Bloomberg News

BlackRock’s Fink Says U.S. to Trail Global Growth for Decade

June 10, 2011

(Updates with Fink’s comments on global economy in sixth and seventh paragraphs.)

June 10 (Bloomberg) -- BlackRock Inc.’s Laurence D. Fink, chief executive officer of the world’s biggest asset manager, said the U.S. will trail the global economy for much of the next decade.

The U.S. economy will grow 2 percent to 3 percent for the next five to 10 years, lagging behind global growth of 3 percent to 5 percent, Fink said today in a Bloomberg Television interview with Erik Schatzker from the Morningstar conference in Chicago.

“We will have modest growth for five to 10 years,” Fink, who heads the world’s largest asset manager, said in the interview. “If we cut our deficits, I may be wrong, and they might be lower,” he said, referring to the U.S. growth numbers.

A series of reports suggests the world’s largest economy is decelerating. Manufacturing grew at its slowest pace in more than a year in May, consumer spending rose less than forecast in April, and the unemployment rate unexpectedly climbed to 9.1 percent in May. Fink said as recently as January that he didn’t believe the U.S. would enter a prolonged period of below-average growth.

“We were always talking about a U.S. economy growing 3 plus percent,” he said on a Jan. 25 conference call. “We never believed in the ‘new normal,’” he said then, referring to a term used by rival asset manager Pacific Investment Management Co. to describe the declining role of the U.S. in the global economy following the 2008 credit crunch.

‘Still Unsettled’

Fink, one of the co-founders of New York-based BlackRock in 1988, is less optimistic than he was earlier this year. Oil prices have surged, putting consumers under pressure, and the earthquake in Japan will hurt growth, he said.

“The economy has weakened, I think,” Fink said in a separate briefing with reporters in Chicago. “Worldwide, we are still unsettled.”

Economists surveyed by Bloomberg expect the U.S. to grow 2.6 percent this year and 3 percent in each of the next two years. Growth decelerated to 1.8 percent in the first quarter from 3.1 percent in the fourth quarter of 2010.

Fink has built the firm through acquisitions including the purchase in December 2009 of Barclays Global Investors. The $15.2 billion deal, the largest for BlackRock, added passive index funds such as exchange-traded products to BlackRock’s active stock and bond strategies.

$3.65 Trillion

BlackRock manages about $3.65 trillion in assets in its stock, bond and hedge funds, as well as its iShares ETFs. The firm’s BlackRock Solutions unit advises financial institutions and governments around the world on hard-to-value assets. BlackRock, which advised the U.S. Federal Reserve on illiquid debt portfolios after the bankruptcy of Lehman Brothers Holdings Inc. helped freeze global credit markets, this year was picked by the Central Bank of Ireland to advise on the assets held by six of the nation’s largest banks.

BlackRock began as a fixed-income firm. In 2005, it bought State Street Research & Management to add more stock, real estate and hedge funds. In 2006, it expanded its equity business with the purchase of Merrill Lynch & Co.’s money-management unit. In 2008, BlackRock acquired a division of Quellos Group LLC to add hedge-fund assets. The purchase of BGI, the biggest seller of index-tracking ETFs, was the industry’s largest to bring together active and passive funds.

Slower growth in coming years means investors should own more stocks, Fink said today. Dividend-paying stocks will return about 7 percent to 8 percent per year, far higher than what investors can earn in bonds, he said.

“I’m not bearish on bonds,” Fink said. “I’m not saying bonds are a bad investment. I’m saying that with the liabilities that people have, they need to earn more.”

--Editors: Christian Baumgaertel, Josh Friedman

To contact the reporters on this story: Sree Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net; Charles Stein in Boston at cstein4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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