BlackRock sees global slowdown worsening in 2009
By Walden Siew
NEW YORK (Reuters) - BlackRock Inc's (BLK.N) president (BLK.N) said on Tuesday the money management firm is bracing for a "much bigger" global economic slowdown, but said financial market declines have created some of the best buying opportunities ever for fixed-income money managers.
In addition, BlackRock President Robert Kapito said that all options are open in a possible sale by Merrill Lynch & Co MER.N of its large stake in the U.S. money management firm. Merrill had mentioned such a possibility last month.
Kapito, citing slowing growth in emerging markets and tightening pressures on the U.S. consumer, said BlackRock expects a much bigger slowdown in 2009.
"We think there's going to be a global slowdown," he said at a lunch sponsored by the Securities Industry and Financial Markets Association in New York. BlackRock is the largest publicly traded U.S. asset manager with about $1.4 trillion in assets under management.
Using a baseball reference, Kapito said the credit crisis is in the fourth inning, indicating he believes the crisis is nearly halfway over.
"Inflation is up, housing is down," he said. "The consumer is hurt. I can't think of one positive thing for the consumer here."
"BEST TIME" FOR BONDS
But amid the poor economic outlook, Kapito said there are bright spots for investors.
Declines in residential and commercial mortgage-backed securities since last year have created some of the best buying opportunities for fixed-income money managers in history, he said.
"If you take a look in the marketplace, and step back from what's going on, this is the best time that we've ever been in to add value to a portfolio," he said.
Challenges remain, however, since homeowners are still defaulting on loans and house prices are falling. But money managers who have the ability to do the proper credit research can "ferret out" good opportunities, he said.
Kapito said securities backed by loans on properties such as office buildings, retail stores and hotels were especially attractive, in addition to residential mortgage bonds that do not carry the guarantees of Fannie Mae and Freddie Mac, the two government-sponsored enterprises.
"I am a big believer in backing up the truck and buying CMBS," he said, referring to commercial mortgage-backed securities.
MERRILL STAKE
When asked about a possible sale of Merrill Lynch of its almost 50 percent stake in BlackRock, Kapito told Reuters, "A CEO has to evaluate all their options." He declined to comment further.
Merrill Lynch Chief Executive John Thain said earlier this month that if the company needed to raise more capital, it might sell its nearly 50 percent stake in BlackRock.
Thain also said at the time that Merrill might sell its 20 percent stake in news and financial data provider Bloomberg
Kapito, who joined BlackRock at its inception in 1988, became president of the firm last September.
BlackRock shares fell 2.4 percent to $194.83 in afternoon trading on Tuesday. Based on current prices, Merrill's BlackRock stake is worth roughly $11.6 billion.
BlackRock has emerged as one of the winners from the subprime mortgage and credit crisis that has gripped global markets since last year.
The firm is managing $30 billion of illiquid assets acquired by the Federal Reserve from Bear Stearns Cos as part of bailout efforts for the collapsed bank, which was acquired by JPMorgan Chase & Co (JPM.N) earlier this year.
(Additional reporting by Al Yoon; Editing by Leslie Adler)
