Summary: Blackrock manages US$10 TRILLION in assets. What insights does its stock holdings offer us and where does the world's largest asset manager see growth ahead? 1) Blackrock holds A LOT of US tech but elevated interest rates may also be beneficial for Blackrock. 2) Market consolidation is also potentially beneficial for Blackrock.
It's important to point out that Blackrock is holding these investments on behalf of their investors since over 70% of Blackrock assets are invested in passive strategies. This means many of their investment holdings are under the iShare exchange traded funds (ETFs) they issue.
1️. Blackrock holds A LOT of US tech but elevated interest rates may also be beneficial for Blackrock.
When we look into the stock portfolio of Blackrock 39% of the top 25 stocks are in technology. These included the tech giants you can imagine like Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia and Tesla. Their holding in Apple alone is worth US$171 billion. So Blackrock has HIGHLY BENEFITTED from the 2023 'narrow' US stock market rally in exactly these US tech giants. Large tech (FAAMG) names are up on average +61% in 2023.
But a much less talked about area is how elevated interest rates can also benefit Blackrock. Currently about 30% of Blackrock's assets are in bonds. Considering US interest rates are close to topping out and planning to keep interest rates higher for longer, it is now a good time for investors to look at bonds.
The current yield levels for different asset classes:
"Yield" refers to the return on an investment (usually for bonds) over a particular period of time.
It is now more attractive to hold US treasuries or US corporate bonds given they offer HIGHER yield and LOWER risk relative to US stocks. This is why analysts are pointing out investors ahead may shift from investing from US stocks into US bonds and cash. This will be beneficial for bond giants like Blackrock.
2️. Market consolidation is potentially beneficial for Blackrock
BlackRock Chief Operating Officer Rob Goldstein recently told investors he sees asset management clients are beginning to consolidate their businesses. This means they are narrowing down the number of asset managers they deal with as they search for more efficiency and ways to REDUCE EXPENSES. Blackrock Chief Financial Officer Martin Small said that the top 5 asset managers have a combined 16% of the global market, meaning the asset management space is still highly fragmented compared to other industries. They feel when clients start to consolidate Blackrock will be seen more and more as a 'one stop shop' and will grow as a result.
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