Insider Finance - Business - Insider Today: BlackRock's next big bet

November 1, 2023 • 5 min read

with Dan DeFrancesco

Hi! Did you go a bit overboard with candy yesterday? Don’t sweat it. Here’s some guidance on how to undergo a sugar detox.

In today’s big story, we’re looking at a Wall Street giant jumping into one of the hottest sectors in finance.

What’s on deck:

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AP Photo/Julia Nikhinson; Arantza Pena Popo/Insider

The big story

Everybody's a lender

When you hear BlackRock, what’s the first thing that pops into your head?

Larry Fink? ETFs? ESG? Aladdin (not the movie)? Conspiracy theories?

The world’s largest asset manager wears many hats. Now it’s trying to add another to its $9.1 trillion wardrobe: lender.

BlackRock is the latest player pushing into the red-hot private credit market, writes Insider’s Rebecca Ungarino.

The business of lending directly to companies has become the topic du jour on Wall Street. Sky-high interest rates and stricter lending requirements from big banks created an opportunity for investment firms. 

These so-called shadow banks can offer borrowers alternative forms of financing, albeit with some hefty interest payments. 

But BlackRock’s private-credit ambitions have put the massive firm in uncharted waters, Rebecca writes, as it’s a small fish in a big pond. 

The firm’s $81 billion private credit business is only a drop in the industry’s $1.75 trillion bucket. It’s also well behind larger players like Apollo, Blackstone, and KKR.

BlackRock's Larry Fink. Spencer Platt/Getty Images

BlackRock’s private credit plans also add further validity to an industry on the rise. 

One executive in the space told Rebecca that BlackRock’s entrance is a “stamp of approval” for the market. 

And while everyone seems to want in on the action — private credit was the talk of the Greenwich Economic Forum last month — it’s unclear how that’ll ultimately impact the industry. 

Lending is a complicated enough business on its own. Adding more competitors in a high-rate environment, without the shackles that regulate traditional banks, feels like a recipe for disaster.

Maybe I’m paranoid, but Wall Street’s history of investing in floating-rate debt structures shrouded in mystery isn’t pristine. 

BlackRock's cohead of US private capital said during a recent earnings call the firm was passing on more lending opportunities, citing deal terms without adequate lender protections. 

But as more inexperienced players dive into the space, the probability of someone willing to lend to a borrower in need, regardless of the red flags, will rise.

3 things in

Markets

🔔 Before the opening bell: US stock futures fall early Wednesday ahead of the Fed's interest-rate decision

Aaron Schwartz/Xinhua via Getty Images

1. The Fed probably won’t cut rates, but that’s not a bad thing. The Federal Reserve makes its second-to-last interest rate decision of the year today. All signs are pointing to another pause in hikes, but officials remain confident they can skirt a recession. 

2. Charlie Munger isn’t a fan of VCs. Warren Buffett’s business partner had some strong words for the venture community, saying VCs are “not great investors or great at anything." The VC industry in the US also doesn’t do a good job of supporting founders of early-stage companies, he said on a recent podcast. 

3. A CEO walks into a bar… Executives who crack jokes during earnings calls gave their company’s share price an immediate boost, according to a research paper. Humor can even help if it’s not all good news, as jokes "can soften the disclosure of negative news and signal relatively stronger future firm performance," according to the paper. 

3 things in

Tech

Tyler Le/Insider

1. The AI-proof jobs. Blue-collar jobs like nurses, construction workers, and barbers will be the big winners of the AI revolution. While ChatGPT replaces the rest of us, these careers should see a substantial boom. 

2. A leaked email provides clues regarding the UNest CEO’s abrupt resignation. Ksenia Yudina, the founder and former CEO of UNest, accused three board members of voting for a hostile takeover of UNest that was '"illegal and unethical," according to an email she sent to investors and board members obtained by Insider. UNest’s COO, meanwhile, said customers of the startup, which helps families save for college, have no reason to worry about their money.

3. The real risk of AI. Meta’s chief AI scientist said some tech executives’ warnings about the dangers of AI are their way of trying to control the future of AI. Similarly, a Google Brain cofounder said Big Tech companies are lying about AI risks to shut down competition.

3 things in

Business

Christian Northeast for Insider

1. Choppy waters for a startup cruise ship pitching itself as a utopian community. Storylines’ MV Narrative offers customers an “anti-aging global lifestyle” aboard a $900 million, 18-deck ship traveling to six continents over 1,000 days. But the ship’s launch has been delayed seven years from when it was initially slated to hit the seas, and former employees, consultants, and investors doubt it will even be built. 

2. Move fast and blow up your startup. A minor update to ChatGPT enabling users to upload and analyze PDFs has massive implications for startups designed to do precisely that. It’s the latest example of how Big Tech can wreak havoc on smaller players overnight. 

3. Gen Z’s best bet for curing loneliness might be returning to the office. Young people have been hit particularly hard by the solitude of remote work. Gen Z workers told Insider how remote work increased anxiety, lowered morale, and curtailed opportunities for career advancement.

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The Insider Today team

Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.

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