«It is a great, great honor and privilege to be here with you today. It’s an honor and a privilege, first of all, to be able to represent my ...»
The second way, again, is to have a powerful common technology platform. That common platform, supporting a common global approach to risk management, allows us to run our business globally in a way that ensures that leadership in Beijing thinks no differently than leadership in London or New York – that we’re not divided up into regional and functional pods. That we really are One BlackRock.
Another way that common platform helps us operate successfully in global markets is by keeping the lines of communication open all the way across the company. The changing, expanding and accelerating flows of capital today mean that intelligence and insight gained in advising clients and monitoring markets on one side of the world must 6 be continuously available to inform your activities on the other. The world is interconnected in ways that never existed to this extent in the past and along lines that were never drawn in the past.
It’s easier to do business when everyone sees the same data and shares the same information – talks a common language, as it were. In our case, our portfolio managers get the information they need in their timeframe... benefitting their clients.
Plus, the data is kept clean – once a correction is made in a piece of data, everyone benefits. You can’t do that if you have a dozen different systems. And it helps us to achieve efficient, centralized trading and operations and approach investment and business decisions in the same way globally.
We’ve stuck to that belief in a common technology platform for 25 years, even as we have made a series of major acquisitions. Many firms maintain multiple systems – Merrill Lynch Investment Advisors had 17 when we acquired them.
But through every acquisition, we have insisted on bringing everyone onto that single risk management platform to keep everyone on the same page culturally and operationally.
So I think that’s an important lesson to consider if you’re running multiple platforms – a common technology platform not only allows you to manage risk across your entire company but also to keep communications open in a way that builds and strengthens your common culture.
Advising Governments through the Financial Crisis
So to bring these lessons home, I want to share a very current and relevant case study about how a fiduciary model, risk management capabilities, a global culture and a common technology platform came together. And that is BlackRock’s work in helping governments and institutions manage through the financial crisis.
For four years, we’ve been helping the New York Federal Reserve dispose of tens of billions of dollars in troubled assets that it bought to facilitate the sale of Bear Stearns and help rescue AIG at a time of severe peril for the global economy.
Just last month, the New York Fed announced that it had repaid all of the loans from U.S. taxpayers that were used to finance these emergency operations and had done so with interest.
So here’s how the lessons I have shared apply to this work: first of all, we were selected for this critical assignment in the midst of intense political scrutiny because our fiduciary model gave us a reputation for integrity and neutrality.
Meanwhile, the common global culture and technology platform we have built meant we could bring together more than 300 BlackRock experts in seven offices across
For the same reasons, we were selected to monitor trillions of dollars on the balance sheets of Fannie Mae and Freddie Mac, the big U.S. government-sponsored agencies at the heart of the housing crisis, and to advise the central banks of Ireland and Greece on the recapitalization of their banking systems in the eurozone crisis.
The Importance of Passion
But all of your success in creating a client-focused business model and building a common global risk management and technology platform will go for naught if you don’t also nurture one additional quality at the heart of your shared global culture: a passion for performance.
I’m often asked what makes a great leader rather than a good leader. Well, the difference between a good leader and a great leader … a good employee and a great employee … a good company and a great global enterprise … is not intelligence or talent but passion.
The differentiator even among the smartest and most talented people is the passion they bring to their jobs. That’s especially true for leaders. Jeff Immelt, the CEO of General Electric, has said that if you’re a leader, you never have enough time in the day, because you have an infinite “to do” list.
That’s why at BlackRock, we are intensely focused on performing at the highest level, whether that’s delivering superior investment returns, managing risk or contributing to the company’s bottom line. That passion for performance will be the true differentiator for your firms as well.
So where does that passion come from – the passion that separates out a great employee from a good one, a great leader from a good one, or a great global company from one that can’t make the transition?
We believe that from the founding of your company, that passion has to come from remembering your broader responsibility … to your clients or customers … to society … to the world.
Our Responsibility to Be a Voice of Investors on Regulatory Issues One way we seek to meet that responsibility is by working to serve as the voice of the investor on regulatory issues. At BlackRock, we recognize the importance of efficient financial markets to long-term prosperity. So we feel a responsibility to work with governments and industry to promote smart regulation that reflects the realities of the market.
8 That’s especially true now given the sheer volume and scope of the regulations that have been promulgated over the last four years since the financial crisis. The number of proposed regulations is just staggering … and so are the costs of compliance.
Consider just the Dodd-Frank legislation in the United States that was passed after the financial crisis of 2008 – it is 849 pages long.
Analysts estimate that to comply with Dodd-Frank, financial services companies in the U.S. will have to spend an additional 1 billion dollars on technology alone in 20121.
And Dodd-Frank is just one piece of legislation in one country – we are seeing increased legislation and regulation across the globe.
Increasing regulation is going to mean enhanced reporting requirements across the asset management industry and beyond. It is a global phenomenon, and it partly explains why we continue to see increased interest in our Aladdin technology and BlackRock Solutions business. It is because better technology and better systems are required not only to manage risk but also for reporting purposes and therefore to enhance transparency.
At the same time, I believe there’s a real risk of “regulatory arbitrage” as capital flows to more investment-friendly venues from the U.S. and Europe.
Western nations should not be punished for doing the right thing. But they need to make sure that they are not engaging in crushing regulation for the sake of regulation … those regulations, again, need to be aimed at making markets more transparent, efficient and fair.
BlackRock is a strong supporter of sound, practical regulation. That’s why we have been speaking out, on issues like ETF regulation in Europe, and the segregation of client accounts and money-market reform in the U.S.
Certainly strong, sound regulatory regimes are critical for sustainable economic growth, and as China continues to enhance the quality of its regulation, it will prepare Chinese companies to meet the requirements of regulatory regions elsewhere in the world and become global leaders in their fields.
Our Responsibility to Those We Truly Serve There’s another and even more important source of the passion that has helped us build a global firm.
Since our founding, our passion has come from focusing on the people we ultimately serve: working people, as well as retirees and students, who depend on our funds for 1 Tower Group
It’s a scary time for investors and working people today. In a New World of Investing characterized by high volatility and uncertainty … in the midst of a global crisis of confidence … fear is driving trillions of dollars out of the markets and to the sidelines.
Both institutions and individuals are frozen because of the low yields and uncertainty in the markets. In particular, for cultural reasons, Asia as a region is focused too much on savings and not enough on investing, even more so than the West. For example, China’s savings rate rose from under 40 percent in the 1990s to some 51 percent today.
Many commentators believe that China’s high savings rate has provided a drag on interest rates worldwide that continues today.
While saving and staying in cash may seem like a safe strategy, the problem is that low yields mean that inflation will erode the value of investments over time and savers will fall short of their goals.
To achieve the region’s long-term goals, just as in the West, we need to turn more of Asia’s savers into long-term investors. It’s time to encourage long-term investments with the potential to generate real growth and meaningful income over time.
That involves more than just cheerleading to get investors off the sidelines and out of cash. It involves some structural changes as well. In particular, the opening of capital markets is necessary, so that corporations can issue equity through IPOs and are able to raise capital through bonds and are less dependent on the banking system.
And as I indicated earlier, the opening of capital markets requires greater transparency and strong regulatory oversight to ensure the safety and soundness of markets.
Earlier this year, we launched a global branding campaign that puts our responsibility to our clients and to those they serve at the heart of our company’s identity.
In this New World of Investing, amid the volatility and uncertainty, we want people to know that our responsibility, our passion, is to provide answers, to encourage investors to take a long-term view, and to help them achieve a brighter future.
We also believe that our client companies have a moral duty to help their workers understand how to increase their financial security, and that we have a particular responsibility to support those companies. It all comes together in this branding campaign.
Our campaign exemplifies how we are living out the mission we saw for ourselves when eight of us founded BlackRock 25 years ago – building a different financial services company with a true fiduciary purpose and a truly global outlook that is invested in just one thing – helping our clients invest responsibly for the future.
10 So let’s summarize: building a global financial services company is about institutionalizing not only structures but also models and culture. We believe that those models need to be built around an understanding of risk and a commitment to put our clients first.
But what truly drives a start-up into a global company, and separates a great firm from a merely good one, is more than just structures and models and culture: it’s passion, responsibility, and a shared sense of purpose.
Thank you so much. I’m looking forward to spending the rest of the time we have in discussion with you and hearing your perspectives.