Following is the unofficial transcript of a CNBC interview with BlackRock Chairman & CEO Larry Fink on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) today, Friday, October 11.
BlackRock CEO Larry Fink: Firm is positioned to take advantage of growing capital markets worldwide
JIM CRAMER: Yes. I really do. I want to bring in Larry Fink. I don't think people understand that I'm about to speak to the person who has more money under management than any -- I don't know, I was going to say G-D. I don't want to do that. But Larry is the Chairman and CEO of BlackRock. And, Larry, congratulations. You are doing the impossible. You are organically growing the largest asset base in the world at a level that's high single digit. It's impossible. So tell us how you're doing it.
LARRY FINK: Well, hi, everyone. How are we doing it? I think it's -- you know, we also had our 25th anniversary a couple of weeks ago or last week. I think we've positioned the firm to take advantage of the growing capital markets worldwide. I think the foundational belief when we started the company 37 years ago, when we went public 25 years ago, was about more and more of the world's economic growth will be financed through the capital markets. And we positioned ourselves in that in all different measures. In 2009, when we did the acquisition of BGI, we had a belief that ETFs are going to be one of the vehicles in which we're going to be doing more and more economic activity. You know, when we bought BGI, iShares at $340 billion. Today it's $4.2 trillion. Even in 2012, when I think on this show I said ETFs are becoming the major engine for fixed income, we crossed a trillion dollars of fixed income ETFs. And now what we are seeing through the capital markets is the blending of privates and publics. I think we're going to see portfolios that are going to be looking at publics and privates in a blended way. And that's why analytics and data are going to be even more and more important in the private area. You know, we acquired frequent. We'll close that at year-end. I think that'll be the major component of making privates even larger and the role of the capital markets even bigger. So we're seeing now private credit becoming more the domain of the capital markets away from banking and insurance. This is all a part of the growth of the capital markets. And BlackRock's now positioning over the next five years of becoming a large-scale player in India. And, you know, we are working on creating a whole new retirement platform in India with our partners Jio. So all of this is just building on the capital markets. And then, importantly, when I think about our role, we're -- you know, we own a large share of every company in the world in their credit business and in their equity. And so we're perceived as a long-term investor, a partner with all these corporations. We're not this transactional firm going in and out. And so when you think about things that were going on, they're coming to BlackRock both through work. How can we expand our platform? We announced a few weeks ago our Microsoft, MGX.
CRAMER: This is it –
FINK: Right.
CRAMER: September 17, which was breakthrough.
FINK: Correct. And, you know, it's about BlackRock helping in playing a role. That also explains the industrial logic of why we did GIP.
DAVID FABER: Right but, which you just closed.
FINK: Which we just closed.
FABER: Global infrastructure partner. And adding another $116 billion in assets that's not part of the number.
FINK: Not part of the number. No.
FABER: But I want to talk private credit because you just brought it up, of course, in your initial remarks here. You know, right now it's been a place where institutional money has largely played and/or, I mean, insurers, you know, the asset base there. BlackRock is known for bringing these things to the masses. Is there and are there going to be products where obviously you can't offer the daily liquidity but where you can get an audience similar to what you've done on the ETF front for public equities?
FINK: Or Bitcoin.
FABER: Or Bitcoin.
FINK: Right.
FABER: And how is that going to evolve? Because I spent a lot of time here talking about the growth of private credit because it's so important.
FINK: So, David, I think it's about creating analytics and data in that sector to help investors understand it so we could compare and contrast public and private. Obviously, through that, we broaden the market and through broadening the market, we create more liquidity.
FABER: Which almost makes it like a public market, though, in a sense.
FINK: Yes. It should be. You know, I think about it when in my early days before BlackRock, we created the mortgage-backed securities market. Nobody even wanted to see or hear from me. But each day we try to grow and build something that was very illiquid to something that became one of the largest liquid markets in our capital market. I think this is the evolution of the capital markets. I will tell you, I have more conversations with governments and heads of state about how can we replicate the power of America's capital markets. I mean, we're the envy of the world because of the breadth and depth of having a strong banking system. You know, we have the strongest banks in the world like JP Morgan and Wells. And we have the strongest capital markets.
FABER: Right.
FINK: And we're able to ebb and weave around that. Whereas in most places in the world, you have maybe a strong banking system and a very weak capital market. And so if there's a problem there, you don't have that offset.
FABER: But Larry, I feel like we spent all our time here talking largely about the public equity markets, which you haven't even mentioned. I mean -- and you know, Marc Rowan and I sat down a few weeks ago. He said it many times. He'll keep saying it, 4,000 public companies versus 8,000 a few years ago. The fact that, I don't know, 35%, 40% of the S&P is basically seven companies. What about the public equity markets? They suffer while these private markets grow?
FINK: No, I think, well, look at the capitalization of our public markets. They're certainly not suffering. They're actually growing. I think what -- I'm not frightened of this 4,000 versus 8,000 because I think what we're witnessing is scale brings on more scale. I think if you think of the power of what AI is going to do and how it's going to transform. I mean, right now, if you think about venture capital, AI right now appears to be the domain of these five hyperscalers plus Nvidia. It is not the domain of venture capital. So, we're witnessing a transformation of scaling. Scaling becomes you're able to keep costs down. You're able to expand. So, I'm not worried about only having 4,000 companies because the reality is we have some of the greatest companies in the world that are expanding and then providing more services and more things. When I think about, you know, the power of, let's say, Chubb as an insurance company, I mean, what they have done in expanding their presence globally. And so, you know, I think that's what the whole M&A market is about. It's bringing these companies together. And the successful integrated companies are the ones that are benefiting. And we have a stronger capital markets with fewer public companies. I don't look at that as a problem. I look at that as a plus. At the same time, we will see as more and more private companies have more and more access to private capital.
FABER: They're never going to go public.
FINK: No, I would say the opposite. One day they are going to go public because they're going to want to expand the ownership beyond the few. And that's what BlackRock did 25 years ago. I mean, it was only -- we only had, you know, a number of partners. We did our IPO, everybody got shares, all the main leaders of the firm. So, I don't see that as an outcome. I see this as a natural evolution. I think what we are seeing, though, because you do have access, in the short run, you're delaying when you go public. But the reality is when you go public, you're a larger cap company.
FABER: Yeah.
FINK: And so, what we're witnessing now, when BlackRock did its IPO, I mean, I was, you know, we did it, our market cap was $1 billion. I think it was $980 to be specific. And now, what are we, $145 billion or whatever it is.
CARL QUINTANILLA: So, that's a great point. And this got talked about a lot this week, this delaying effect, right?
FINK: Yeah.
QUINTANILLA: But are you then arguing that the IPO market long-term gets more stable? New issues are more stable and hence, I don't know, less risky?
FINK: Well, I don't think IPOs are that risky depending on the companies that are coming. I don't think there is a less risky time or a more ebullient time. I think it's the quality of the company that is going public will determine that. But I do believe there is -- you're going to see great, private companies that are going to want to go public and want to expand. I mean, it's hard as a private company to do M&A. And if you believe that your moat can get larger, you can expand globally better, you're going to go public in doing that. I mean, I do believe the way we've used our public equity, I mean, you know, back in 2004, before we started expanding through inorganic opportunity, we were a bond manager. And we took that to expand. MLIM was our first big, giant one where we expanded globally, and then obviously BGI. But even eFront and Aperio, all these different transactions, and now Preqin and GIP. So all of these are just a part of it. But I mean, think about what we did. So we added $2 trillion organically over the last five years. $2 trillion is equivalent to being the sixth largest asset manager, and that was all organic over the last five years. And so I think the breadth and depth of what we're building in terms of whether it's active flows or ETF flows, private markets, public markets, digital products, and on and on. And so, and I'm very pleased with how we are doing this and the breadth of our growth.
CRAMER: Now, I do want to talk -- we all agree capital markets largely going to replace the banking market, but I want to worry about something else. I need your advice. I see the government, the Justice Department, going after Google, one of the finest companies in the world. They're going after Apple, one of the greatest companies in the world. FTC going after Amazon, a great equalizer. Is the government, of course, good or bad with you?
FINK: I'm not in agreement with the government. They may have more knowledge than I do, so I can't speak about the specifics. But at the same time, we say that we have a competitive advantage right now against China. And, you know, the key is about our relative strength in technology. And it seems odd at the same time we're becoming more and more dependent on our technologies. And we're now talking about breaking up these technology companies. It doesn't feel consistent to me. But I don't know the intricacies that the Justice Department is looking at. But I -- you know --
CRAMER: Theoretically.
FINK: And importantly, though, you know, breaking up a company may not be a good or bad outcome. We, you know, you've seen that, you know, if you own all the breakup of AT&T, you would have done really well over time.
CRAMER: Standard oil.
FINK: There are many examples, but I like the US position in technology, and it seems odd that we are now questioning the scale of these companies. These companies actually are going to get quite a bit larger. I mean, we're working with them through our new partnership. We're working with Jensen. We're working with all these companies right now. And our -- the US moat is getting larger and better, and we have a huge opportunity to be there. And the question is, are we going to be the country that distributes and diffuses AI technology? There's a lot of books being written on it. It's not the country that creates the technology, but the net winner is a country that diffuses the technology. And to me, we want our strong technology companies, and that's why BlackRock wants to be there to help them financing this. Like this one activity in data centers. Data centers are a great investment for pension funds and insurance companies. They're going to throw off a low teen return. That's actually a bad investment when you're trading at a 26 or 30 or 35 BE. And you can say they have a lot of asset -- a lot of free cash flows, 70, 80 billion of free cash flow. But it's much better for them to be buying back their shares or finding and developing a competitive chip to Nvidia or whatever that may be. And so -- but that's a great example where capital markets can help these companies even grow larger and take advantage of these opportunities. And as I said before, I think we're going to have the dawning of a new horizon related to infrastructure. You know, and I think this is going to be one of the great capital market opportunities over the next 10 years.
FABER: Larry, you know, you mentioned, sorry, the capital markets here. We have an election coming up. The capital markets being a strength of the US. We have an election coming up, both candidates putting out plans. On one side, I think Trump, tax cuts for everybody, potentially ballooning the deficit. Some estimates say as much as $7.5 trillion to $15 trillion over a 10-year period. The Vice President's plan, different, but also potentially not good for the deficit as well. How do you think about it from your perspective as the largest asset manager?
FINK: So I wrote about this in an editorial. I think our deficits are going to hurt us one day. Let's put the perspective now. At the end of 1999, we had an $8 trillion deficit after 220 years as a country, $8 trillion. And today, we're up close to $37 trillion. We added -- we added, you know, close to $29 trillion in 24 years. This is at an unsustainable pace. And if we are going to continue to be doing this, I think we are really mortgaging our future for so many parts of our economy. And how that plays out? It plays out when the financing of this deficit becomes so large, it crowds out the private sector. As you know, we then will have elevated interest rates, higher than we could actually afford in any one economy. And so I have in my editorial, in my conversations with both candidates, we need to talk about growth, how to build growth, how to unlock growth, work with the private sector. I mean, one of the oddities in America today, the IRA, which was about 98% voted for by representatives of blue states, and yet 90% of all IRA projects are in red states. What does that tell you? It tells you that some states have the ability to accelerate permitting, so you can get things in the ground and you can invest money in it. And I think this is a wake-up call for everybody, for every leader in government. We need to unlock growth. I was in Germany and Italy seeing the representatives of those two countries last week. My conversation was about growth.
FABER: Claudia Sheinbaum? Have you met her?
FINK: I'm going to see her in November. I am going to be in the UK on Sunday night and see the government about growth in the UK Politicians should not be focusing on raising taxes, lowering taxes. They need to be spending time. How do we grow the economy for more? And the United States, to sustain these deficits, how do we get a 3% GDP for the next rolling 20 years? If we have that, I don't worry about the deficits.
CRAMER: Young people, message to them about investing right now.
FINK: Look, the more you can put away, and I know it's hard, the compounding of returns will allow you to have, you know, a retirement with dignity. I saw an amazing company actually in Germany, one of the neatest companies that are focusing on retirement. That's all they focus on. And they already have about $80 billion under advice. And it's all about helping Gen X people understand the power of compounding and Gen X about how should they be putting money to work early in the age. And in most cases, this is excess savings, or they work for small companies that don't have a plan, and they're doing it, you know, like we do there. We need to be educating more on the power of this. And, you know, it is imperative now that we make sure that these new generations of young people, that they're focusing on this long-term goal. You know, and I think this is going to be important. And this is why I've been advocating. We need to have a conversation about deficits, but we also need to have a conversation about retirement. And the sooner we can have a literate, educated conversation about retirement, we can fix it. But if we're going to deny the conversation about retirement and preparedness for retirement, we're going to have a bigger and bigger problem, like our deficits are in this country today.
CRAMER: Rigorous optimist Larry Fink, who is the Chairman and CEO of BlackRock, the greatest aggregator of money in the world. Thank you so much.
FINK: Thanks, guys. Thank you, everyone. See you later.