Story by CNBC
Central banks do not understand “the huge pain” low interest rates are causing to the long-term interests of insurance companies, pension funds and retirement plans, BlackRock founder and CEO Laurence Fink said Thursday.
Fink spoke after BlackRock reported first-quarter earnings that beat Street estimates. He attributed the performance of his firm in part to the fact that low interest rates are creating problems for its clients, and they are consequently seeking guidance.
“It’s a global phenomenon that global interest rates are creating huge pain. This is something that’s misunderstood and not talked about enough. Everyone appreciates low rates, how it really accelerates the interest markets, which it’s certainly doing, but it’s certainly creating quite a bit of havoc with a lot of our clients,” he told CNBC’s “Squawk Box.”
BlackRock is the world’s largest asset manager, overseeing $4 trillion of investments.
Those low interest rates are preventing BlackRock’s insurance companies in Europe from reinvesting in Germany and Switzerland, he said. They must now look for other ways of making returns.
European Central Bank President Mario Draghi suggested on Wednesday that low interest rates in Europe will likely persist as the ECB continues its bond-buying program for another year or more.
“If you think rates are going to stay that low longer, you’re going to see more and more people moving into equities, into more alternatives,” Fink said. “We’re seeing that conversation now. We have one of the top-ranked European equity funds in the world and we’re seeing huge inflows into our European equities.”
Europe will be the surprise for the year, Fink said, adding that the prevailing belief that the continent will have higher GDP growth in the first quarter than the United States is “a huge change” from the market outlook four months ago.
The U.S. dollar is now a little too expensive, he said. Cold weather and falling capital expenditures among American corporations may contribute to a weak first quarter, but the big surprise is that U.S. consumers appear to be stashing rather than spending gasoline savings, Fink said.
Asian stocks are set to outperform as the region’s net energy importers benefit from low oil prices.
“I like European equities more today than I like U.S. equities. I like Asian equities more today than U.S. equities,” he said. “U.S. equities as we all know outperformed for three straight years Europe and Asia, and it’s catch-up time. ”
Long-run stability of oil will likely fall between $60 and $80, Fink said. If prices do creep higher, they will likely be offset by greater production, he added.
“The one thing people misunderstood when we see the rig counts collapse in the United States … 30 percent of the wells produce 70 percent of the oil, and so much of the inefficient wells have been taken offline,” he said.
Until global GDP growth picks up, the story of the oil markets will remain one of excess supply, he said.