Well, he ought to know.
Larry Fink, CEO of Blackrock, says that a slew of money managers will put themselves up for sale rather than pay to meet new fiduciary standards. The head of the $2.7 trillion asset manager was speaking to a group of fellow predators—er, large money managers—and he noted that mid-sized firms will be subject to greater scrutiny from the SEC. He thinks it won’t be adequate to depend on broker-produced research.
So, he expects that they will either have to develop their own research or sell out to bigger firms. In either case, the smaller firm is crippled—either by excessive costs or by an overbearing parent. Mr. Fink is famous for his blistering attacks.
But this is a false choice. Instead of selling out, why couldn’t smaller firms pool their resources to form a joint research team. For that matter, what’s to stop an enterprising analyst from opening her own research shop and selling her reports? Using truly independent analysis would surely satisfy fiduciary duties, and might not be all that expensive.
My suspicion is that Mr. Fink is “talking his book”—discussing the possibilities of nabbing some rivals on the cheap. Mr. Fink’s share in his firm amounts to over $300 million, but he’s not beyond augmenting his empire through a little jawboning.
Hey, we’d all like to build our businesses with a little help from our friends in Washington. But given the issues large managers face—intractable conflicts, control issues, turnover—it makes sense for Mr. Fink to temper his comments.
Douglas R. Tengdin, CFA
Chief Investment Officer
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