Higher interest rates make ultra-safe money-market funds holding U.S. government bonds more attractive than BlackRock equity funds, which used to be the relatively safest and cheapest way to earn a decent buck. Little wonder then that Fink is talking up the idea of buying something sexier.
Third-quarter results unveiled on Friday showed that, for the first time since the pandemic struck, BlackRock customers on net pulled money out of long-term investments. Only $13 billion of the company’s roughly $9 trillion under management fled, and total flows were slightly positive. Even so, $644 billion has crowded into retail money-market funds this year, crimping BlackRock’s all-important stock portfolios.
Surefire one-month Treasury bonds now pay 5.6%. After a long stretch of yielding near zero, the gap has narrowed considerably with BlackRock’s average annual return of 11.8% on its S&P 500 Index (.SPX) fund over the past decade. Fink has been bulking up in infrastructure, credit and other investments that are harder to trade, but which also generate higher fees. Given the stiffer competition for vanilla options, BlackRock is left to explore riskier ones. (By Jonathan Guilford)
(The author is a Reuters Breakingviews columnist. The opinions expressed are their own. Refiles to fix USN.)
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