BlackRock Loses $1.7 Trillion in Six Months
Larry Fink's investment giant loses record amount of clients' money
Investment giant BlackRock has lost a staggering $1.7 trillion of its clients' money in the past 6 months, according to a new report.
According to a Wednesday report from Bloomberg analyst Marc Rubenstein, the loss is the largest sum ever lost by a single firm over a six-month period.
Among BlackRock’s largest holdings are technology companies such as Apple, Microsoft, Amazon, and Tesla, according to filings with the Securities and Exchange Commission (SEC).
However, technology firms were the first to lay off large portions of their staff as the stock market entered its months-long tailspin.
“The first half of 2022 brought an investment environment that we have not seen in decades,” BlackRock CEO Larry Fink said in the company’s second-quarter earnings report.
“Investors are simultaneously navigating high inflation, rising rates and the worst start to the year for both stocks and bonds in half a century, with global equity and fixed income indexes down 20% and 10%, respectively.”
Rubenstein attributed the loss to an increased reliance on passive investment, which tends to suffer during short-term declines in the stock market.
“BlackRock is increasingly giving up: At the end of June, only about a quarter of its assets were actively managed to beat a benchmark — rather than track it seamlessly as passive strategies are designed to do,” Rubenstein wrote, observing that BlackRock’s “roots” lie in active fixed income.
BlackRock has also garnered attention for its embrace of "woke" Environmental, Social, and Governance (ESG) investing, which in turn has suffered in the current downturn.
By adopting ESG goals — or, in the case of BlackRock, pushing portfolio companies into adopting ESG goals — executives commit themselves to pursuing green energy, appointing a certain number of minorities to serve as managers, or otherwise blending profitability with progressive politics.
For instance, iShares’ ESG Aware MSCI ETF — which has its largest holdings in companies like Microsoft, Alphabet, and Tesla — is down 18% since the beginning of 2022, slightly lower than the overall S&P 500 index.
Meanwhile, iShares’ Global Energy ETF — dominated by oil and gas conglomerates like Exxon Mobil, Chevron, and Shell — has risen nearly 25% over the same time period.
A May report detailing BlackRock’s “firm-wide” ESG efforts said that the company seeks to “engage with investee companies on ESG issues to enhance long-term value.”
Indeed, Fink said in 2017 that he desires to change the direction of corporate America toward progressive outcomes.
“At Blackrock we are forcing behaviors,” he said of the company’s ESG scoring approach.
“You have to force behavior and if you don’t force behavior whether it’s gender or race or any way you want to say the composition of your team, you’re going to be impacted.”
BlackRock — which maintains a 4.2% stake in Apple, a 4.5% stake in Microsoft, and a 3.6% stake in Amazon — is among the most influential asset managers in the world.
Combined with the holdings of Vanguard and State Street, the three firms control an average 20% stake in every Fortune 500 company and have been willing to exercise their power toward progressive ends jointly — for instance, by placing three environmental activists on the 12-person board of oil giant Exxon Mobil.
In essence, BlackRock and other large asset managers direct the policies of corporate America on the basis of their clients’ funds — which is often the retirement and pension savings of typical American investors.