This is a short story about Larry Fink and how he became to be known as the “10 trillion dollar man”
Laurence Douglas Fink is the chairman and CEO of the largest asset management company in the world, BlackRock. As of January 2022, it manages around 10 trillion dollars under management.
The year is 1969, California. Like any other country, its people too were going through major economic, political, and social changes. Larry Fink was one of them.
After completing his degree in political science from UCLA, he aspired to be a politician. But he ended up on Wall Street. He got a job in one of the leading investment firms, First Boston as a bond broker. During the early ’70s, bonds were just started being traded more actively in the market and his career as a broker took off.
After Ronald Reagan became President of the United States in 1981, the government began cutting down on taxes and deregulating Wall Street which helped in creating the perfect environment for financial innovation. One such innovation was the mortgage-backed securities. Fink was its main architect. It brought in millions of dollars in revenue for First Boston which at the time specialized in mergers and acquisitions. After creating 1 billion dollars in profits, he becomes the most profitable manager in the firm.
But this state of euphoria wouldn’t last long. After losing 100 million in a single quarter, Larry Fink quits First Boston. At age of 36, he is unemployed but being a competitive man he refuses to quit. This time he wants to create his own business. For that he needs investors. But due to his reputation on Wall Street that would be difficult until he meets the legendary Stephen Schwarzman, founder of Blackstone. After the meeting, they decided to do a joint venture called Blackstone Financial Management with an investment of 5 million. Within just 5 years of operations, the fund grew to 8 billion dollars under management. But after an internal power struggle, Blackstone FM became a separate private equity fund. Now Fink is free to build his company however he sees fit.
Now renamed as BlackRock. They specialized in financial engineering. These types of tools are only available to big players in finance. Not to retail investors like you and me. Financial Engineering has now become its top competitive edge for the firm. If you have bad portfolios on your book and want to get rid of them, Larry Fink was the man you would call. In a short period of time, the company now has 46 billion dollars of assets under management. By the time BlackRock went public in 1999, it had become the fifth-largest private equity asset management company in America with 165 billion dollars under management. But Fink wants to be №1. A little over 10 years, BlackRock has now become a goliath and it only wants one thing, to get BIGGER.
But under this prosperity, a new storm was brewing. During 2006–07, housing prices in America were skyrocketing and a bubble was being formed that nobody foresaw. On March 16, 2008, the housing market came crashing down which lead to one of the largest financial crises in the world. Major companies were filing bankruptcies left and right. The government had to step in and so they hired BlackRock to clean up the mess. This was the perfect opportunity for Fink to cement himself as the King of Wall Street. They acquired Merrill Lynch Investment Management, expanding its retail and international presence.
Due to the crisis, nobody wanted to buy actively managed funds anymore. So they looked towards ETFs (exchange-traded funds). So BlackRock launched iShares in 2012. They raised 103 billion just from iShares alone. Now the firm is so big that they are the majority stakeholders in almost every public traded company out there in the world. Their actions can influence world economies, government policies, and how companies operate. They have their hands dipped in every sector you can imagine. Fink has now become the J.P Morgan of the 20th century.
