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Is BlackRock Too Big?

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BlackRock NY

With continued loose monetary policy and relatively less regulatory hurdles than banks and brokers, gargantuan U.S. asset management firms have financially prospered over the past years. According to an SEC filing, as of December 31, 2014, BlackRock reached US$ 4.652 trillion in assets under management. This monumental figure is an 8% increase from last year’s number. In 2006, BlackRock’s assets under management crossed the US$ 1 trillion threshold. To put things into perspective, the U.S. retirement market in 2013 was worth US$ 23 trillion, according to the Investment Company Institute (ICI). Using BlackRock’s assets under management figure for December 2013 of US$ 4.324 trillion, the asset manager stacks up, as being almost a fifth the size of the whole U.S. retirement market. BlackRock’s AUM is majority made up of institutional investors at 65% – a key revenue generator. The asset manager counts sovereign wealth funds, central banks, pensions, life insurance companies and endowments as major clients.

BlackRock’s Assets Under Management


Data: Trillions USD – December End Dates

We Are the Good Guys

In the post-global financial crisis years, DC policymakers are identifying potential systemic threats to the global financial system. The easy culprits were the over-leveraged banks and insurance companies. Traditional asset managers have faced far less scrutiny compared to hedge funds, investment banks and insurance companies.

However, the concentration of assets in large asset managers has steadily grown over the years.

Asset managers contend, due to their very nature of managing other people’s money, they are not taking specific risk on their own balance sheets. Thus, investment managers believe they are less susceptible to financial distress versus banks, brokers and insurers. Brand name managers such as PIMCO, BlackRock and Fidelity Investments have further debated that asset managers like them, should not be designated systemically important financial institutions (SIFI). BlackRock is using its financial muscle to lobby on Capitol Hill. According to the Center for Responsive Politics, since 2010, BlackRock has spent over US$ 1 million in annual lobbying.

In late 2014, the debate between the FSB and the SEC has shifted toward analyzing an asset manager’s products and services versus an individual asset manager.

Potential Criteria For Asset Managers

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GIC Raises Stake in China Oilfield Services

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On November 14 2018, Singapore’s GIC Private Limited acquired 2,982,000 H- shares in China Oilfield Services Ltd at an average price of HK$ 6.9883. GIC increased its ownership in China Oilfield Services to 9.07% from 8.91%. China Oilfield Services is an oilfield services company. It is a majority owned subsidiary of Chinese state owned company CNOOC Group.

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Carlyle Group Completes Deal on 19.9 Percent Stake in Fortitude Re

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More private equity firms are scooping up reinsurance assets. The Carlyle Group finalized its acquisition of a 19.9% stake in Fortitude Group Holdings, LLC, whose group companies operate as Fortitude Re (formerly DSA Re) from American International Group, Inc. (AIG) The transaction was first announced on August 1, 2018. Part of this deal included Fortitude Re inking an investment management agreement (IMA) whereby US$ 6 billion of assets will be committed into a variety of Carlyle investment strategies.

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RDIF, Indorama Corporation, and Yadran Oil Ink Joint Investment in Tartarstan

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The Russian Direct Investment Fund (RDIF), and Singapore-based Indorama Corporation Pte Ltd, a chemical corporation in Asia, and JSC Yadran-Oil, the company authorized by the Government of the Republic of Tatarstan, have agreed to jointly implement investment projects in Russia. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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