BlackRock’s Larry Fink highlights the ‘barbell Effect’ as investors return back to fixed income

BlackRock CEO Larry Fink stated on Monday that investors are creating a “barbell effect” in the fixed income markets when they choose low-cost exchange-traded funds and alternative assets over traditional bond funds.

Fink, the world’s biggest money manager, announced that BlackRock had reached a new record of $10.6tn of assets under management. He also cited the high level of interest from clients in infrastructure products such as energy and data centers.

Fink stated that “assets are in motion”, as investors who still have large cash reserves prepare for an early US rate cut , possibly as soon as September. They also realize they missed the big equity rally of this year.

Investors in equity are divided between index funds with low fees and private equity funds, which charge high fees but promise uncorrelated returns. He added that the same split will soon be seen in fixed income.

We used to say that equity had more of a barbell-effect. “I think we’re beginning to see this here in the Bond Market,” he said. It’s the moment where people are shifting away from cash, and they’re going to heavily invest in fixed income. . . ETFs, as well as alternative income-oriented products”, such a private credit and infrastructure bond funds.

Fink stated that BlackRock was “very well positioned” for this, due to its large iShares business and Global Infrastructure Partners acquisition, which will close by the end September.

Fink made his remarks to analysts as the world’s biggest asset manager reported revenues of $4.81bn in the quarter ended June 30, up by 8 per cent on the year due to the increased AUM, but below the $4.84bn that analysts polled and surveyed by Bloomberg.

Margin improvements helped boost net income by 9 percent from the previous year, reaching $1.5 billion. The adjusted figure, $1.56bn, exceeded expectations of $1.47bn.

Assets under Management were up 1.7% quarter-on-quarter. Inflows of net $82bn were below expectations of $112bn. Equity inflows dropped to $6bn as institutional clients rebalanced. The loss of one institutional client, who pulled $20bn in fixed income, slowed down the flow.

BlackRock announced two weeks ago that it had purchased Preqin a provider of private markets data. The company continues to invest in alternative assets and technologies. The strong interest in the bitcoin ETF has boosted its ETF inflows.

Edward Jones analyst Kyle Sanders stated that ‘BLK’s investment to strengthen its capabilities in the private markets will reduce its reliance upon low-fee-generating iShares etfs and position it to capitalize on the strong growth opportunity for private assets over the long term.

BlackRock’s shares are valued at a higher multiple than those of its traditional asset managers, but they have lagged the financial sector in recent months, with a rise of just 1.4 percent compared to the 12 percent for the financial companies of the S&P 500.

Martin Small, the chief financial officer of the company, stated that the company is on track to reach its long-term organic growth goal of 5% per year. He also said expenses are on track for an increase in the low single digits, excluding the acquisitions.

In early Monday trading, shares of the asset manager fell by 0.6 percent.