BlackRock boss issues UK recession warning

Brexit has caused uncertainty for BlackRock's clients, as Fink suggests a potential UK recession. 

The boss of the world’s largest asset manager has warned that the UK’s decision to leave the European Union will lead to a recession for the British economy.

Larry Fink, chief executive of BlackRock said the vote to leave was likely to reduce the UK’s gross domestic product by two percentage points, in an interview with CNBC.

Speaking on its second quart earnings call on Thursday 14 July, he said Britain’s vote to leave the EU, as well as additional political and regulatory uncertainty around the world, has left its pension fund and sovereign wealth fund clients confused and ‘afraid’.

Fink said: “clients do not know what to do with their money. They are afraid and pulling back.”

Fink added pension fund clients “are facing an ever-growing liquidity gap”, while the group’s insurance clients are struggling to make their business models work in a zero yield environment.

“Sovereign wealth funds have been forced to focus on liquidity and funding needs after years of rapid growth… Today, there's $10 trillion of sovereign bonds that are delivering negative returns and negative yields...  

“Active equity managers as a group have underperformed over a multi-year period, and are seeing record out flows,” he stated.

BlackRock reported revenues of $2.8 billion in the second quarter, down 3% due to market headwinds and political uncertainty impacting client activity.

However, Fink said it has benefited from clients rushing to fixed income trading in the wake of heightened equity volatility, with inflows of $15.7 billion for its iShares unit.

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