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BlackRock Is Now the 800-Pound Gorilla

Plus, Fidelity-iShares partnership a good deal for index investors, and more.

Morningstar Analysts, 02/08/2010

Now that BlackRock BLK has completed its acquisition of Barclays Global Investors, investors are now seeing just how big a player the firm will be in the asset-management industry--and could be in corporate boardrooms.

Even before the deal, BlackRock was sizeable. Now, with $3.35 trillion in assets under management at the end of 2009, it can claim the title as the world's largest money manager. About $1.9 trillion of that comes from BGI, which includes iShares, the largest ETF provider in the world. IShares commands more than 48% of the U.S. ETF industry market share with its 350-plus funds and more than $360 billion in assets. BlackRock also is one of the 10-largest traditional mutual fund managers in the United States with more than $100 billion in assets under management, up from about $77 billion at the beginning of 2009.

Now that BGI and BlackRock are one, BlackRock has started to file consolidated financial disclosure forms with the Securities and Exchange Commission. According to various media sources, last Friday, BlackRock filed more than 1,500 13G forms with the SEC. A 13G form is similar to Schedule 13D, which is used to report that an investor owns more than 5% of a company.

These ownership forms were filed for some of the largest Fortune 500 companies. The Wall Street Journal reported BlackRock now owns 5.6% of Apple AAPL, 5.2% of Microsoft MSFT, 5.9% of Google GOOG, and 6.3% of Hewlett-Packard HPQ.

BlackRock even owns 5.76%, or about 10 days of trading volume, of ExxonMobil XOM, one of the largest publicly traded companies in the world, with a market cap of more than $300 billion.

BlackRock also filed a 13G for Goldman Sachs GS and Morgan Stanley MS, two financial-services firms that have been in the headlines lately for their executive compensation practices. BlackRock says it owns about 6.2% of Goldman and 5.4% of Morgan Stanley.

Investors may want to start sending complaints and ideas about financial industry compensation to BlackRock instead of to their elected representatives.PAGEBREAK

Investors Should Short U.S. Treasury Bonds, says 'Black Swan' Author
Nassim Taleb, author of The Black Swan, made headlines recently by arguing "every single human being" should short U.S. Treasury bonds, calling the trade a "no-brainer." Taleb cited the inflationary policies of Federal Reserve Chairman Ben Bernanke and officials in the Obama administration in his reasoning.

He also recommended shorting the S&P 500 against gold and other "intelligent metals" as well as buying out-of-the-money options on hyperinflation. Taleb explains his strategy in this Bloomberg news video and article (see the related video under the Video tab on that page).

Fidelity Allows Free Trading on Some iShares
Fidelity and BlackRock have teamed up to offer 25 popular iShares ETFs to Fidelity clients without commissions.

Fidelity specialist Chris Davis and ETF analyst Paul Justice recently discussed what the deal means for Fidelity investors. You can check out the related article here.

This is big news, especially for S&P 500 Index investors. Now, Fidelity clients can dollar-cost average into iShares S&P 500 Index IVV commission-free, which makes the iShares fund a better deal than Fidelity's own index fund (Fidelity Spartan 500 Index Inv FUSEX). The iShares fund is 20% cheaper (0.08% versus 0.10%). Plus, the iShares fund has no investment minimum, while the minimum for the Spartan fund is $10,000.

The board of trustees of Fidelity Select Environmental FSLEX has approved several changes to the fund intended to broaden the fund's investment policies. The board also wants to rename the fund Fidelity Select Environment and Alternative Energy. These changes will not occur until certain shareholder approvals have been obtained. If approved, the fund will invest primarily in companies engaged in business activities related to alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies, or other environmental support services.

Vanguard Dividend Growth VDIGX replaced its former performance benchmark, the Russell 1000 Index, with the Dividend Achievers Select Index. That index is the benchmark for the passively managed Vanguard Dividend Appreciation Index fund VDAIX and ETF VIG. The strategy of the fund remains unchanged; it still sticks with high-quality businesses that produce enough free cash flow to grow their dividends.

By the end of February, Leuthold Select Equities LSEQX will merge into Leuthold Select Industries LSLTX.

Pending shareholder approval, three MTB funds--MTB Managed Allocation Aggressive Growth VMAGX, MTB Managed Allocation Moderate Growth VMMGX, and MTB Managed Allocation Conservative Growth VMCGX--will merge into MTB Balanced ARBAX, which will change its name to MTB Strategic Allocation.

Jeffrey Schwarte replaced John Pihlblad as co-portfolio manager of Principal Large Cap Value PCACX.

Thomas Luster and Bernard Scozzafava replaced Duke Laflamme as co-portfolio managers of Eaton Vance Investment Grade Income EAGIX and Eaton Vance Balanced EVIFX.

Matthew Krummell replaced Michael Mara as portfolio manager of MFS Sector Rotational SRFAX.

Robert Weller is off the portfolio management team of JPMorgan Intrepid America JIAAX, JPMorgan Intrepid Growth JIGAX, JPMorgan Intrepid Multi Cap JICAX, and JPMorgan Intrepid Value JIVAX.

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