KUALA LUMPUR – Although BlackRock Inc’s involvement in the privatisation deal of Malaysia Airports Holdings Bhd (MAHB) has sparked considerable controversy, how much is truly known about the American global asset management firm?
Despite government representatives doling out assurances, lawmakers and Palestinian supporters have not held back their condemnation of the prominent investment institute’s perceived links with Israeli companies, with many citing national sovereignty concerns.
While BlackRock has faced criticism from those who view the firm as pro-Israel, Scoop takes a look at how BlackRock came to be, its extensive influence in the corporate world, and its influence on Malaysia’s economy.
BlackRock: a firm founded in crisis flourishes to success?
Boasting a whopping US$10.34 trillion (RM48.44 trillion) worth of assets under management (AUM) alongside its total assets valued at US$123.2 billion, it is no surprise that BlackRock’s clientele consists of some of the most influential entities in their respective industries.
Services provided by BlackRock to financial institutions, retirement savings, and sovereign wealth funds, among others, can be traced back to its formation in 1988 by Larry Fink on the heels of Black Monday, the severe stock market crash on October 19, the previous year said to be due to speculative trading.
Fink’s initial foray into the financing world was at investment bank First Boston Corporation, where his department was reported to have lost US$100 million in 1986 due to incorrect interest predictions.
Taking the experience as a lesson to develop a comprehensive risk management approach to investing, Fink established BlackRock with co-founder Robert S. Kapito, with the duo now holding the posts of chairman and president, respectively.
According to publicly available information, a significant portion of BlackRock’s shares, based in New York, is held by Vanguard Fiduciary Trust Company, an American investment advisory firm, which owns 8.87% of BlackRock’s shares, valued at approximately $10.37 million.
BlackRock’s second-largest shareholder is its subsidiary BlackRock Advisors LLC, with a 5.07% (US$5.94 million) stake, while one of the largest banks in the United States, Wells Fargo & Company, holds another 2.06% (US$2.41 million) stake through its subsidiary Wells Fargo Bank, National Association.
Meanwhile, BlackRock’s shareholding also includes non-American entities such as Singapore’s sovereign wealth fund Temasek Holdings Pte Ltd (3.44% or US$4.028 million) and British wealth manager Merrill Lynch International (3.549% or US$4.152 million).
Essentially, Blackrock represents clients with certain financial goals by assisting them in realising their objectives through investments in and management of assets ranging from securities, bonds, equities, commodities, and real estate.
While BlackRock’s business model is akin to that of Goldman Sachs, one of the oldest investment banking firms, and J.P. Morgan & Co, local state-owned entities with similar operations include Khazanah Nasional Bhd, Majlis Amanah Rakyat, the Employees Provident Fund, and the Minister of Finance (Incorporated).
In the private sector, corporations such as OSK Ventures International Bhd, Public Mutual Bhd, and Cradle Fund Sdn Bhd also seek to improve their respective clients’ financial portfolios through investments in strategic sectors.
How is BlackRock here, there, and everywhere?
Seeing as how BlackRock’s AUM amounts to 10% of global gross domestic product (GDP) while their total assets are valued higher than the economies of over 100 countries, the investment firm’s presence around the world is undeniable, with Malaysia not excluded from its impact.
According to Investment, Trade, and Industry Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz, BlackRock has had a foothold in Malaysia since the 1990s, with the firm’s ownership in various major industries here now valued at RM27.5 billion, or 6.7% of the nation’s GDP.
In June, Tengku Zafrul told Parliament that RM20.5 billion of BlackRock’s investments are in the Bursa Malaysia stock market, while approximately RM7 billion are in government and corporate bonds nationwide, including Malaysia Sukuk Global Bhd, Export-Import Bank of Malaysia Bhd, and Petroliam Nasional Bhd (Petronas).
Out of the 100 public-listed companies BlackRock holds equity investments in, 32 are detailed in the firm’s exchange-traded funds marketplace, iShares, which it acquired from British bank Barclays in 2009.
Besides a US$5.34 million equity investment in MAHB, a significant portion of BlackRock’s holdings in Malaysia as of July 18 are invested in Public Bank Bhd, where it has a market value of US$35.82 million, followed by Malayan Banking Bhd (US$31.76 million) and CIMB Group Holdings Bhd (US$28.73 million).
BlackRock also has stakes in Tenaga Nasional Bhd (US$21.77 million), Petronas Chemicals Group Bhd (US$9.79 million), CelcomDigi Bhd (US$7.6 million), IOI Corporation Bhd (US$5.57 million), Telekom Malaysia Bhd (US$4.74 million), and Nestlé Malaysia (US$4.97 million).
Although BlackRock’s online directory lists 89 offices in 38 countries worldwide, it does not currently include Malaysia. However, it was reported that the firm opened an office in Kuala Lumpur in 2011, which was used as a centre for market research and client services in Southeast Asia.
Additionally, it is believed that BlackRock’s now-dissolved subsidiary, BlackRock Property Malaysia Sdn Bhd, was involved in the firm’s acquisition and eventual sale of several high-end properties within The Intermark integrated commercial development.
In April 2015, BlackRock reportedly sold Integra Tower to Retirement Fund Incorporated for RM1.06 billion, while DoubleTree by Hilton was acquired by Singapore-based Royal Group Holdings for RM388 million.
Eight months later, Pavilion Real Estate Investment Trust purchased Intermark Mall from BlackRock for RM160 million, followed by the sale of Vista Tower to AmanahRaya Real Estate Investment Trust for RM455 million in 2017.
In February this year, Malaysia Airlines Bhd signed an avionics hardware and support agreement with Collins Aerospace, a technology firm and subsidiary of Raytheon Technologies, now known as RTX Corporation. BlackRock holds a US$9.28 million market-value stake in RTX Corporation, according to iShares.
Additionally, Collins Airspace’s RM16 million allocation for the expansion of its Malaysian operations in 2022 allowed the group to relocate to Subang Aerotech Park, an MAHB-developed facility.
Notably, also located in the park is aerostructures manufacturer Spirit AeroSystems Inc, an entity in which BlackRock has a US$274,477 stake.
BlackRock’s presence here is also through its investments in other renowned defence companies such as Lockheed Martin Corporation, BAE Systems plc, and Boeing Co, with BlackRock through iShares holding US$6.83 million, US$3.37 million, and US$6.99 million in the entities, respectively.
For the record, the Royal Malaysian Air Force’s fleet features 14 Lockheed Martin C-130 transport planes and 12 BAE Hawks light fighter jets. It is also reportedly attempting to acquire 10 more Boeing F/A-18 fighter jets to supplement its existing eight units.
All three arms manufacturers, along with BlackRock, were named in a June 20 statement issued by United Nations experts cautioning that the transfer of weapons and ammunition to Israel may constitute serious violations of human rights and international humanitarian laws.
Is controversy a familiar spotlight for BlackRock?
Critics of BlackRock often cite Malaysia’s firm support for Palestine and Putrajaya’s lack of diplomatic ties with Israel as reasons for condemning the firm’s involvement with defence companies that supply weapons for Israel’s military actions in Gaza.
Given these factors, BlackRock’s planned takeover of Global Infrastructure Partners, which will be part of a consortium holding a 30% stake in MAHB, has understandably raised concerns among the public here.
However, this is not the first time BlackRock’s operations have faced significant public backlash; the firm has also been targeted by election-rigging allegations and conspiracy theories in its home country.
Efforts were also made to implicate BlackRock in a recent assassination attempt against US presidential candidate Donald Trump, with clips of the shooter, Matthew Thomas Crooks, starring in a 2022 advertisement for the firm resurfacing online.
Meanwhile, earlier in April, the US House of Representatives Select Committee on the Chinese Communist Party concluded that BlackRock and its iShares index provider, Morgan Stanley Capital International (MSCI), conducted transactions with Chinese companies accused of human rights abuses.
While the committee found that BlackRock had invested at least US$1.9 billion while MSCI channelled US$3.7 billion into the companies said to support China’s military, both BlackRock and MSCI have since denied any wrongdoing, asserting their compliance with US laws. – July 22, 2024