The US Federal Reserve recently announced that Blackrock plans to invest in so-called junk bond ETFs, raising eyebrows since Blackrock runs several large fixed-income funds that hold high-yield corporate bonds.
Despite the market chaos, BlackRock is seeing huge demand for its iShares Family ETFs.
iShares ETFs are more popular than ever
“The ETF business is strengthening and empowering the entire company,” said Mac Sykes, an analyst with Gabelli Funds, which owns a small stake in Blackrock.
So BlackRock can emerge from this market pullback as a company that can report more earnings per share as it has fewer shares.
Socially conscious investment is not a big deal
However, BlackRock can earn higher fees from ETFs offered to individual investors (especially socially responsible ETFs), and BlackRock CEO Larry Fink has been successful over the years.
Switching to ESG (environmental, social and corporate governance) funding may be more than just doing the right thing.
“BlackRock’s ESG shift is really about making more money for the company. Pensions should focus on revenue and Blackrock going this route reduces the low-cost benefit of indexing,” the Institute for Pension Fund Integrity said in a report.
“Over time, BlackRock looks like a low-fee, efficient index provider and a high-fee forecaster of economic and social trends, biased towards stocks and bonds that are in line with its new ESG bias,” the company said.
However, BlackRock is appealing to a trend that has attracted the minds of many socially conscious investors.
“Asset flows into ESG mutual funds and ETFs have remained stable over the past five years before taking to the air in 2019,” said Brian Price, head of investment at Commonwealth Financial Network.
“There is no watershed moment that has caused this surge, but it has brought the industry into perspective. ESG investments have evolved and have actually become a permanent fixture in the investment management landscape,” Price added.
So while investing in ESG is not just for philanthropic purposes, it is an undeniably smart move that benefits BlackRock.