CEO Larry Fink says money is pouring into Chinese investments despite U.S. restrictions.
Simon Dawson/Bloomberg
Even as BlackRock’s earnings surged in 2020, with the world’s largest asset manager benefiting from increased saving and investment, the coming retirement crisis in the U.S. is getting worse, BlackRock CEO Larry Fink said.
The three reasons are low interest rates, low savings rates, and more part-timers and self-employed people in the economy. Partly because of the low U.S. household savings rate, Fink said he believed the U.S. has required more fiscal stimulus than Europe.
In the first quarter of 2020, the savings rate in Europe was about 15.6%, versus 8.3% in the U.S. in March.
“I am petrified about the silent crisis of retirement,” Fink said in an interview with Barron’s. “The great problem is a high percentage [of people in U.S.] in part-time work or self employed with no retirement funding.” While those working for larger companies do have retirement savings, many companies aren’t adequately teaching financial literacy.
“The reason the U.S. has needed more fiscal stimulus than the European economies is Americans don’t have adequate savings,” Fink continued. “When you have a crisis like the pandemic, Europe is better prepared because of broader, deeper savings” and a stronger safety net. “The U.S. is less prepared than Europe in terms of the financial resiliency of families because we’re not a society of savers.”
Separately, Fink’s outlook on the stock market remains positive because of the persistence of low interest rates, and because he believes the coronavirus vaccines will be “fully disseminated” in the late second quarter, producing herd immunity in the third quarter. That will revive parts of the economy that have flatlined and lay the groundwork for better growth later in the year.
“I don’t expect [the market] to rise like it did in 2020, but I do believe the foundation of the markets will be fine,” Fink said. That doesn’t mean the going will be smooth: Fink also said he expects a 5% to 10% correction in the course of the year.
Finally, Fink said that even as the U.S. restricts investments in China, BlackRock saw record inflows of money into Chinese investments from global investors.
“Let’s be clear: Many many large U.S. companies are very active in China and selling goods so our trade deficit with China has never been greater,” he said. “We stand by our country’s wishes and we’ll do whatever’s necessary, but we see global investors are running toward China not away from China.”
He added that he welcomes the prospect of discussing the need for a multilateral approach to China with the Biden administration. “There is a need to have the No. 2 and No.1 marketplaces have conversations and to have multilateralism to build a better world,” he said.
Fink also said BlackRock is reviewing its political spending after last week’s insurrection by supporters of President Donald Trump trying to stop the certification of President-elect Joe Biden’s victory. The company has halted political spending.
Earlier, BlackRock reported that 2020 earnings climbed to $4.9 billion, or $31.85 a share, on revenue of $16.2 billion. That compares with a profit of $4.5 billion, or $28.43 a share, and revenue of $14.5 billion in 2019. Net inflows of money into BlackRock products totaled $390.8 billion in 2020, down from $428.7 billion in 2019.
The results were much higher than analysts expected, wrote Craig Siegenthaler of Credit Suisse.
Assets under management totaled $8.67 trillion, versus $7.43 trillion a year earlier. “Strong markets, good performance and the breadth and depth of BlackRock’s platform should produce more of the same,” wrote Glenn Schorr of Evercore ISI.
BlackRock’s Aladdin division, a provider of risk-management and technology solutions, was particularly strong. Revenue grew 11% from a year earlier in the fourth quarter, lifting the annual total to more than $1 billion for 2020.
Edward Jones expects Aladdin to deliver midteens revenue growth over the long term. “We see a long runway for demand, as wealth management firms are increasingly turning to BlackRock’s best-in class technology,” wrote Kyle Sanders of Edward Jones.
BlackRock stock was down 4.1% to $747.91 in mid afternoon. The stock gained 22% over the three months ended Wednesday, versus 9.2% for the S&P 500.
Write to Leslie P. Norton at [email protected]
