 brought the company the biggest drop in assets since 2011 and stopped at the level of 6 trillion dollars.
Due to BlackRock being among the top three largest shareholders of any oil company and the seven largest coal producers, it is heavily criticized for its environmental impact. In 2020, Fink, issuing an annual open letter, announced in it that the goal of future investment decisions will be environmental sustainability. At that time, it was also planned to sell coal investments worth USD 500 million.
Also in 2020, the US Federal Reserve selected BlackRock to manage two corporate bond purchase programs. It was a response to the pandemy of the the coronavirus. August 2020 brought this corporation another success. It has received approval from the China Securities Regulatory Commission to establish a mutual fund business. This made BlackRock the first such global company to obtain Chinese government approval to start operations in China.
In 2022, the company announced that talks were underway with the President of Ukraine Volodymyr Zelensky to cooperate in rebuilding Ukraine. BlackRock fell under the fire of criticism and its actions were assessed as making money on the Ukrainian tragedy.
The year 2022 also brought an important change to the company. The fund has noticed that more and more institutional clients are interested in the revolution brought about by blockchain. Customers were looking for something that would facilitate their access to effective and cost-effective access to cryptocurrency resources. So BlackRock has launched a Bitcoin fund that focuses on four areas of digital assets and related ecosystems. These are blockchains, stablecoins, cryptocurrencies and tokens. The fund is called Spot Bitcoin Private Trust and is the result of a partnership with Coinbase. The connection, which was made through the Aladdin investment platform and the stock exchange, will allow free trading, trusteeship, prime brokerage and reporting. And it is institutional clients who will gain a new option in asset management. This is, you can say, a sign of the times because until recently, the CEO of BlackRock himself claimed that cryptocurrencies are only suitable for money laundering.
Due to the huge amount of funds at the company’s disposal, it often happens that the funds of its clients are invested in companies listed on the stock exchange that compete with each other. They are also among the top shareholders of the world’s largest companies. Although the shares legally belong to BlackRock’s customers, it can take part in voting replacing its customers. This concentration of power raises public concerns about competitiveness. The concentration of ownership in one hand causes the prices of products to increase while the quality and quantity of available services decreases. Researchers studying this type of investment say that it does not mean collusion of shareholders, but it does affect the willingness of companies to take competitive actions.
Researchers conducting studies on ownership concentration in airlines and banking have already proven how disruptive this trend is. Slowly, scientists are starting to convince politicians to fight the concentration of ownership. In the United States, this would be handled by the Department of Justice. In a situation where 75% of American industries are experiencing an increase in the concentration of capital, the state would introduce antitrust law. Because under such conditions, rich corporations get even richer with very little outlay. This exacerbates inequalities.
Despite the fact that BlackRock is a corporation in the United States and the research conducted by scientists also applies to American companies, problems with centralization affect all countries in the world. This is because investments are mostly in global enterprises. This may result in exorbitant prices for products and services, as well as reduced competition.
Funds such as BlackRock are not only a negative impact on the market. Managing them is much cheaper for investors and by reflecting the mechanical behavior of indices they generate profits.
BlackRock is currently ranked 192 on the Fortune 500 list of the largest corporations in the United States in terms of revenue.
