Largest Asset Manager Anticipates Market Recovery

BlackRock Inc.’s co-founder, Robert Kapito, believes that markets are poised for a comeback. He made this statement at the Asia Pacific Financial and Innovation Symposium in Melbourne, noting that there is currently almost $9 trillion in money market funds and an equal amount in cash alternatives at banks. Kapito emphasized that this significant amount of money is likely to have a major impact on the equity market, especially as investors have been moving towards private assets.

The influx of cash into the market is something that investors should closely monitor, according to Kapito. The speed at which investors decide to move away from cash might be influenced by the Federal Reserve’s upcoming decisions on interest rates. With strong US growth and persistent inflation, there is a higher chance that the Fed will raise interest rates rather than cut them, potentially pushing borrowing costs up to 6.5% next year based on UBS Group AG strategists’ predictions.

Kapito has previously highlighted the large cash pile sitting in money markets. In January, he mentioned the trillions of dollars of dormant cash that could be redirected to bonds if interest rates decline. He also suggested that some of this money-market cash might move towards model portfolios and exchange-traded funds.

BlackRock is positioning itself as a comprehensive investing solution, offering a full range of options, including alternative assets that are increasingly popular among institutional clients like pensions, endowments, and sovereign wealth funds. While alternatives currently make up around 3% of BlackRock’s assets under management, they generate about 10% of fees for the company.