(Bloomberg) — The co-founder of BlackRock Inc. sees that the markets are ready for a comeback.
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There are currently nearly $9 trillion in money market funds, and the same amount is in cash alternatives at banks, Robert Kapito, president of the world’s largest asset manager, said Tuesday at the Asia Pacific Financial and Innovation Symposium in Melbourne.
That cash pile is expected to become a “very big force” in the stock market, which has shrunk as investors have moved into private assets, he said. “This is going to be something you have to pay close attention to, you don’t want to miss this,” Kapito said.
Read more: BlackRock’s Kapito ‘drooling’ over $7 trillion in cash
How quickly investors decide to move away from cash may well depend on the Federal Reserve’s next move on interest rates. The combination of strong U.S. growth and persistent inflation increases the likelihood that the Fed will raise rather than cut rates, pushing borrowing costs to 6.5% next year, UBS Group AG strategists said.
Kapito has previously pointed out the pile of cash in the money markets. In January, Kapito said he was monitoring trillions of dollars of dormant investors’ money, which could soon be reallocated to bonds if interest rates fell. Much of the money in the money market could be shifted to model portfolios and exchange-traded funds, he said at the time.
BlackRock is seeking to position itself as a one-stop shop for a full range of investment options, including alternative assets that are in greater demand among institutional clients, such as pensions, savings and sovereign wealth funds. Although alternatives currently represent about 3% of BlackRock’s assets under management, they generate about 10% of the costs.
–With help from Ainsley Thomson.
(Adds further commentary from BlackRock’s Kapito.)
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