The truth behind BlackRock, Worlds largest asset manager

The increasing growth in global wealth and the advent of emerging markets have created limitless opportunities for investors worldwide, with easy access to dozens of asset classes - From equities and bonds to real estate and alternative assets, financial inclusion has seemingly reached its peak.

However, the daily operations of the monolithic companies that grant access to these assets and instruments, remains quite vague for the average investor.

Huge asset management companies and investment banks, such as Blackstone, Goldman Sachs, and BlackRock, dominate the global underwriting and asset management market, with trillions of dollars in cumulative AUM.

BlackRock, in particular, has drawn a lot of scrutiny and criticism in its involvement in multiple industries, its size relative to the U.S. economy, and potential influence on policy and lobbying.

To better understand how BlackRock operates, we can look at several important factors, such as notable subsidiaries and investments, portfolio allocation, political power, and the top management of the firm.

BlackRock ownership and financials

BlackRock was officially founded in 1988 and has since grown to become the largest asset management firm in the world - Serving hundreds of thousands of institutional investors, corporations, governments, and retail clients globally. 

Before we dive deeper into how BlackRock works, it is best to look at BlackRock ownership explained for beginners. 

Finding out the major shareholders of BlackRock is much easier than you may first assume. As BlackRock is a publicly traded corporation listed on the New York Stock Exchange, it only takes a quick Google search to find the 5 largest shareholders of BlackRock, which are:

• Vanguard Group Inc - Another major asset manager, Vanguard owns 13.38 million shares of BlackRock stock, which amounts to 8.62% of outstanding stock

• 10.05 million shares, or 6.47%, is owned by BlackRock itself as treasury stock on the company balance sheet

• State Street Corporation - The insurance giant owns 6.3 million shares of BlackRock stock, or 4.06% of all outstanding shares

• Temasek Holdings - The Singaporean sovereign wealth fund owns 5.09 million shares of BLK, which amounts to 3.28% of all outstanding shares

• Bank of America - One of the largest commercial banks in the United States owns 3.22% of BlackRock shares

These are only a handful of institutional investors in BlackRock, as numerous pension funds, asset management companies and investment banks own BLK shares. 

The CEO of the company is Larry Fink, who is also the co-founder of the firm and has been running the company since its inception in 1988.

It is worth noting that BlackRock offers more than simply asset management services, as the company also provides software solutions, underwriting services and its own brand of iShares ETFs, which are some of the most popular exchange-traded funds on the market, giving investors access to multiple asset classes and diversified portfolios and indices from the United States and internationally. 

BlackRock services and investments

One of the flagship services offered by BlackRock, Aladdin, is a risk management and investment system that gives financial institutions the ability to assess risk, analyze markets and manage portfolios. 

Furthermore, BlackRock also owns Preqin, which is a private equity market analysis platform. The acquisition of Preqin marked an important milestone for BlackRock, as private investments are notoriously difficult to assess and liquidate. 

The iShares brand of ETFs offered by BlackRock is part of the core of the company’s business - representing investment vehicles that attract billions of dollars of investment from a global audience of financial institutions, governments, family offices and corporations. 

Some notable ETFs offered by BlackRock include the following:

• iShares Core S&P 500 ETF - Tracks the S&P 500 index. Providing exposure to large-cap U.S. equities

• iShares MSCI EAFE ETF - Offers access to large and mid-cap companies in developed markets outside North America

• iShares Russell 1000 Growth ETF - Focuses on U.S. large-cap growth stocks

These are only a handful of different ETFs offered under the iShares brand, which is one of the most reliable providers of exchange-traded funds in the world. 

Controversies surrounding BlackRock

To say that BlackRock is a controversial company would be an understatement. Critics of the corporation and its approach to asset management, compounded by its market power, argue that BlackRock does not operate under the rules of fair competition and frequently gains unfair advantages and favors from political groups.

The Environmental Social Governance, or ESG, principles upheld by BlackRock have greatly influenced how investors choose equities, which prompts companies to engage in fraudulent reporting to boost their ESG merits. In some cases, investors have alleged that BlackRock places a greater focus on ESG, as opposed to financial results. 

Furthermore, BlackRock’s involvement in the housing market is often seen as exacerbating the housing shortage in the United States - driving up the price for working class Americans. 

The firm also played a key role in managing a large number of toxic assets during the 2008 financial crisis, as well as the Covid-19 pandemic, which has further tarnished its reputation.

Conspiracy theories derived from Larry Fink’s involvement with the World Economic Forum have also damaged the public image of BlackRock throughout the years.