BlackRock CEO: European Equities Trump Debt

(September 14, 2011) — BlackRock’s CEO Laurence Fink is favoring equities over debt.

He said he anticipates a “major migration” out of bonds and into equities over the course of the next year. “I just think we’ve got to get out of this short-termism, and we’ve got to start focusing on what is best to protect…our return on our investments,” Fink said in an interview on CNBC.

Meanwhile, Fink said that it would be wise for investors to avoid low-yielding US debt and some European debt as the region faces its mounting debt crisis. “We are going to find a solution in Europe, and Germany will have to play a major role,” he said in New York at the Delivering Alpha conference sponsored by CNBC and Institutional Investor. 

Fink’s comments echo earlier assertions made in a recent Fitch’s European senior fixed-income investor survey. According to the study, Europe’s sovereign debt crisis has remained a major worry for investors. The survey, conducted between March 31 and May 2, polled the views of managers of an estimated $4 trillion of fixed-income assets.

The biggest concern for bond investors, the survey showed, was Europe’s sovereign debt crisis, with 64% of respondents, up from 56%, expecting developed market sovereigns to endure the biggest refinancing challenges.

The worries echo recent sentiments by Harvard professor of economics Gita Gopinath, who said during an investor forum that pensions — typically large bondholders — may be forced to take a loss on their investments as a result of the European sovereign debt crisis. At the Dublin-based forum — titled Adjusting to New Realities — among Europe’s largest institutional investors and asset managers responsible for the investment of more than €1 trillion of funds, 75% of those in attendance saw a high likelihood of default in the Eurozone within three years. Gopinath asserted that the solution would likely be for bondholders, namely pension funds, to take some form of a loss on their investments, “given the sheer scale of the debt amounts involved.”