BlackRock Inc's Laurence D Fink said savers need to become more aggressive investors as returns on bank accounts and Treasuries shrink and people grow older.
The traditional mix of putting 60 per cent of assets in stocks and 40 per cent in bonds is inadequate in a "new world" characterised by an aging population, a reduction in borrowing and risk-taking by individuals and governments, and a greater role of emerging economies.
"I've personally said many times I would be 100 per cent in equities," Fink, 59, said in a speech on Thursday to the Council on Foreign Relations in New York. "Most investors need a more diversified portfolio, but virtually every investor has to find ways to achieve a better return than they'll get in cash or government bonds for the foreseeable future."
The comments by Fink, chief executive officer of the world's largest asset management firm with $3.5 trillion in assets, mark an effort by BlackRock to articulate an overarching view of markets and how retail and institutional investors should respond. Unlike Bill Gross's Pacific Investment Management Co, where investment decisions have been guided by the firm's "new normal" philosophy coined three years ago to describe a world of below average economic growth, each of BlackRock's units has the freedom to articulate its own investment outlook.
'Off the sidelines'
"Our perspective of time is different from Wall Street firms," Fink said after the speech. Because asset managers have a longer-term perspective, they have a responsibility to be more vocal about what investors should do, Fink said.
Fink, who built New York-based BlackRock through a series of acquisitions including the 2009 purchase of Barclays Global Investors, has since been working on establishing a common brand for units ranging from exchange-traded funds to hedge funds.
"Whether it comes from an individual, a corporation or a pension fund, my answer is the same: you need to get off the sidelines and get your money working again," Fink said.
Fink, who urged investors to put all of their money in equities earlier this month, told BlackRock employees in Beijing that the call was aimed at getting cash off the sidelines and back into the capital markets.
Investors near or at retirement without sufficient time to build up assets may have to continue working, Fink said after the speech.
'New normal'
Pimco forecast a "new normal" in May 2009 of slower growth in the developed economies, higher unemployment and orderly deleveraging. Gross, founder and co-chief investment officer of Pimco, wrote in his investment outlook in January the new normal was morphing into a world of credit and zero-bound interest-rate risk.
A commentary posted by Gross on Newport Beach, California- based Pimco's website yesterday said investors should embrace a defensive strategy that includes emphasizing income, deemphasizing derivative structures that are fully valued and being willing to accept returns lower than historical averages.
Mutual fund companies are trying to reverse stock fund redemptions after investors pulled money from funds that invest in US equities for five straight years, withdrawing $134 billion last year, according to the Washington-based Investment Company Institute.
Promoting confidence
Financial institutions and governments can also help turn savers into investors by passing regulations that promote confidence in the markets, Fink said in on Thurday's remarks. Examples include better investor protections for futures trading and clearer labeling of ETFs, he said.
Fink, who co-founded BlackRock in 1988, has built the firm through acquisitions including the 2006 purchase of Merrill Lynch & Co's investment unit. BlackRock acquired the hedge fund-of-funds business of Quellos Group LLC in 2008. The company last year expanded the alternatives division, which manages hedge funds, real estate funds and private-equity strategies.
