In his annual letter to shareholders, BlackRock Chairman and CEO Larry Fink focused on various topics involving the economy and the world of investing, and specifically vowed to open up private markets to more people.
“As we enter our century’s second quarter, there's a growing mismatch between the demand for investment and the capital available from traditional sources,” Fink wrote in the March 31 letter. “Governments can’t fund infrastructure through deficits. The deficits can’t get much higher. Instead, they’ll turn to private investors. Meanwhile, companies won’t rely solely on banks for credit. Bank lending is constrained. Instead, businesses will go to the markets.”
Fink noted some $25 trillion is now sitting idle in banks and money market funds.
“Assets that will define the future, data centers, ports, power grids, the world’s fastest-growing private companies, aren’t available to most investors,” Fink added in the letter. “They're in private markets, locked behind high walls, with gates that open only for the wealthiest or largest market participants.”
But nothing in finance is immutable, Fink noted. “Private markets don’t have to be as risky,” he wrote. “Or opaque. Or out of reach. Not if the investment industry is willing to innovate; and that’s exactly what we’ve spent the past year doing at BlackRock.”
Fink explained how BlackRock, which has $11.6 trillion in assets under management, has recently dove into the private markers.
In the past 14 months, he said “we've announced the acquisition of two of the top firms in the fastest-growing areas of private markets: infrastructure and private credit. We bought another firm to get better data and analytics, so we can better measure risk, spot opportunities, and unlock access to private markets.”
As such, BlackRock has been transformed, he said.
With respect to infrastructure, Fink wrote: “Today, we're standing at the edge of an opportunity so vast it's almost hard to grasp. By 2040, the global demand for new infrastructure investment is $68 trillion. To put that price tag in perspective, it’s roughly the equivalent of building the entire Interstate Highway System and the Transcontinental Railroad, start to finish, every six weeks, for the next 15 years.”
Governments, already weighed down by historic deficits, cannot rely solely on taxpayers to shoulder the staggering costs of new infrastructure without risking a debt spiral, he added. “Even the world’s largest tech companies, despite their billions in free cash flow, aren't equipped for this scale of investment,” he observed. “A single AI data center can cost between $40 billion and $50 billion.”
The markets are eager to step in where governments and corporations are stepping out, he wrote. Investors are already voting with their dollars, making infrastructure one of the world's fastest-growing market segments, Fink asserted. While private assets may carry greater risk, they also provide great benefits, he said, noting that infrastructure offers inflation protection, stability and high returns as an example.
