Does BlackRock Own the World?
Maybe, maybe not — The Difference Between Managing and Owning Assets
I hear it from people all the time:
“Nobody can afford to buy houses anymore because of companies like BlackRock.”
They blame BlackRock for driving up home prices nationwide by supposedly buying up tens of thousands of single family homes to use as rentals.
I’ve heard many other theories too. Some of the wildest theories even claiming that the owners of BlackRock are members of the Illuminati — a small group of wealthy elite who attempt to control the world order.
So, is BlackRock really buying up all the houses? Are they really making an attempt to control the entire world by buying everything?
Let’s take a look at what we know.
Who is BlackRock?
BlackRock is an asset management company that was founded in 1988 by a guy named Larry Fink. Over the last 30 years, Fink and his team have grown BlackRock to be the world’s largest asset manager; at the beginning of 2022 they were managing over $10 trillion USD in assets.
What’s an Asset Manager?
Just in case I’ve gotten a little ahead of myself here, it’s important to know that BlackRock does not own that $10 trillion USD. Instead, they manage it for other people — other companies and individual investors — and, it doesn’t always come in the form of cash either.
So, when you hear someone say that BlackRock manages $10 trillion USD in assets, it’s more likely a complicated mix of stocks, bonds, and other money making assets that belong to other people.
An asset manager’s sole purpose is to take other people’s assets and wisely reinvest them to turn a profit for their client — for a fee of course.
Is BlackRock Buying Single Family Homes?
To put it simply, NO.
This is easily one of the most circulated pieces of misinformation that I see on the internet. It’s all over Twitter, YouTube, you name it; but it’s a flat out lie. It always has been.
This rumor has gotten so out of hand that BlackRock itself had to address it on a dedicated webpage.
I don’t believe this rumor was started out of malicious intent. I think instead it came from a simple misunderstanding — because there is an asset management company that did this very thing.
Blackstone
Blackstone is an entirely separate asset management company founded by Stephen A. Schwarzman in 1985. The only other thing it has in common with BlackRock besides its strikingly similar name, is that Larry Fink used to work there too. It’s not a coincidence that the names are so similar either. Call it friendly competition, if you will.
Invitation Homes
After the housing market crash in 2008, Blackstone saw an opportunity to buy dirt cheap homes, fix them up, and rent them out. They did this by acquiring a company and renaming it Invitation Homes.
Blackstone was a majority shareholder of Invitation Homes from 2012 until 2019, when it eventually backed out of the single family home rental market altogether and sold all of its shares in the company.
Home Partners of America Inc.
But wait — if you thought they were done, you’re mistaken. In 2021 Blackstone decided to invest $6 billion into another company with a similar business model as Invitation Homes. This time, it was Home Partners of America Inc.
What Does BlackRock Own?
So now we know for sure that BlackRock does not own any residential units and they don’t operate any property management companies either. So what do they own?
BlackRock owns and manages the iShares ETF collection.
ETF stands for exchange traded fund. ETFs act very similar to stocks in that you can buy them on the stock exchange. The difference is that ETFs are actually made up of thousands of different stocks and other assets.
When a client buys a share of an ETF it allows them to buy into a selection of assets hand-picked by BlackRock — instead of buying individual stocks on their own.
It’s also important to remember that when a client buys into an ETF, the client owns the fractional shares of the companies that are included in that ETF — BlackRock is not the owner.
This means that BlackRock doesn’t own $10 trillion worth of stock in companies. Their clients do.
How Does BlackRock Make Money?
BlackRock makes the majority of their money from investment advisory fees. These are fees clients pay to have their assets professionally managed.
It’s standard in the industry and competitors like Vanguard, Fidelity, and Edward Jones all do this as well.
Advisory fees are usually calculated as a percentage of your total portfolio.
Conclusion
At the end of the day, people are going to believe what they want to believe about BlackRock — whether it’s true or not.
It’s really very easy to despise the rich and make up stories about them to support those feelings; however, at the end of the day that’s not reality.
Given the facts at hand, I think we can fairly say that BlackRock does not own the world, nor are they trying to.
Though, with the salary its executives are pulling in, it’s entirely possible they might have considerable influence over some very powerful people.
You never know!
References:
Anonymous. (n.d.). Blackrock v blackstone. Retrieved August 2, 2022, from https://www.economist.com/business/2018/01/13/blackrock-v-blackstone Anonymous. (n.d.). Facts on Blackrock buying houses. Retrieved August 2, 2022, from https://www.blackrock.com/us/individual/insights/buying-houses-facts Bhatt, S. (2014, March 10). Wall street buyers snap up thousands of local homes for rentals. Retrieved August 2, 2022, from https://www.seattletimes.com/business/wall-street-buyers-snap-up-thousands-of-local-homes-for-rentals/ Grant, P. (2021, June 22). Blackstone bets $6 billion on buying and renting homes. Retrieved August 2, 2022, from https://www.wsj.com/articles/blackstone-bets-6-billion-on-buying-and-renting-homes-11624359600 Lane, B. (2019, December 12). Blackstone cashes out on invitation homes. Retrieved August 2, 2022, from https://www.housingwire.com/articles/blackstone-cashes-out-on-invitation-homes/ Reiff, N. (2022, July 13). How blackrock makes money: Investment and advisory fees. Retrieved August 2, 2022, from https://www.investopedia.com/articles/markets/012616/how-blackrock-makes-money.asp Ungarino, R. (2022, March 10). Here are 9 fascinating facts to know about blackrock, the world's largest asset manager. Retrieved August 2, 2022, from https://www.businessinsider.com/what-to-know-about-blackrock-larry-fink-biden-cabinet-facts-2020-12
Oh Hey, It’s Ray is a real estate investor, entrepreneur, and former real estate agent. She lives happily with her husband and two children in the Pacific Northwest. See more from Ray at her YouTube channel and on Ohheyitsray.com