Market Briefing with Larry Fink- Blackrock CEO

April 1, 2020

• These are unprecedented times – haven’t seen anything like this in my 44 years in finance.
• This is not a financial crisis. Dependency on central banks to moderate the problem can only achieve limited results
• We are seeing central banks become very aggressive, taking on responsibility of stabilizing markets, doing a good job of providing liquidity – unlike 2008 which became worse and worse because of liquidity crunch
• That being said, a lot of leverage in the system – personal leverage and hedge funds. We are seeing vast amounts of liquidation particularly amongst hedge funds which is causing huge stress in markets
• But again, this is not a financial crisis. That’s why when fed announces ambitious programs, markets continue to slide. This is a crisis of confidence
• We’re all triaging – we are doing everything we can, some measures won’t work, but overall, we will recover
• We are working with the government and doing everything we can to stabilize the economy
• We need to determine how much fiscal policy we need, which is ultimately a function of the curve of the disease
• If it peaks in the U.S. at end of April, which many scientists suggest – we have 5-6 weeks left of this, then another 5-6 of watching infections decline. Altogether, that would suggest a 3-4-month problem
• If we look to China as a barometer, they were able to mitigate the pandemic by closing down their economy quite severely, and it took them about 10 weeks to recover
• Much harder to completely shut down democratic economies vs. autocracies. That’s why I’m suggesting it will take the U.S. 3-4 months stop infection rates
• If this is true, how do we ensure Americans have money to live, small business can survive, etc. This is where fiscal policy comes in
• Recommend to everyone who’s listening – if you agree with us that this is a 3-4-month problem, do not run away from the world of investing
• If anything, with markets down 30%, credit spreads of hundreds of basis points, you can buy floating municipal bonds at 1% – we are seeing opportunities you would have dreamed about 5 weeks ago
• The most important thing – take a deep breath, have a long-term perspective
• Watch what China did – room to start looking at curve of infection rate, where are the opportunities to invest

• Every company is looking to ensure they have enough liquidity, and that employees are taken care of and feel comfortable. Purposeful companies know that employees come first
• There are some companies that are benefiting from this calamity (Kroger’s, P&G, Amazon, Netflix, etc.). Many sectors of the economy are seeing overwhelmingly more demand, but the impact on small business is devastating
• My conversations in china – factories went from closed to up to 80% production again. U.S. companies need to focus on preservation over the next 8, 12, 20-week period
• Blackrock needs to make sure we’re working with our clients, protecting employees, and preparing for stability and the inevitable rebound
• We’re helping many industries (insurance, pension clients) navigate uncertainty, take advantage of adding risk, big opportunities, yields + dividends that you dreamed about just weeks ago
• We are seeing a huge opportunity to run into the markets – not fully today, but systematically recommending that clients take on risk

• We are focused on ensuring that our culture as robust today as it was 8 weeks ago
• Today we have 8-12% of employees in offices, more employees are coming back to offices in Asia
• Most important thing is that our team is connected, that they’re communicating to all of our clients
• A lot of people aren’t thinking about culture during this pandemic. The difference between bad and good companies, and good and great companies is culture. It has to be virtuous and connected, especially when everyone is WFH
• We are working really well at home, have great technologies in place (Aladdin system – singular technology platform)
• We are overcommunicating – I just issued a video message to all employees, every day we are communicating to employees about what we’re doing, sending a daily communication about what our clients are doing, etc.

• Entering election period in America – there is no time now for partisanship
• Doing everything we can help America and Americans. Working with this administration as best we can, working with democrats in congress, working with both sides
• Tying to accelerate action by government to reduce fear amongst Americans, providing support to Americans who are losing jobs, working with regulators and making sure markets stay open, fluid and functioning

• One thing that’s fair to say – I don’t see how movie theaters ever come back, I think we’re going to see real pressure on commercial real estate
• More and more companies finding that WFH is a functioning way of working – Especially with technologies like Aladdin, single platform, video conference, etc.
• I still believe in congregation – pods of excellence are important. Still believe that water cooler talk creates the most ingenuity
• We may see long term behavioral changes. More Americans may cook from home (bad for delivery services, great for grocery stores perhaps)
• Need to think about these behavioral changes as investors.
• No question – this is going to leave an impact on every human being, will overall create a little more fear
• People will hopefully realize they need to save more money, invest long term. This could be a great outcome. A personal safety net is imperative

• Some people think globalization created the virus. In my conversation with CEOs, their attitudes have not changed
• Globalization has lifted more human beings up in shorter period of time than anything we could image, this won’t change. Trend towards globalization is not going to go away
• Believe there will be great opportunities to invest overseas again. America is in great position over next 10 years
• This pandemic is going to force more and more businesses to think about how they can be more connected in all the societies they work in
• Sustainability – with the pandemic, and oil prices + economy where they are, whole issue of sustainability has become secondary. I do believe when we’re behind this crisis, and we get back to normal, and we look at death rates and cause and effect, we will see evidence that death rates were higher in areas with more pollution. Until then, sustainability will be secondary to pandemic

• BlackRock has always focused on long term
• We are being opportunistic and buying companies during this time
• I have no idea if we’ve hit bottom yet, but I do know where valuations are over a long horizon, credit valuations over long horizon – there are good opps out there
• Urge everyone, if you have long liabilities, if you don’t have leverage with your clients /own portfolio, time to start adding risk, not running away
• At BlackRock globally, we have seen little in terms of redemptions. Of course they have accelerated over the last few days during panic, but the massive declines are amongst leveraged hedge funds, leveraged mortgage REITS and leveraged companies
• Core investors not witnessing that much selling
• Strong recommendation to all of you: if you don’t have to sell, and you feel nervous, go have lunch with your spouse
• Not a time to be running away from risk over a long horizon. Markets can still fall from here. 6 weeks ago, DOW was 30% higher than now, corrections over a long run are good, wipe out leverage, reassert it, 5 years from now those are adding risk now, will feel pretty good about it

Market Briefing with Larry Fink– Blackrock CEO