BlackRock Archives - Channelchek

Bitcoin Surges Past $50,000 For First Time in Over 2 Years

Posted on February 14, 2024February 14, 2024 by slightbourne@noblecapitalmarkets.com

The price of bitcoin has crossed over the psychologically important $50,000 level this week for the first time since December 2021. The world’s largest cryptocurrency by market capitalization rallied roughly 15% over the past week to hit $50,000 on Monday afternoon, riding a wave of bullish sentiment in crypto markets.

Several factors are contributing to bitcoin’s renewed momentum above $50,000. Firstly, the recent launch of spot bitcoin exchange-traded funds (ETFs) has provided a boost to bitcoin prices. These ETFs, which hold actual bitcoin rather than bitcoin futures, have seen strong inflows from investors. According to data from Bloomberg, spot bitcoin ETFs recorded their second largest day of inflows last Friday, totaling over $540 million.

The two largest bitcoin ETFs – BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Trust – have accumulated substantial assets after only one month of trading. The combination of easy access to bitcoin exposure through these ETFs along with optimism around the scheduled halving event in 2024 seems to be driving enthusiasm and higher prices.

The upcoming bitcoin halving, expected to occur in mid-2024, will see the bitcoin mining reward cut in half from 6.25 bitcoin per block currently to 3.125 bitcoin. This quadrennial event has historically been bullish for bitcoin prices over the long-term. According to a recent report from Grayscale Investments, while the halving poses challenges to miners in the form of reduced block rewards, innovations like Layer 2 scaling solutions could offset this by lowering transaction fees and enhancing throughput.

Beyond market structure changes like the ETFs and the halving, bitcoin also received a small boost from a geopolitical event last week. The re-election of pro-bitcoin President Nayib Bukele in El Salvador for another 5 year term was cheered by cryptocurrency advocates. El Salvador under Bukele was the first country to make bitcoin legal tender in 2021. While Bukele’s visions of a bitcoin-powered economy have stumbled, his re-election signals continued support.

After hitting the historic $50,000 mark, bitcoin pulled back modestly but has remained firmly above $48,000 over the past few days. The key question now is whether bitcoin can rise and continue trading stably above $50,000, which would signal a definitive change in market structure according to analysts.

Take a moment to take a look at Bit Digital, a large-scale bitcoin mining business and a sustainability focused generator of digital assets.

Previous rallies above $50,000 over the past two years have been short-lived, with bitcoin failing to establish support at those levels. In March 2022, bitcoin briefly topped $48,000 before slipping back down. And in early January this year, bitcoin hit $50,000 but quickly dropped below $45,000 within days.

This time, bitcoin investors are hopeful that conditions are ripe for bitcoin to finally break out above $50,000. Analysts at Bernstein recently predicted a “fear of missing out” or FOMO rally in bitcoin, as momentum builds following the breach of $50,000. However, bitcoin remains highly volatile, as evidenced by its drop from all-time highs near $69,000 in November 2021 down to below $20,000 by the end of 2022.

Market analysts will be monitoring key support and resistance levels, like the 200-day moving average near $46,500. As long as bitcoin can avoid dropping below these key technical levels, the bullish case remains intact. But buyers will need to maintain consistent support above $50,000 and catalyze follow-on demand in order for this latest move higher to be sustainable. Other factors like rising interest rates and broad macroeconomic uncertainty still pose downside risks.

Nonetheless, the combination of factors lining up in bitcoin’s favor – the surging interest and inflows into spot ETFs, optimistic narrative around the halving, and the breakout above $50,000 – has many crypto investors calling this bitcoin’s next bull run. As bitcoin solidifies its status within mainstream finance and garners attention from major institutional players like BlackRock and Fidelity, the dynamics appear to be changing in favor of greater price stability and less volatility. But bitcoin’s freewheeling ways are difficult to tame. We will soon find out in the coming weeks and months if bitcoin has finally matured enough to leave its past boom and bust cycles behind.

BlackRock Goes Big on Infrastructure in Transformational $12.5B GIP Deal

Posted on January 12, 2024January 12, 2024 by slightbourne@noblecapitalmarkets.com

In a move that could shape its future, BlackRock is making a huge bet on infrastructure investing with its $12.5 billion acquisition of specialist firm Global Infrastructure Partners (GIP).

The deal, announced Friday, includes $3 billion in cash and 12 million BlackRock shares to bring GIP’s $100+ billion infrastructure portfolio under its umbrella. With infrastructure booming globally, it plants BlackRock’s flag in an alternative asset class that offers stability and strong cash flows.

For Larry Fink, BlackRock’s founder and CEO, the deal provides a growth engine and caps a storied career. At 71 years old, Fink has not yet named his successor. This acquisition generates buzz around President Rob Kapito and COO Rob Goldstein as potential heirs apparent.

It also brings infrastructure investing veterans from GIP into BlackRock’s senior ranks. GIP Chairman Bayo Ogunlesi will join BlackRock’s board, while co-founders like ex-World Bank President Jim Yong Kim provide invaluable experience.

Why Infrastructure, Why Now?

Infrastructure has become increasingly attractive to institutional investors, particularly those with long-term liabilities to fund. The assets provide inflation protection, and the regulated nature of many infrastructure projects leads to predictable cash flows even during economic downturns.

Swelling demand for infrastructure also powers opportunity and growth. E-commerce and supply chain modernization require massive investment in logistics and transportation assets like airports, seaports, rail, and warehouses. The global energy transition is expected to necessitate trillions in spending on renewable power, battery storage, transmission lines, and more. And booming data usage makes digital infrastructure such as cell towers and data centers a near-certainty for major funding.

BlackRock saw the writing on the wall. With interest rates still relatively low by historical standards, it pulled the trigger on a transformative infrastructure deal rather than waiting for valuations to potentially rise further. GIP’s assets also provide diversification and inflation mitigation to complement BlackRock’s vast holdings of stocks and bonds.

For forward-thinking infrastructure investors, BlackRock’s whopper of a deal validates the long-term potential of the sector. And it positions the asset management titan to capitalize on infrastructure demand in both developed and emerging markets for decades to come.

Rejuvenating Revenues

The move into infrastructure also helps reinvigorate BlackRock’s revenues. With rock-bottom interest rates in recent years limiting fee income, BlackRock has searched for ways to accelerate growth. The company manages over $10 trillion in assets but has seen minimal increase in revenue since 2018.

Alternative investments like infrastructure represent a potential answer. They generally command higher management fees while also offering incentive fees based on investment performance. That combination bodes well for BlackRock’s results.

BlackRock has dipped its toe into alternatives over the past decade via real estate, hedge funds, private equity, and other strategies. But the GIP deal vaults infrastructure to the forefront of BlackRock’s alternatives platform. Expect heightened focus and more resources dedicated to infrastructure deals in the future.

With the Fed lifting rates this year, BlackRock also has a short-term revenue boost at its back. Higher interest rates allow BlackRock to charge more for managing cash and fixed income, its largest assets. BlackRock’s 8% increase in fourth quarter earnings served as an appetizer. The GIP acquisition is the main course in its long-term growth agenda.

Fink Caps Career with Legacy Deal

Larry Fink has run BlackRock since its inception in 1988, guiding it to become the world’s preeminent money manager. But the end of his tenure looms. While no retirement plans have been announced, Fink is 71 years old.

The GIP deal thus shapes up as a culminating move to put his stamp on BlackRock’s future. Shortly after the acquisition was announced, Fink said, “This is one of the most exciting transactions we’ve ever completed.”

What excites Fink and BlackRock is GIP’s expertise, global reach, and the long runway for infrastructure investing. Fink pulled the trigger on a legacy deal that can steer BlackRock’s course beyond when he ultimately steps down.

The acquisition also stirs up increased speculation on who could succeed the respected CEO. As BlackRock makes infrastructure integral to its future, the deal elevates infrastructure veterans like GIP Chairman Bayo Ogunlesi. COO Rob Kapito and President Rob Goldstein also see their standing boosted.

While the stock dipped slightly on Friday’s news, the deal primes BlackRock for sustainable growth. Shareholders will be monitoring the integration, but early reviews applaud Fink and BlackRock for their foresight and ability to execute.

Blackrock Checked “No” on 93% of Environmental and Social Proxy Votes

Posted on August 23, 2023August 23, 2023 by phoffman@channelchek.com

Blackrock’s Support for ESG May Have Been Unsustainable

Blackrock, a firm with a reputation for strongly supporting ESG resolutions, having voted yes on 47% of them in 2020, voted down 93% in the past year. The company provided the reasons for shunning 371 proposals out of 399 in its annual Stewardship Report released on August 23^rd. With $9.4 trillion under management, investors pay attention to the investment manager. This gives it the power, whether it likes it or not, to create trends as others follow its lead. Should the company’s adjusted position on ESG be taken as something others want to mimic? The reasons given leave that in question.

BlackRock is the world’s largest asset manager. As such, the funds it manages own significant amounts of shares of a broad array of public companies. The Blackrock funds vote on important matters related to the underlying companies if a corporate resolution requires a shareholder vote. Think of the ETF or mutual fund as a trust, and the fund manager, Blackrock, gets to vote on behalf of the assets in the trust. Whereas if an investor owns individual shares of a company, they get to decide and vote themselves, either at a board meeting or more likely, through a proxy statement. Certainly, the amount of control over the decisions of corporations worldwide given to an asset manager of this size is immense.

Each year, the company files a report on its voting during the proxy season. It broke records by voting down 91% of all shareholder proposals and against 93% of those focused on environmental and social issues during the 2023 proxy year. The 7% of ESG proposals that BlackRock supported this year is down sharply from 2022, when BlackRock’s investment stewardship team supported 24% of such proposals, and from 2021, when it supported 47%.

BlackRock’s Investment Stewardship team, makes the voting decisions on both management and shareholder proposals on behalf of BlackRock’s clients. It said the large number of “NO” votes this year is partly related to a huge influx of shareholder proposals. These were described as “poor quality” by the BIS team, either because they were “lacking economic merit,” were “overly prescriptive” and “sought to micromanage a company’s strategy,” or were simply redundant, asking a company to do something it had already done, the Stewardship Report said.

BlackRock’s support for management proposals (not shareholder proposals), which accounted for more than 99% of the roughly 172,000 proposals voted on by BIS, remained high at 88%.

BlackRock’s trend of voting against shareholder proposals is largely in line with other fund managers. The median shareholder support for environmental and social proposals in the U.S. fell sharply from 25% in 2022 to just 15% in the 2023 proxy year.

The firm has backed away from ESG as a term if not a concept. The most recent CEO newsletter did not include the acronym at all, and during a June interview, CEO Larry Fink said he does not use the term, he gave this reason, “I’m not blaming one side or the other, but it has been totally weaponized,” Mr. Fink said. “In my last CEO letter, the phrase ESG was not uttered once, because it’s been unfortunately politicized and weaponized.” He now has a reluctance to have his firm associated with the term ESG after a wave of backlash from both sides of the political spectrum.

In December 2022, Florida’s chief financial officer announced that the state would pull $2 billion worth of assets managed by BlackRock, the largest such divestment by a state opposed to the asset manager’s environmental, social and corporate governance (ESG) policies. BlackRock also lost some of its business of oil rich Texas from its government pension funds because of its ESG policies. Louisiana and Missouri, have also taken steps to divest from BlackRock.

Although not specifically stated in the report, Blackrock fund managers still support the idea that good corporate citizenship could in turn, benefit shareholders. But they will no longer be out front as though ESG factors are the most important criteria. Earlier this month S&P Global Ratings decided it would not provide ESG ratings separate from its credit ratings. Instead, S&P will factor in all of the obligors’ business practices as it relates to risk of non-payment, and assign only a credit rating.

The term has become polarizing as differing political philosophies tend to stand together in support of ESG issues being taken into investment consideration, and other political leanings stand opposed to the not fully developed concept. This has hurt Blackrock.

Republican politicians have been probing Blackrock’s business dealings and asking conservative-leaning state pension funds to divest from the company, which they say has unfairly excluded the traditional energy sector.

On the other hand, environmental activists have lambasted Mr. Fink and his company for not doing enough to stop climate change, protesting in front of BlackRock’s headquarters and heckling senior executives at public speaking engagements. In June Blackrock began providing high-level security to protect Mr. Fink and others in management.

Take Away

When you put your money into most mutual funds, you give away the power that comes with voting on important matters to the underlying shares held by the trust of which you are a part owner. As mutual funds and ETFs have grown, more of the power to guide companies has been handed to the elite running asset management companies.

The growth in popularity in “sustainability” investing caused a rush from investors to these funds, which then needed to place assets in the limited number of companies in the segment. This caused a rise in the share prices of the companies and a rise in the popularity of the funds. Many investors were indifferent to ESG, but not indifferent to making money, they also jumped in. Companies quickly caught on and adjusted their logos to include leaves and the color green, altering some business practices.

While the leadership that Blackrock provides may signal the eventual demise of the term ESG, there has always been, and will always be an interest in putting your money where your heart is. The concept will live, but with Blackrock’s lead, the acronym may transform to something that is less political and less likely to cause protests outside of his home.

Paul Hoffman

Managing Editor, Channelchek