There is an abundance of capital sitting idle today that is being deployed too narrowly, says BlackRock chairman and CEO Larry Fink in his annual chairman’s letter on March 31. To that end, Fink pledges to make private markets more accessible to everyday investors and not just the wealthy few.
“As we enter our century’s second quarter, there’s a growing mismatch between the demand for investment and capital available from traditional sources,” Fink says. “Governments can’t fund infrastructure through deficits. The deficits can’t get much higher. Instead, they’ll turn to private investors.”
Likewise, as bank lending is constrained, companies will not solely rely on banks for credit and will turn to markets.
“The money is already there,” says Fink. He notes that about US$25 trillion ($33.52 trillion) is parked in banks and money market funds, but if left untouched, the world will be repeating a mistake from the earliest days of finance.
He cites Amsterdam's first stock exchange, which historians said “could have made a much greater contribution to the economy” if investors had more companies to invest in.
Yet the assets today that will define the future — data centres, ports, power grids, and other fast growing private companies — are not available to most investors as they are in private markets and “locked behind high walls”.
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The US$68 trillion investment boom
Fink argues that governments who are already weighed down by historic deficits can no longer shoulder the costs of infrastructure without risking a debt spiral.
Therefore, markets are eager to step into the US$68 trillion infrastructure investment opportunity. “We’re standing at the edge of an opportunity so vast it's almost hard to grasp,” he says.
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“As the global financial system continues to evolve, the classic 60/40 portfolio may no longer fully represent true diversification,” he says.
The future standard portfolio may look more like 50/30/20 — stocks, bonds, and private assets such as real estate, infrastructure and private credit.
The CEO notes that bridging the divide between 50/30 and the 20 is “almost impossible” for most individuals, who often barely have enough capital to meet the minimum for just one private fund.
To that end, BlackRock sees an opportunity to bridge the gap between private and public markets. Fink says that last October, BlackRock completed the first of three acquisitions — Global Infrastructure Partners (GIP) — to erase the boundary holding investment back.
BlackRock has also completed the acquisition of Preqin, and will be acquiring HPS Investment Partners to give clients more direct access to private markets, he notes.
Fink goes on to focus on democratising investing through tapping on retirement. He highlights the US economy as an example which argues it needs to put effort into helping people “climb to the ceiling” through investing.
The global fund manager names three ways to address this — expand emergency savings, close the retirement gap for small businesses, and help people start investing earlier.
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Europe, Bitcoin and Tokenisation
In his note, Fink says that he thinks Europe is waking up from its persistently pessimistic economic outlook with slow growth, stagnant markets and cumbersome regulations.
According to the IMF, reducing intra-EU trade barriers to the level between US states could boost productivity by nearly 7%, adding US$1.3 trillion to its economy—the equivalent of creating another Ireland and Sweden, he adds.
With the continent facing a fast aging workforce, artificial intelligence (AI) may prove to be a solution to its labour issues.
Meanwhile, Fink says that America risks losing its dollar reserve status position to digital assets like Bitcoin if it doesn’t get its debt under control.
“To be clear, I'm obviously not anti-digital assets. But two things can be true at the same time: Decentralized finance is an extraordinary innovation. It makes markets faster, cheaper, and more transparent. Yet that same innovation could undermine America's economic advantage if investors begin seeing Bitcoin as a safer bet than the dollar,” Fink says.
