Bitcoin-averse BlackRock loses $1.7 trillion in 6 months

Lavina Daryanani
Source: Sovereign Wealth Fund Institute

Markets all across the board continue to remain choppy. The geo-political and macro-economic turmoil has directly and indirectly affected the financial landscape. Of course, companies from the crypto sphere have been bearing the brunt. But, others from the traditional side of the spectrum, especially Wall Street companies, have also not been spared.

New York-based BlackRock has been making it to the headlines on almost a consistent basis. The American multinational investment management corporation was the first firm to break through $10 trillion of assets under management. Retrospectively, it’s also the world’s largest asset manager.

However, amid the not-so-healthy macro conditions, BlackRock has created another record. This time, it isn’t glossy. Over six months, it has lost the most significant amount of money by a single firm. Per reports, BlackRock has lost $1.7 trillion of clients’ funds in the first half of this year.

BlackRock hits rock bottom?

Chairman and Chief Executive Officer Larry Fink quickly tied the company’s turbulent status quo to the broader sluggishness. During the company’s earnings call, he highlighted,

“2022 ranks as the worst start in 50 years for both stocks and bonds.”

The firm is in a fix and hasn’t been doing much about it. Reportedly, at the end of June, only around one-fourth of its assets were actively managed to beat a benchmark. Notably, the same is down from 2009’s one-third, when BlackRock acquired Barclays Global Investors to become the leading player in ETFs.

Around $21 billion has flowed out of active equity in the past decade for BlackRock, with $730 billion flowing into indexed equity. Consequently, the firm’s passive equity holdings are ten times larger than the active ones.

Now, the collapse in bond markets this year has caused money to be left out of active fixed-income funds. BlackRock saw clients pull more than $20 billion during the year’s first half. On the other hand, the amount shaken off from the entire industry remained to be 10x more.

Even so, it is worth noting that this year, it has gained $39 billion of new money in ETFs and $25 billion in other indexed strategies. This means the shift toward passive that started in equity is now accelerating in fixed income. During the earnings call, Fink said,

“The challenges associated with high inflation to rising interest rates are attracting more first-time bond ETF users and prompting existing investors to find new ways to use ETFs in their portfolios.”

Bitcoin tangent

It is worth recalling that BlackRock has no plans to launch any Bitcoin product. However, the firm is bullish on blockchain technology. In April, the asset manager rolled out its Blockchain and Tech ETF, which gave investors access to companies involved in blockchain technology. The fund has a portfolio of 33 companies, including Coinbase, Riot Blockchain, and Galaxy Digital.

Salim Ramji, global head of iShares and index investments at BlackRock, told Financial News during Barron’s Live event in June,

“In terms of the underlying technology of blockchain, it is incredibly innovative and incredibly disruptive. It takes out frictions, it enables the easier transfer of value in ways that make the underlying plumbing of markets much more efficient for clients.”

Even so, the asset manager doesn’t intend to launch crypto ETFs despite other companies lining up to get the SEC’s approval for Bitcoin products. One of the reasons Ramji cited back then for holding back was the “incredibly opaque” regulatory framework around cryptos.

However, BlackRock has not entirely ruled out the option. They’re waiting for the “right” time. The executive added,

“We continue to be studying and looking at cryptocurrencies themselves, including bitcoin, around: are there ways to make it easier and more accessible for investors — just as we have with the bond market, the gold market and other markets around the world.”