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(Bloomberg) – The co-founder of BlackRock Inc. thinks the market is poised for a comeback.
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Robert Capito, president of the world’s largest asset management company, said at the Asia-Pacific Finance and Innovation Symposium in Melbourne on Tuesday that about $9 trillion is currently sitting in money market funds, with the same amount in banks’ cash-alternative assets. He said he was asleep.
This pile of money would be a “huge force” in a stock market that is shrinking as investors move into personal wealth, he said. “This is going to be something you’re going to want to pay very close attention to. You don’t want to miss this,” Capito said.
Read more: BlackRock’s Capito ‘drools’ over $7 trillion in cash pile
How quickly investors decide to move away from cash could depend on the Fed’s next move on interest rates. The combination of strong U.S. growth and persistent inflation makes it more likely that the Fed will raise rates rather than cut them, pushing borrowing costs as high as 6.5% next year, UBS Group AG strategists say.
Capito has previously pointed to the mountain of cash sitting in money markets. Mr. Capito said in January that he was eyeing trillions of dollars in cash in dormant investors that could be quickly reallocated to bonds if interest rates fell. He said at the time that much of the money market cash could be directed to model portfolios and exchange-traded funds.
BlackRock is positioning itself as a one-stop shop for all investment options, including alternative assets, which are increasingly in demand from institutional clients such as pensions, endowments and sovereign wealth funds. Alternatives currently account for about 3% of BlackRock’s assets under management, but they bring in fees of about 10%.
–With assistance from Ainsley Thomson.
(Adds further comment from BlackRock’s Kapito.)
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