Put 100% of investment in equities: BlackRock CEO
Investors should have 100 per cent of investments in equities because of valuations and higher returns than bonds, said Laurence Fink, chief executive of BlackRock Inc, the world’s largest money manager.
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Investors who seek safety of treasury bonds will see minimal returns, he says
Bloomberg
08 February 2012
Investors should have 100 per cent of investments in equities because of valuations and higher returns than bonds, said Laurence Fink, chief executive of BlackRock Inc, the world’s largest money manager.
Investors who seek the safety of treasury bonds will have minimal returns and will not be able to meet their needs with the US Federal Reserve expected to keep interest rates low, said Mr Fink, who in 1988 co-founded the New York- based manager with US$3.5 trillion of assets. By contrast, equities are trading at the lowest valuations in 20 or 30 years.
‘I don’t have a view that the world is going to fall apart, so you need to take on more risk,’ he said in an interview with Bloomberg Television in Hong Kong yesterday. ‘You need to overcome all this noise. When you look at dividend returns on equities versus bond yields, to me it’s a pretty easy decision to be heavily in equities.’
The US Federal Open Market Committee last month pledged to keep borrowing costs low through at least late 2014 to boost the US economy and put more Americans back to work, extending a previous end date of mid-2013.
Investors pulled money from mutual funds that buy US stocks for a fifth year in 2011, the longest streak in data going back to 1984, according to the Investment Company Institute in Washington.
Mr Fink said in a May 31 interview that he’s more bullish on US equities than bonds because companies are benefiting from the weak US dollar and have surplus cash to invest for growth.
While equities around the world were off to the best start in 18 years, the S&P 500 Index gained just 1.2 per cent since Mr Fink’s prediction last year, compared with the 6.8 per cent return in Treasuries, according to Bank of America Merrill Lynch indexes.
The MSCI All-Country World Index rallied 5.8 per cent last month, topping gains in commodities and handing investors January’s best returns in almost two decades, according to data compiled by Bloomberg. The measure is trading at 13.6 times earnings, more than twice its valuation of 32.4 times at the end of 2009, according to the data.
Mr Fink also said that the Greek debt crisis will be resolved as it is not in anyone’s interest to have a blow-up now. Greece is trying to win a 130 billion euro (S$214.7 billion) second aid package to prevent the country’s collapse, strike a deal with private creditors and remain in the euro area. European leaders in recent days stepped up pressure on Greek politicians to meet the conditions of the rescue.
‘I’m very bullish on the market,’ Mr Fink said, citing the increased liquidity from the US and European central banks. ‘I think the market is focusing too much on noise like Greece. And yet we’re going to have a lot of volatility and we’re going to have to live with it.’
The European Central Bank will be able to provide liquidity to stabilise the European markets this year, Mr Fink added. In the US, he doesn’t see another round of quantitative easing for at least a year. ‘The only reason that I would think we would do a quantitative easing three is if the dollar gets too strong,’ he said\. \-- Bloomberg