We’ve all heard of “BlackRock” but how much do you know about its CEO, Larry Fink – the undisputed king of wall street?
BlackRock is the world’s largest asset manager, with over $10 trillion in assets under management. Here’s how the BlackRock empire was built:
Fink, founder and CEO, began working at First Boston Investment Bank in 1976 and where he became a top performer in trading bonds. Fink leveraged the power of using computers for trading and generated roughly $1 billion for the bank.
In 1986, Fink made a mistake costing him $100 million on a trade. As a result, he quit his job at First Boston out of humiliation but had intentions of starting his own company. Fink sought out investment money which resulted in his meeting with Stephen Schwarzman from Blackstone. Fink made a good impression and received a $5 million investment. Schwarzman and Fink then developed a join venture named Blackstone Financial Management in 1988 which began making money in just two weeks. By 1989, Fink had $2.7 billion in assets under management (AUM) and $8 billion by 1993. Fink’s experience at First Boston made him obsessed with risk management which he continued to explore as one of the few traders using algorithms to trade bonds.
By 1994, Fink was managing $53 billion. That same year, Schwarzman and Fink had an internal dispute over methods of compensation and equity. Fink wanted to share equity with new hires to lure talent from banks while Schwarzman did not want to lower Blackstone’s stake any further so Fink sought out a buyer, landing on PNC.
When Fink went solo, he developed a reputation for being a specialist in managing toxic debt — a complicated niche in which Fink became known as the best. His reputation became so powerful that the United States Government contracted BlackRock for help during the 2008 Financial Crisis where Fink consulted on every aspect of the Government’s response.
Next, Fink identified ETFs as the next big thing in investment banking which led to BlackRock’s purchase of iShares from Barclays for roughly $13 billion. BlackRock then offered ETFs at a more competitive price than any other company and now owns 35% of the ETF market.
BlackRock was tapped by the Government again in 2020 to assist with purchasing corporate bonds to stabilize the market. The Fed needs BlackRock for its expertise in evaluating and managing different types of debt like portfolios of corporate bonds — something the central bank does not specialize in.
In late 2020, Larry Fink declared a fundamental reshaping of global capitalism.
“Our flows continue to grow and dominate,” Fink said regarding ESG funds. BlackRock drove a significant part of that shift by inserting its primary ESG fund into popular and influential model portfolios offered to investment advisers, who use them with clients across North America.
Harvard Business Review:
One of either Blackrock, Vanguard, or State Street is the largest shareholder in 88% of S&P 500 companies. This gives BlackRock the ability to influence board decisions.
Earlier this month BlackRock applied for a spot Bitcoin ETF and Larry Fink said he expects crypto to “transcend traditional currencies.” This is quite different than the statement Fink made in 2017 saying Bitcoin was “an index for money laundering.”
There’s a lot to be learned from Larry Fink in regard to building a business.
- Found an edge every decade.
- In the 80’s he started using algorithms for bond investing when nobody else was doing it.
- He positioned himself and BlackRock as the world experts for restructuring toxic debt.
- Positioned BlackRock to be the dominant player in the ETF boom with the ishares purchase.
- Became the financial crisis management group for the U.S. government.
- Now Bitcoin.
The question is, who controls Larry Fink and what force is pushing him to push ESG on corporate America?