BlackRock’s Kapito Says Stocks Are Primed for a Comeback
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BlackRock Inc.’s Robert Kapito says the stock market is poised to benefit as investors deploy their outsized holdings of cash.

There’s almost $9 trillion sitting in money market funds and the same amount in cash alternatives at banks, Kapito, president of the world’s largest asset manager, said at the Asia Pacific Financial and Innovation Symposium in Melbourne on Tuesday.

That money pile is set to be a “very big force” in the equity market, which has shrunk as investors shifted to private assets, he said. “This is going to be something you want to be paying very close attention to, you don’t want to miss this,” Kapito said.

How quickly investors decide to move away from cash may well depend on the Federal Reserve’s next move on interest rates. The combination of strong US growth and sticky inflation is raising the odds the Fed hikes rather than cuts interest rates, bringing borrowing costs to as high as 6.5% next year, according to UBS Group AG strategists.

Kapito has pointed to the cash pile sitting in money markets before. In January, Kapito said he is eyeing the trillions of dollars of dormant investors’ cash that could soon be reallocated to bonds if interest rates fall. Much of the money-market cash could be shifted toward model portfolios and exchange-traded funds, he said at the time.

BlackRock is seeking to position itself as a one-stop shop for a full range of investing options, including alternative assets that are in greater demand by institutional clients such as pensions, endowments and sovereign wealth funds. While alternatives currently account for roughly 3% of BlackRock’s assets under management, they bring in about 10% of fees.

–With assistance from Ainsley Thomson.

(adds further comments from BlackRock’s Kapito.)