Against an economic backdrop of the rich getting richer and the poor poorer, BlackRock CEO Larry Fink said his firm succeeded in transforming itself over the past year to meet the moment and address America’s retirement crisis along the way.
BlackRock, the world’s biggest asset manager with $11.6 trillion in client assets, managed to move forward in a fraught political environment, Fink said. Today, “many countries have twin, inverted economies: one where wealth builds on wealth; another where hardship builds on hardship, (reshaping) our politics, our policies, even our sense of what’s possible,” he wrote in his latest annual letter to BlackRock clients and shareholders.
BlackRock’s antidote for heading off pitchfork-wielding protestors? Portfolio exposures, eventually tokenized, to asset classes such as infrastructure, private equity and other private market investments, hitherto the domain of wealthy, sophisticated investors, Fink suggested. Providing retail investors with access to those asset classes will bolster their 401(k) retirement accounts, he added.
The industry veteran rejected the view, underlying the recent rise in protectionism, that the failures of capitalism make this the time to try something else. "Protectionism has returned with force. The unspoken assumption is that capitalism didn’t work and it’s time to try something new," he said.
Fink said it would be better to see the problem as too few people being able to enjoy capitalism’s successes until now. Over the past year, BlackRock has doubled down on its mission to broaden the universe of investors with access to the capital markets driving global growth now.
“The solution isn’t to abandon markets; it’s to expand them,” Fink asserted.
Enabling Mom-and-Pop investors to gain access to private market segments they previously found inaccessible would mark the final stage of market democratization, a process that’s unfolded over the past 400 years, he wrote.
Fink said BlackRock’s acquisitions last year –- of infrastructure heavyweight Global Infrastructure Partners, private equity veteran HPS Investment Partners and private markets data firm Preqin –- have positioned the firm to lead that democratization of private market exposures.
“BlackRock has always had a foot in private markets but we’ve been – first and foremost – a traditional asset manager. That’s who we were at the start of 2024 but it’s not who we are anymore,” Fink said.
Among other takeaways from Fink's letter:
- Tokenization –- turning financial assets, including stocks, bonds and real state into digital tokens that trade online -- will be a key to driving the democratization of private market assets, he said. Tokenization will revolutionize investing, lowering the barriers to investing in previously inaccessible assets like private real estate and private equity, he predicted.
- Adding private markets exposures, tokenized or not, to 401(k) plans would help close the annual gap of 0.5% by which pension funds have outpaced 401(k) plans, Fink said. And that, over a 40 year span, would provide 401(k) participants with enough additional savings to fund nine more years of retirement, he noted.
- The U.S. dollar’s status as the world’s reserve currency is “not guaranteed to last forever,” Fink wrote. He warned that the U.S. needs to get a handle on its debt and highlighted the prospect that the dollar could lose its position to digital assets like Bitcoin.
- With wind and solar power alone not capable of reliably keeping the lights on, Fink said there needs to be more “clear-eyed” thinking about the permitting process and energy sources, including nuclear power. “Today’s nuclear isn’t the old model of massive plants with the ominous cooling towers,” Fink said.
