Laurence D. Fink, chairman and chief executive officer of BlackRock Inc. (BLK), said the money manager’s repurchase of stock from Barclays Plc demonstrates his belief that equities are cheap compared with bonds.
“These are scary times, I’m not trying to suggest they’re not, but I think because they’re scary times, it’s a good entry level to be a long-term investor,” Fink said today at the company’s annual meeting in New York. BlackRock’s buy back of shares valued at $1 billion from Barclays is “a very good example of the relative cheapness of equities versus interest rates,” he said.
Barclays, the U.K.’s second-largest bank by assets, said this week it was selling its entire 19.6 percent stake in BlackRock, the world’s largest money manager, for proceeds of about $5.5 billion ahead of regulations that would force the lender to set aside capital to cushion itself against a decline in the holding. As part of the transaction, BlackRock will buy back 6.38 million shares at $156.80 a share, about 8.8 percent less than the stock’s 171.90 close on May 18, the last trading day before the deal was announced.
BlackRock, based in New York, issued $1.5 billion of bonds at its lowest coupons on record to help fund the share repurchase. The firm sold $750 million each of 1.375 percent, three-year notes and 3.375 percent, 10-year debt at 165 basis points.
“At the price we were able to buy our stock back, our dividend was three and three-quarters percent,” said Fink, 59.
BlackRock’s shares rose 0.62 percent to $168.54 at 10:20 a.m. in New York. The stock fell to near a six-month low of $163.37 on May 22.
Investors who buy a diversified portfolio of multinational companies with at least a 3 percent dividend that are also poised for growth could expect to see returns from 7 percent to 8 percent over a 10-year cycle, Fink said. The benefit of dividend stocks is that they’re also less volatile, he said.
BlackRock in February started a “new world” campaign to tell clients how to invest in an uncertain market. Four-page inserts appeared in publications including the Wall Street Journal and the Financial Times as part of the branding initiative. Fink and other BlackRock executives have spoken publicly about how investors can be harmed by staying in cash-like products and focusing on short-term investing.
Barclays became a BlackRock shareholder after the asset manager acquired the lender’s Barclays Global Investors unit in December 2009. The transaction allowed BlackRock to add passive strategies such as exchange-traded funds to its actively managed stock and bond funds and hedge funds, giving it the broadest array of products among money managers. The firm managed $3.68 trillion in assets as of March 31.
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