We need to continue to build the BlackRock brand......
The U.S. Treasury Secretary looks up to him for advice, the guru’s of the financial markets listen to him when he speaks about a possible renaissance in the U.S. manufacturing sector, and many aspiring and, even successful, entrepreneurs draw inspiration from this man who created a $3 trillion global investment empire from – literally – nothing! He is none other than Larry Fink, the chairman and CEO of the world’s largest money-management firm, Blackrock. And, if rumors are to be believed, he might just himself fill the Treasury Secretary’s position - may be because he has been the go-to man for the government to address situations, ever since the world was gripped by the economic melt-down. But all that doesn’t stop him from declaring that he is a student as far as leadership is concerned!
Early Days
Fink was born in 1952 in Van Nuys, CA, to a shoe-store owner father and an English-professor mother, so he need not have looked further than home for inspiration as a child. He completed his B.A. in political science from UCLA in 1974, and followed it up with an M.B.A. from the UCLA Anderson School of Management in 1976.
Right after his B-School studies, he joined First Boston where he ran the mortgage-backed securities division. In fact, he is often referred to as being instrumental in bringing about the concept of a mortgaged-backed security market to the U.S.A. Not only that, he also started the financial futures and options department at the company. He went on to add about as much as $ 1 billion to the company’s revenue where the other roles that he assumed namely, co-head of the fixed-income division and head of the real estate products group, also helped him succeed greatly.
The Spark
While the success of few divisions along with the new ones he had developed were manifestations of his vision and business acumen, creating much value for First Boston, all the good work done by him was soon threatened by what was apparently a judgement error or an under-estimation of the power of market dynamics and various other factors that made up risk. This reportedly cost the company about $100 million. The shock of seeing so much wealth wiped-off, presumably, for not being able to predict the direction in which interest rates were headed, and what impact that would have on First Boston’s revenues, was like a jolt to Fink. While some may have bickered, most of the powers that be, and the market in general, did not worry as much about this unsavory development. They knew that it was Fink who had added $1 billion to the company’s revenues and he’ll make up for it sooner than later. But what they did not know was that the loss had hurt the visionary and thorough-bred Fink. He had learned that it does not suffice to just know how to make money (for clients) without fully understanding the risks. It fired his imagination so much that he decided to start a company that would not merely invest clients' money but would also be mindful of the risks engendered in the various products of the financial markets.
He, along with a handful of colleagues at First Boston and a like-minded contemporary, Ralph Schlosstein, (who also, like Fink, managed the mortgage-backed securities division at Lehman Brothers Kuhn Loeb) decided to join hands and see how best they could insulate their client's wealth from risks. With that in mind, in 1987, they together joined the Blackstone Group to manage an investment fund and provide advice to financial institutions, before ultimately, establishing Blackrock that worked on a 50:50 partnership basis with Blackstone to run the investment management business. The plan was to use a Blackstone fund (the $5 million line of credit given by Blackstone for the stake) to invest in financial institutions and help build an asset management business specializing in fixed income investments.
Thus, in 1998, after 12 highly successful years at First Boston, and after having learnt one of the biggest lessons of his life, he co-founded Blackrock (initially called as Blackstone Financial Management). Obviously, the objective was to go one step further than everything that the investment-management companies back then did. It would also provide sophisticated risk management.
The Journey
Fink assumed the twin-responsibilities of the new entity (the name was changed to BlackRock in 1992) i.e. Director and CEO. The partnership worked for about 6 years before splitting in 1994 by which time it had acquired about $20 billion in assets. Fink retained both the positions even after the separation, and the very next year he pulled off a coup d'etat of sorts when the company helped GE save about $1 billion by disposing off a $10 billion distressed portfolio. It thoroughly established BlackRock’s reputation. And, in only about 5 years since that, Fink made sure that the company achieved the success it deserved by accomplishing what it had aspired at the time of its inception i.e. manage risk of its clients, and living upto to stake-holders’ expectations. By 1999, the time was ripe for BlackRock to go public, which it did quite successfully, thus reflecting the investor-confidence in its capabilities. This helped Blackrock tremendously in its now well-defined path of making money management less risk-prone than earlier. All these developments helped Fink make BlackRock as the chosen one to manage about $3.67 trillion worth of assets, thereby attaining (unofficially) the status of one of the most influential financial institutions in the world. It is also said that there’s no bank, no sovereign wealth fund, no insurance company that’s as large as BlackRock!
The success of BlackRock in becoming one of the world’s premier and most trusted financial institutions was built on Fink’s vision and, his outstanding leadership in being able to transform that vision into reality. Obviously, there were many spokes in the wheels of this success, but all of them were coordinated by the top man. His stamp is visible on every achievement of the company since it was founded up until now when it is has become a hall-mark of the best practices in the industry the world over.
It can be seen in his decision to merge with established and larger organizations as well as grow organically with a spate of acquisitions. The merger with PNC Financial Services Group (which owned 70% of BlackRock) in 1995, with the combined entity offering a common vision and platform; floating a one-of-its-kind initial public offer (IPO) in 1999 with a broad employee ownership in the stakes as the stand-out feature; the launch of BlackRock Solutions in 2000; and acquisition of State Street Research Management in 2005 which added a good chunk of equity business BlackRock’s funds. Fink orchestrated BlackRock’s merger with Merrill Lynch Investment Managers (MLIM), which has been considered as one of his master-strokes in investment and re-alignment strategies. The merger with MLIM was effected so as to halve PNC’s ownership and facilitate MLIM’s to about 49.5%.
This was followed by a spate of small and reasonably big purchases and stake acquisitions (so much so that it filed paperwork with the SEC reporting stakes of more than 5 percent in 1,800 companies, temporarily paralyzing the SEC’s electronic database) such as the fund-of-funds business of Quellos Capital Management, hiring 43 employees from R3 Capital Management, LLC, to eventually take control of the $1.5 billion fund, Barclays Global Investors (BGI) – the UK-based money-management firm, to the latest stake acquisitions in the Moscow Exchange and owning about 3.5% of Apple Inc.’s shares (valued at about $20 billion). All these meant that by 2012, BlackRock had become the largest money-management company in the world (reportedly about 15 times the size of the assets managed by some of the big AMCs), thereby justifying it replacing GENZYME on the S&P 500 Index.
But all along Fink, and the core team that started the BlackRock saga, realized what a painful stigma it could be if the basic principles on which it was founded were not adhered to, and the aspirations were not realized. Hence, they have ensured that BlackRock’s philosophy and belief -that the clients’ needs are of paramount importance and its sole business is managing clients’ assets on their behalf, and that they are investors and not traders- remained sacrosanct. In its passion to invest for clients with effective market risk management mechanisms, the company is aided further by its stated and exemplary three-dimensional approach of managing the institution (ensuring consistency on a global basis, allowing for the tailoring of products and services according to client or local needs, promoting teamwork among its 8,900 employees worldwide, and facilitating operational integrity and efficiency).
With so much success and so many accomplishments to show for, it isn’t any surprise that Fink’s wisdom is much sought after by scores of other institutions. And he hasn’t shied away from that. If anything, these things act like intoxications to Fink. Besides the 39 Trusts & Advisories under the BlackRock umbrella, of wWe need to continue to build the BlackRock brandhich he is the CEO, he also serves as an Executive Officer at PNC Financial Services Group Inc., as the Chief Executive of Private National Mortgage Acceptance Company, LLC, FDP Series, Inc. - Van Kampen Value FDP Fund; FDP Series, Inc., as Co-Chairman of the NYU Hospitals Center Board of Trustees. He served as Vice-Chairman of New York University, VIMRx Pharmaceuticals Inc.; New York Stock Exchange, Inc. and Innovir Laboratories Inc, Member of the Executive Board at NYSE Euronext, Inc., and many, many more.
Family
Fink is married to Lori (whom he married in the mid-1970s), and the couple has three children. (It is also worth mentioning that he has become a grand-father).
Awards & Accolades
* CEO of the Year (2009), Financial News Asset Management Awards.
* Listed on Smart Money’s Power 30: Finance and Wall Street List in October 2009.
* The 2007 John E. Anderson Distinguished Alumni Award.
Quotes
“If we did run into problems in markets, I think he would actually be the best person you could have in the job.”
“We have a giant responsibility. We have to not just focus on $3.4 trillion of assets being managed, but who we’re managing for -- maybe it’s your parents, maybe it’s a school teacher or a fireman. The company is connected to the entire world in what we do.”
“Wall Street’s about velocity of money. And, as velocity of money became more and more important, relationships became less and less important, and as Wall Street started to realize they could make more money by ‘balance-sheeting’ things, it became less client-centric. I wanted to do something different, and that was being client-centric.”
“I think we caught an idea before people recognized that it was an important idea. We believe that fully understanding what you’re investing in is very important.”
“We should have been fired for making all the money and not understanding how we were making it! It was a big lesson, at 33 years old.”
“We need to continue to build the BlackRock brand. Hopefully someday, your families will know what BlackRock is.”
“A great portion of our success will be through generating investment performance.”
“Culturally, asset managers have not been a good fit within banks.”
“It’s not hard to see the appeal of asset management; it is a terrific business.”
