New York: Larry Fink, chief executive of BlackRock, the world’s largest asset manager, urged the Federal Reserve to bring a quicker end to its crisis-era monetary policies a day after Janet Yellen signalled the US central bank was in no rush to raise interest rates.
Fink, whose firm manages $4.6 trillion (Dh16.8 trillion) of assets across equity and fixed income markets, said that plans to maintain the Federal Reserve’s balance sheet at its current size would do little to tackle what BlackRock believes is structural unemployment.
“We have a central bank that has not admitted we have structural unemployment,” he said. “Factories that used to employ thousands now employ 200. For the US to grow above trend, it has to be about government policy not central bank policy.”
Fink told the Financial Times that Fed policy would remain too aggressive even if it ends new bond purchases as planned in October, since the central bank intends to reinvest the proceeds from expiring Treasuries and mortgage-backed securities.
BlackRock called for an early tapering of quantitative easing last year, but Fink said that the Fed had in fact become an even bigger factor in the fixed income markets this year, despite reducing the size of its purchases.
“They have actually been more aggressive this year relative to supply than they were in 2012,” he said. “And don’t think they are not still heavily aggressive in the markets after October.”
Fink was speaking after BlackRock reported forecast-busting earnings for the second quarter. Its assets under management were $4.59 trillion at the end of June, up 19 per cent on the same time last year and four per cent larger than three months earlier.
Net income was $837 million in the second quarter, up 16 per cent on 2013, thanks to higher management fees, lower taxes and a reduction in costs. Revenues were up 12 per cent; earnings per share of $4.89 were above consensus of $4.46.
Shares were up more than one per cent before market open, but analysts were disappointed that institutional customers are still pulling money from BlackRock’s active equity managers, despite an executive shake-up in that division.
The company said $2.4 billion came out of fundamental equity in the three months ended June, with a further $2.1 billion pulled from its smart beta products. That is better than the respective $4.1 billion and $3.9 billion outflows in the first quarter, but reflects a warning Fink gave three months ago, namely that it will take time for new managers to build a record that attracts investors.
There were strong inflows into BlackRock’s exchange traded funds business iShares, which now account for $994 billion of the firm’s assets under management. Fink said hedge funds were increasingly using ETFs instead of futures to make big long and short bets on financial markets.
— Financial Times
