Why the CEO of BlackRock says the pension crisis is getting worse

Font size

Even if

Black rock‘s

Revenues soared in 2020, with the world’s largest asset manager benefiting from increased savings and investment, the coming retirement crisis in the US is getting worse, BlackRock CEO Larry Fink said.

The three reasons are low interest rates, low savings rates and more part-time and self-employed workers in the economy. Partly because of the low household savings rate in the US, Fink said he believed the US needed more fiscal stimulus than Europe.

In the first quarter of 2020, the savings rate in Europe was around 15.6%, compared to 8.3% in the US in March.

“I’m petrified about the silent crisis of retirement,” Fink said in an interview with Barron’s. “The big problem is a high percentage [of people in U.S.] in part-time work or as a self-employed person without pension funds. “While those who work for larger companies have retirement savings, many companies do not adequately teach financial literacy.

“The reason the US needed more fiscal stimulus than the European economies is because Americans don’t have enough savings,” Fink continued. “When you go through a crisis like the pandemic, Europe is better prepared because of wider, deeper savings” and a stronger safety net. “The US is less prepared than Europe for the financial resilience of households because we are not a society of savers.”

Regardless, Fink’s stock market outlook remains positive because of persistently low interest rates and because he believes the coronavirus vaccines will be “fully distributed” in the late second quarter, creating herd immunity in the third quarter. That will revitalize parts of the economy and lay the foundation for better growth later in the year.

‘I don’t expect it [the market] to rise like in 2020, but I do believe the fundamentals of the markets will be good, ”said Fink. That doesn’t mean things are going well: Fink also said he expects a 5% to 10% correction in the course of the year.

Finally, Fink said that even while the US is restricting investment in China, BlackRock saw a record inflow of money into Chinese investment from global investors.

“Let’s be clear: many major US companies are very active in China and sell goods, so our trade deficit with China has never been greater,” he said. “We are following the wishes of our country and we will do what is necessary, but we see global investors running to China and not away from China.”

He added that he welcomes the prospect of discussing the need for a multilateral approach to China with the Biden administration. “We need the No. 2 and No. 1 marketplaces to have conversations and multilateralism to build a better world,” he said.

Fink also said BlackRock is reviewing its political spending after last week’s uprising by supporters of President Donald Trump who tried to stop the certification of President-elect Joe Biden’s victory. The company has halted political spending.

Previously, BlackRock reported that earnings rose to $ 4.9 billion, or $ 31.85 a share, in 2020 on sales of $ 16.2 billion. That compares to earnings of $ 4.5 billion, or $ 28.43 per share, and revenues of $ 14.5 billion in 2019. Net cash inflows into BlackRock products totaled $ 390 in 2020 .8 billion, compared to $ 428.7 billion in 2019.

The results were much higher than analysts expected, Credit Suisse’s Craig Siegenthaler wrote.

Assets under management totaled $ 8.67 trillion, up from $ 7.43 trillion a year earlier. “Strong markets, good performance and the breadth and depth of the BlackRock platform should yield more of the same,” wrote Glenn Schorr of Evercore ISI.

BlackRock’s Aladdin division, a provider of risk management and technology solutions, was particularly strong. Sales grew 11% from a year earlier in the fourth quarter, bringing the annual total for 2020 to more than $ 1 billion.

Edward Jones expects Aladdin to achieve long-term revenue growth. “We see a long way to demand as asset management companies increasingly turn to BlackRock’s best technology,” wrote Edward Jones’ Kyle Sanders.

BlackRock shares fell 4.1% to $ 747.91 by mid-afternoon. The stock rose 22% for the three months ended Wednesday, from 9.2% for the

S&P 500.

Write to Leslie P. Norton at [email protected]