Blackrock To Implode?
Could we see at the beginning of the end for Blackrock?
Of course, how can we ask this question for a company that has more than $7 trillion in assets under management. This is, by far, the largest manager of money in the world.
That said, there are some headwinds. We are seeing something taking place that are very upsetting. In fact, if it persists, this could end Blackrock.
While many will cheer that, as they say, be careful what you wish for. This could cause a lot of carnage and impact markets for a long time.
So let us take a look at what is going on.
Commercial Real Estate
One of the things affecting Blackrock is their portfolio has a lot of commercial real estate. This is a sector that was absolutely battered and there is questions whether it will come back.
If we consider what took place the last few years, we can see how the remote work craze is not fading. We know downtown areas, at least in the United States, is rather vacant. This is having a major impact upon the real estate values there.
Blackrock is one of the major players in this sector. Their portfolio is getting hammered due to this. It is not much different than we see with some of the regional banks. One of the biggest issues is they have real estate portfolios that cannot be leveraged. If nobody is willing to accept that as collateral, this puts them in a tough position.
Here we see the same thing, just on a larger scale. Reports are that Blackrock is refusing requests to liquidate. This is one advantage it does have. With a bank, when a customer wants to withdraw the deposit, that cannot be stopped. Blackrock is another story. It can fend off a run by simply denying request for withdrawal.
This will help to sustain it longer yet it might not save it.
Liquidity
At the core of this is liquidity.
This is what bit the banks in the butt and it could take down Blackrock. What people do not consider is what happens if the company needs to liquidate $250 billion in assets. Where does the market come from?
Here we see where the company is so big that is cannot possibly find the liquidity needed to move its asset. This presents a major problem since they cannot stall redemptions forever.
At some point, they have to return the money.
Of course, money managers never consider this. The goal is always to keep growing regardless of the situation. When dominating an asset class, things are very rosy on the way up. However, if the market turns, this can get very nasty.
It is what we can see with Blackrock.
The main issue is how do you unload $7 trillion in assets? Naturally, there is no way to do it. This means that Blackrock could find itself in a situation where it needs to fire sale some things.
It also might not end well for all involved. The losses could be staggering.
If you found this article informative, please give an upvote and rehive.
gif by @doze
logo by @st8z
Posted Using LeoFinance Alpha
Blackrock has enough pull with so many governments, I have a hard time imagining them taking too big a hit.
Which is unfortunate, as I'd love to see them completely collapse. Any financial chaos that would cause would be less damaging to the world than all of the ESG/DEI bullshit they force other corporations to go along with.
"Assets under management" is a vague term used in the business world, and because it's a business term many people gloss over it. Many people think of Blackrock in terms of pension plans. (along with Vanguard). When non-business people discover that AUM can consist of entire corporations-- especially in banking, media, and phameceuticals-- they will be shocked at the degree of control Blackrock has over them.
As an example, we're led to believe that cable networks such as CNN and Fox are rivals; in fact, Blackrock owns enough of each to dictate what they present their viewers. In that regard, it's like professional wrestlers fighting each other in a match; both wrestlers are part of the same organization, so an hour later they party hard with each other at the corporate party.
Extend this to other AUM, and it can be enough to get the people marching to its global headquarters with torches and pitchforks.
Is it Blackrocks own money or unit holders’ money?
They can't indeed continue to deny withdrawal requests. $7 trillion in AUM is a lot of influence and many people aren't comfortable with that amount of control talking less of the standards they're trying to impose on the companies they manage. They'll soon realise that too big to fail is a myth.
Blackrock is a big name. Though I am not familiar with the business of this company, I have been hearing its name since 2015.
What is the use of a portfolio that cannot be utilized as collateral?
I have been waiting for years for BlackRock to start showing cracks in its armor. $7T? Try closer to $9T, and that's just what they publicly-acknowledge. We don't have any clue how much they have offshored and how big their overseas portfolios truly are. That's what is truly terrifying. If we think $250B in fire sale assets is a problem, how about all the leveraged debt they've used in the past 30 years? There's no market in the world that can absorb that level of paper. Not the Fed, not the BIS, no one has the capacity to absorb that hit without global fallout.