BlackRock is an American multinational corporation specializing in asset management, headquartered in New York. Founded in 1988, it has become the largest asset manager in the world, with nearly $10.008 trillion in assets under management as of December 31, 2023. BlackRock provides investment, advisory, and risk management solutions.
The company’s activities are concentrated in the United States, where just over half of its revenue originates. Since 2005, BlackRock has seen significant growth in assets under management.
As of the end of 2022, the company employs 19,800 staff across 89 offices in 38 countries, serving clients in over a hundred countries.
BlackRock has been publicly traded on the New York Stock Exchange since 1999.
Historically, BlackRock began in 1988 propelled by eight partners, four of whom still hold positions within the company. The founders included former employees of First Boston and Lehman Brothers, revolving around Larry Fink and Ralph Schlosstein. Initially, the company was named Blackstone Financial Management and belonged to the Blackstone Group, focusing on bond securities and developing the Blackstone Term Trust, a fund that raised a billion dollars.
In 1992, the company was renamed BlackRock. That same year, BlackRock managed $17 billion in assets, which increased to $53 billion by 1994. Concurrently, the company developed a global asset management tool called Aladdin (short for Asset Liability, Debt, and Derivatives Investment Network), a risk management platform that has become one of the most recognized technological tools in the financial sector. Initially designed for internal use, the Aladdin system became available for external clients by the mid-1990s, handling 250,000 transactions and billions of financial calculations daily.
In 1994, Blackstone and BlackRock decided to part ways. Stephen A. Schwarzman, CEO of Blackstone, later referred to this decision as his biggest professional mistake.
In 1995, PNC Financial Services purchased BlackRock for $240 million.
In 1999, the company went public at $14 per share. By the end of that year, it reported $165 billion in assets under management.
In 2000, BlackRock founded BlackRock Solutions, its advisory subsidiary centered on the Aladdin platform.
In 2004, it acquired State Street Research – Management for $375 million, and in 2006, it acquired the asset management division of Merrill Lynch. In 2007, co-founder and chief investment officer Keith Anderson announced his departure for the following year, being replaced by Scott Amero. Robert S. Kapito became president of BlackRock in 2007, succeeding Ralph Schlosstein.
During the banking and financial crisis in the fall of 2008, the firm weathered the market turmoil and expanded its influence. BlackRock was assigned by the Federal Reserve Bank of New York to manage $30 billion in assets from Bear Stearns to facilitate its rescue by JPMorgan Chase. Other Wall Street firms like Morgan Stanley and American International Group (AIG) also sought BlackRock’s advice.
In 2009, as the stock market bottomed out due to the 2008 crisis, BlackRock doubled its size by acquiring Barclays Global Investors for $13.5 billion. This acquisition allowed BlackRock to double its assets under management and become the market leader, marking the second largest merger in the asset management industry’s history.
In 2010, the company announced its own internal exchange aimed at offering better pricing by lowering trading costs. The extent of BlackRock’s holdings was highlighted by The Economist, citing more than
The company directly controlled $4 trillion in assets, with an additional $11 trillion supervised through the Aladdin platform.
In 2012, BlackRock launched iShares Core to enable low-cost stock and bond investments through exchange-traded index funds.
By this time, BlackRock had become the world’s largest investment management firm, with around $4 trillion in assets under management. The influence of BlackRock and its CEO, Laurence D. Fink, was significant in both Wall Street and Washington DC. This monopolistic trend raised concerns among economists and specialized media. As of 2013, BlackRock had become the largest investor globally; The Economist questioned whether this dominance was problematic.
In 2015, the German regulator fined the company €3.25 million for late or incorrect voting rights disclosures. The German watchdog pointed to mitigating circumstances for the relatively small fine: “the incorrect or late statements were due to a misinterpretation of German rules,” it clarified, before adding that BlackRock “helped to clarify the situation and corrected or updated its statements.” In November 2015, American Bank of America transferred management of $87 billion in money funds to BlackRock.
In 2017, BlackRock published its investment stewardship priorities for the first time for the next two years, emphasizing board diversity, particularly gender balance, and long-term climate risk consideration.
In October 2017, BlackRock and BlackStone announced their intention to open offices in Saudi Arabia to contribute to the economic and financial diversification of the country.
In 2018, the company opened its first artificial intelligence lab in Palo Alto, California. By December 2018, BlackRock’s assets under management exceeded $5.980 trillion.
In March 2019, BlackRock acquired French financial management tools provider eFront Financial Solutions for $1.3 billion.
In May 2020, PNC Financial Services announced the sale of its 22.4% stake in BlackRock, valued at $17 billion, which it had acquired in 1995 for $240 million. This valuation represented an impressive return on investment (ROI) of over 7,000% for the bank, which had been a BlackRock shareholder for 25 years.
In 2022, BlackRock surpassed $10 trillion in assets under management, experiencing a $1.5 trillion increase year-over-year—marking the largest organic growth in the company’s history.
Between late January 2022 and February 28, 2022, BlackRock recorded a $17 billion loss on its Russian assets, dropping from $18.2 billion to $1 billion during that period, due to economic sanctions related to Russia’s invasion of Ukraine.
During the 2023 social movement against Prime Minister Élisabeth Borne’s pension reform in France, the company’s Paris office was stormed by demonstrators during a 20-minute protest to draw attention to their cause and denounce pension funds.
In January 2024, BlackRock announced the acquisition of Global Infrastructure Partners, an investment fund specializing in infrastructure, for $12.5 billion.
Operations
BlackRock is a publicly traded investment management firm with diversified operations. As of December 31, 2019, the value of its managed assets was $7.429 trillion. BlackRock is neither a pension fund nor a hedge fund; it raises capital from institutional investors to invest in financial markets on their behalf. The company serves a broad range of institutional clients, including insurance companies and banks.
In 2019, the assets held by individual investors represented 10% of the total long-term assets managed by BlackRock, compared to 57% for institutional clients and 33% for iShares exchange-traded funds. These funds are traded separately as it is not always possible to determine whether the final client is an individual or an institutional actor.
In 2019, in terms of products, 52% of the assets managed by BlackRock were linked to equity markets, 31% to bond markets, 8% to mixed funds, 2% to alternative investment products, and 7% to money market funds.
Regarding investment style, 27% fall under active management (BlackRock is the leading foreign asset manager in France, known for its often aggressive shareholder activism and frequent votes against executive compensation, as well as sometimes aligning with other activists), 66% under index management (referred to as “passive”), and 7% under money market fund management.
Between June 2019 and June 2020, BlackRock exercised its voting rights at 17,000 annual meetings, including 4,190 in the United States and 2,434 in Europe. The company also owns at least 5% of the capital of four of the ten largest publicly-traded US companies, including JP Morgan, Chevron, Facebook, and Walmart.
Following the subprime crisis of 2007, the multinational shifted its focus to exchange-traded funds (ETFs). In Europe, assets under management in ETFs grew from $150 billion to $900 billion during the same period.
In Europe, BlackRock invested in Atos, owning over 5% of the capital as of February 2023. In 2016, BlackRock held shares in 18 companies within the CAC 40 (Atos, BNP Paribas, Vinci, Saint-Gobain, Société Générale, Sanofi, Michelin, Safran, Teleperformance, Total, etc.). By the end of 2017, according to a study from Euronext, BlackRock owned 1.9% of the CAC, with shares around 5% in about twenty French multinationals. In 2020, it was one of the main shareholders of the CAC 40, behind the Arnault family, the Bettencourt family, and the French State. BlackRock also holds 5% of Spanish banking giant Santander. It is one of the largest investors in eight of the world’s top oil firms, with over $87 billion invested in fossil fuel companies.
BlackRock’s data centers, like those of Microsoft and Yahoo!, are located in Wenatchee, where electricity is cheap, partly due to the Rocky Reach Dam. Its servers are situated in large secured warehouses amid the city’s apple orchards.
The company relies on a digital risk management platform called Aladdin (Asset, Debt, and Derivative Investment Network). This tool is utilized by BlackRock and numerous clients, including BNP Paribas. Jean-François Cirelli, president of BlackRock France, Belgium, and Luxembourg, explained that it is not an artificial intelligence making investment decisions independently but a technological tool dedicated to managing clients’ portfolio risks. Aladdin oversees $18 trillion daily.
Since 2010, BlackRock has pursued a data center consolidation strategy, reducing its number of data centers from 32 to 12 sites. Among these sites is Wenatchee, Washington. The use of renewable hydroelectric power and the naturally cool climate that helps cool the servers contributes to reducing energy consumption at the data center.
Global Presence
In 2019, North America accounted for 66% of the assets managed by BlackRock, compared to 27% for Europe, the Middle East, and Africa, and 7% for the Asia-Pacific region. According to BlackRock, the company has 89 offices across 38 countries.
France: The company has been present in Paris since 2016, where its French branch employs 180 staff and manages €26 billion in assets as of February 2020.
In March 2022, Estelle Castres was appointed general director of BlackRock for France, Belgium, and Luxembourg.
China: In August 2020, BlackRock established a joint venture in China with Singapore’s sovereign wealth fund Temasek Holdings and China Construction Bank (CCB).
Financial Performance
In 2018, BlackRock ranked 237th in terms of revenue on the Fortune 500 list of the largest American companies. As of December 31, 2021, its stock was trading at $915.56 per share, with a market capitalization exceeding $101.4 billion. For the fiscal year 2021, BlackRock reported a profit of $5.901 billion on annual revenue of $19.374 billion, marking a 19.4% increase from the previous fiscal year.
Shareholder Overview
In 2010, among BlackRock’s shareholders were the Rothschild family, Queen Elizabeth II, Al Gore, Maurice Strong, Warren Buffett, George Soros, and Carlos Slim Helú. As of October 3, 2020, the following banks and investment groups held significant stakes:
- The Vanguard Group: 5.67%
- Capital Research & Management: 5.27%
- Mizuho Financial Group: 3.97%
- SSgA Funds Management: 3.34%
- Wellington Management: 2.95%
- China Investment Corporation: 1.99%
- BlackRock Fund Advisors: 1.84%
- Norges Bank Investment Management: 1.80%
- Merrill Lynch, Pierce, Fenner & Smith: 1.51%
Lobbying Activities
According to the Center for Responsive Politics, BlackRock’s lobbying expenditures in the United States were $1.83 million in 2020.
BlackRock has been listed in the European Commission’s transparency register since 2010 and reported annual spending on lobbying activities in 2020 of between €1.25 and €1.5 million.
In 2018, BlackRock spent nearly €1.5 million lobbying the European Parliament and organized dozens of meetings with commission heads. The firm seeks to influence taxation and financial regulation issues. In April 2020, BlackRock won a bid from the European Commission to prepare a report on how EU banking supervision could incorporate climate considerations. This announcement raised concerns about potential conflicts of interest due to BlackRock’s investments in fossil fuels.
Public Image
Outside financial circles, BlackRock remains relatively unknown to the general public, often mistaken for the investment fund Blackstone, to which the company was connected from its inception until the mid-1990s. Since then, the two companies have had no links.
Media attention on BlackRock heightened following the 2008 crisis as US and European authorities sought the firm’s expertise to navigate economic difficulties. The Federal Reserve and the US Treasury consulted BlackRock on several sensitive matters, such as evaluating “hard-to-value” assets, managing the balance sheets of mortgage giants Fannie Mae and Freddie Mac, assisting in the rescue of insurer AIG, and facilitating the acquisition of Bear Stearns by JPMorgan Chase. Similarly, Greece and Ireland sought BlackRock’s guidance.
BlackRock’s size and growing influence raise questions. Laurence D. Fink has earned a reputation as Wall Street’s “chief fixer,” while the firm has been compared to a state due to its power.
Opponents of pension reform in France in 2020 labeled BlackRock as “Darth Vader” or “the Great Satan” of finance. Journalists commented on the resurgence of a form of anti-American sentiment and a symbol of capitalism criticized by public opinion, previously associated with Goldman Sachs. Nevertheless, Larry Fink has repeatedly advocated for reformed capitalism.
Controversies
Economist professor Daniela Gabor noted, “The European Central Bank, which consults BlackRock to audit banks, has no power over this company. BlackRock argues simply: we do not leverage, we do not operate like banks, so we do not need to be regulated like a systemic institution. Consequently, BlackRock escapes all scrutiny.”
As with other large corporations, certain salaries and bonuses have come under scrutiny. In 2011, Forbes reported the CEO of BlackRock received a compensation of $23.38 million.
In 2012, BlackRock hired Philipp Hildebrand, a former executive at Moore Capital Management who stepped down from the role of Swiss National Bank president due to currency transactions made by his wife, before being cleared by an audit showing he had not violated Swiss regulations. At BlackRock’s London branch, Hildebrand was responsible for major clients in Europe, the Middle East, Africa, and Asia.
In January 2017, BlackRock hired George Osborne, former UK Chancellor of the Exchequer, to join the company’s think tank, the BlackRock Investment Institute.
In November 2018, German police raided BlackRock’s offices, suspecting the fund of involvement in the massive CumEx Files fraud scheme, employed by investment funds and banks to claim tax refunds on unpaid taxes on shareholder dividends. In 2018, in his annual letter to shareholders, Larry Fink stated that other CEOs should be mindful of their impact on society. This declaration sparked outrage from anti-war organizations because BlackRock is known as the largest investor helping arms manufacturers through its iShares U.S. Aerospace and Defense ETF. In May 2018, representatives from these anti-war organizations protested at BlackRock’s annual shareholder meeting in Manhattan, New York.
From late 2019 to early 2020, BlackRock faced controversy regarding its potential influence on the French government concerning the proposed pension reform known as “universal retirement.” On January 7, 2020, dozens of SNCF and RATP strikers protested at BlackRock’s Paris headquarters, awarding it a “medal of dishonor” while demanding the withdrawal of the government’s pension reform project. Marianne later highlighted BlackRock’s influence on the French executive following Emmanuel Macron’s election, who has maintained regular and privileged relations with Larry Fink and Jean-François Cirelli, the latter receiving a controversial Legion of Honor. Meanwhile, both Fink and BlackRock have praised the government’s actions, and BlackRock’s holdings of French debt doubled, reaching $32 billion in August 2018.
On February 10, 2020, following an earlier intrusion at the beginning of the year to protest BlackRock’s financial support of fossil fuel businesses, around one hundred members of the environmental movement Youth for Climate Paris-Île-de-France, accompanied by other groups, entered the company’s Paris headquarters, inscribing messages like “the future is burning” or “I want to live” on the office walls. This protest aimed to denounce BlackRock’s eco-destructive investments and its perceived role in pension reform. David Belliard, a candidate for Europe Écologie Les Verts for the Paris mayoralty, called for understanding of the activists’ actions.
Climate Change
Starting in 2017, BlackRock has initiated a process to integrate climate change into its investment strategies. A dedicated team called “BlackRock Investment Stewardship” is tasked with ensuring that the companies in which BlackRock invests adhere to their environmental commitments. In 2020, BlackRock identified 244 companies that do not sufficiently incorporate climate risks into their business models. Consequently, it took unfavorable voting action against incumbent leaders for 53 of these companies and placed the remaining 191 under watch.
A report released in conjunction with COP24 in 2018 indicated that BlackRock holds the largest investment portfolio related to coal plants, totaling $11 billion across 56 coal plant developers. Another report from the NGO InfluenceMap stated that BlackRock controls more oil, gas, and thermal coal reserves than any other investor, equating to 9.5 gigatons of CO2 emissions—30% of carbon emissions tied to energy as of 2017.
Concerned about global warming and biodiversity, environmental NGOs, including the Sierra Club and Amazon Watch, launched a campaign called “BlackRock’s Big Problem” in September 2018. According to the campaign, BlackRock is the “largest driver of climate destruction on the planet,” partly due to its refusal to divest from fossil fuel companies.
On January 14, 2020, BlackRock’s CEO Laurence D. Fink responded to critics, writing to shareholders, clients, and investors that environmental sustainability would now be a key objective in investment decisions. Based on “work from a wide array of organizations—including the UN’s Intergovernmental Panel on Climate Change, the BlackRock Investment Institute, and many others, including recent studies by McKinsey regarding the socioeconomic implications of physical climate risk,” he announced that “climate change is almost always the primary issue clients around the world raise with BlackRock.” He articulated that BlackRock is convinced “that portfolios integrated with sustainable development and climate considerations can offer better risk-adjusted returns for investors. With sustainability’s impact on investment returns growing, we believe that sustainable investing is the strongest foundation for client portfolios in the future.” He announced BlackRock would sell $500 million of coal-related assets and create funds excluding fossil fuel stocks; two measures that would radically change the company’s investment policy. He also committed to greater “transparency in the company’s investment stewardship activities.” Environmental journalist and author Bill McKibben called this pivot a “huge, if not final, victory for activists.”
In January 2020, BlackRock joined the Climate Action 100+ initiative, a group of investors engaging with companies to improve their communication of climate-related information and align their business strategies with the goals of the Paris Agreement.
In June 2021, BlackRock acquired the climate change scenario modeling from Baringa to integrate it into its risk management, enhancing its advisory strategy concerning the climate risk exposures of businesses.
In May 2022, despite prior promises, the company retreated from its climate commitments, reducing its support for climate-friendly shareholder resolutions during annual meetings amid the ongoing war in Ukraine.
In June 2022, during hearings of major funds by US senators, BlackRock was criticized for promoting ethical finance too aggressively. In a sweeping attack on ESG criteria (environmental, social, governance), Republican senators accused BlackRock of boycotting fossil companies from US southern states. Labeled “leftist,” Larry Fink was compelled to assure Texas lawmakers that he would continue investing in the state’s oil companies.
In August 2023, BlackRock became the subject of a probe by US authorities regarding its investments in Chinese companies under US sanctions. The House Committee on the Chinese Communist Party accused BlackRock and the MSCI Index of investing in Chinese businesses linked to enhancing China’s military capability, which posed a potential danger to US national security. BlackRock denied any wrongdoing, claiming its investments in China comply with US laws.
References
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