Know How BlackRock Became The World’s Largest Asset Manager

Blackrock- The World's Largest Asset Manager

Did you ever hear the word “Blackrock” in your life?

If your answer is “No” then you should know about Blackrock because Blackrock is the name of a company that is largest asset manager in the world. This whole article is based on all information about Blackrock.

In this article you will know about Blackrock, Origin of Blackrock and what Blackrock do also.

Blackrock and its Origin

Blackrock is a multinational investment company that is basically an American company. Blackrock was founded in 1988.

Blackrock’s founders are- Robert S. Kapito, Larry Fink and Susan Wagner, Barbara Novick, Ben Golub, Hugh Frater, Ralph Schlosstein and Keith Anderson.

Larry Fink is Chairman and CEO, Robert S. Kapito is President and Philipp Hildebrand is Vice Chairman of Blackrock.

Blackrock’s headquarter situated 50 Hudson Yards in New York City, America. Blackrock has their clients from 100 countries. There are 38 countries where Blackrock has their 78 offices.

Blackrock is founded to give asset management services from a risk management perspective to its clients.

Services are provided by Blackrock include- Investment management, Asset management, Risk management, Mutual Funds, Exchange-traded funds and Index funds.

Blackrock has around 19,800 employees as of December 2023. It has $10 trillion in assets under management(AUM) as of December2023.

Blackrock want to become an industry leader in environmental, social and corporate governance(ESG).

Do you know that how Blackrock became largest asset management company in the world?

For this you should know its history deeply, so let’s start:

How Blackrock became the world’s largest asset manager

The formation of BlackRock began with the birth of Larry Fink, Chairman and CEO of BlackRock. Larry Fink was born in Los Angeles, America in 1952. Larry’s mother was a teacher and father was  a small businessman.

Larry was a average student in his studies so he spent most of his time in his father’s shop to help his father. He completed his bachelor’s degree in Political Science subject and then he didn’t take any interest to continue his study.

Also Read:-  Everything You Need to Know About Initial Public Offering (IPO)

One day Larry Fink attended a seminar that is on real estate. He liked seminar so much that Larry completed his Post Graduation from Real estate Business. He entered in real estate business after doing some more economic courses. But Larry didn’t get success in real estate business.

At that time Wall Street was attraction place for those who want to make more money. With the dream of making a lot of money Larry set out at wall street with his girlfriend.

Larry also applied for job at Goldman Sachs that is the biggest firm at that time. But he didn’t get job in Goldman Sachs.

Finally, Larry got the job in bond trading Division at First Boston company in 1976. He managed mostly here trade of Mortgage-Backed Bonds with the help of his real estate experience. He did his job so well that company impressed with his work. Within 2 years First Boston company made Larry in-charge of bond trading division. He connected here with some powerful people.

Larry was so brilliant in his work that He became the M.D. of First Boston at the age of 31. After this he was also going to become the CEO of First Boston. Everything was going well in Larry’s life.

But Then Suddenly the turning point of Larry’s life came.

In 1986, U.S government reduced the interest rate a lot. This caused the First Boston to lose $100 million in bonds. The company held Larry responsible for this loss. Due to which Larry’s path to becoming CEO was also closed. Frustrated with all this, Larry left the company.

Larry learned one thing from this loss that any company can face loss due to government policies. There must be an entity to manage investment and risk of company.

So, Larry decided to open an asset management company.

The foundation of Blackrock:

After leaving the First Boston company, Larry contacted to First Boston company’s connected people. Larry formed a company with 7 people.

These 7 people names are- Ben Golub, Robert Kapito, Barbara Novick, Keith Anderson, Susan Wagner, Hugh Frater and Ralph Schlosstein.

They wanted to open bond investment company with minimum risk and use of technology. But they needed money to get clients and run the company. At all, they needed investors.

Also Read:-  Everything That You Need To Know About Mutual Funds

Finally, they got two investors with the help of Larry’s sources and good reputation of his name in market. Those 2 investors were- Pete Peterson and Steve Schwarzman.

These investors were very big investment bankers and their company ‘Blackstone’ was earning a lot of fame.

They heard Larry Fink’s idea and invested $5 million in exchange of 50% shares. They provided a workspace also.

Now, Larry’s company became a subsidiary of Blackstone that named ‘Blackstone financial Management’.

First of all, Larry hired Charlie Hallac who worked in First Boston with Ben Golub and also started looking for clients.

Keeping in mind the loss of First Boston, Larry asked Golub and Hallac to create a technology that could help avoid such losses. This technology was named ‘Asset Liability Debt & Derivative Investment Network’ or ‘ALADDIN’.

ALADDIN technology was a huge revolution in itself. Due to its good reputation, Larry’s company Blackstone financial management got good investment in the beginning and they started to make profit within few months.

How Blackrock separated from Blackstone?

By 1989, Larry’s company’s assets had quadrupled to $2.7 Billion. With this, Larry’s Group increased its stake from 50% to 60% and they got majority ownership.

After gaining majority ownership, the firm changed its name to ‘BlackRock’.

By the end of year, they were managing $17 Billion assets. Within 6 years about 150 employees were working in Blackrock. Now bond market was increasing at high and they introduced pension plans to public also.

Blackrock was becoming big and trustworthy. Larry used to give stocks to his employees as reward. With this, Blackstone’s ownership was decreasing due to which Schwarzman and Peterson were unhappy.

Larry felt it was time to part ways with Blackstone. But the only problem was that Peterson and Schwarzman would not allow Larry to use the word ‘black or stone’ in the name of their company.

Larry explained to Peterson and Schwarzman the benefits to both companies of using the word ‘Black or Stone’ in their company name. Finally, they approved the name ‘Blackrock’.

Blackstone decided to sell Blackrock’s ownership. In 1994, Blackstone sold ownership to PNC in $240 million.

Also Read:-  What is FD (Fixed Deposit) and RD (Recurring Deposit)?

By 1994, Blackrock was managing $53 billion assets. By the end of year, Larry became the CEO of Blackrock.

In 1999, Blackrock launched its IPO in share market that price was $14 per share. The IPO was not successful but by the end of the year they had assets worth $165 billion. Now Blackrock was managing every type of assets.

Turning point of Blackrock’s history:

The biggest turning point in BlackRock’s history came when the dot-com bubble burst happened. Investors started losing money all over the world. Then investors needed a reliable company where they could invest their money. There was no better option for them than BlackRock.

This is golden period for Blackrock. Because At this time he did not need to find clients but the clients themselves came to him.

By now Blackrock had enough money to acquire other companies. BlackRock was acquiring its rivals only with its share money.

In 2004, BlackRock acquired State Street Research & Management Co. from MetLife for $375 million.

In this way, BlackRock has established its stake in almost all the big companies like Google, Facebook, Amazon, Tesla etc.

BlackRock has also invested a large part of its investment in the petroleum and natural gas sector.

Apart from this, there are other sectors like solar panel producing companies, medicine companies, agricultural companies, clothing brands etc. where BlackRock has invested its money.

BlackRock also has shares in more than 90% of the world’s media houses.

BlackRock also manages the mutual funds of the government of a country like China, which does not allow companies from other countries to enter their country.

Why is BlackRock being criticized?

BlackRock has faced criticism for investing in companies involved in fossil fuels, the arms industry, the People’s Liberation Army and human rights violations.

Additionally, during the COVID-19 pandemic, BlackRock was criticized for its close ties to the Federal Reserve.

But BlackRock has now become such a big company that it manages more than 10% of the world’s GDP. So now these criticisms have no effect on BlackRock.

So That’s all!!!


No comments yet. Why don’t you start the discussion?

    Leave a Reply

    Your email address will not be published. Required fields are marked *