BlackRock Is Bailing Out Its ETFs with Fed Money and Taxpayers Eating Losses

Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp... by anonu on Thursday June 04, 2020 @05:02PM (#23421743)

Garbage article. This sentence got me:

  Since BlackRock is allowed to buy up its own ETFs, this 
  means that taxpayers will be eating losses that might 
  otherwise accrue to billionaire Larry Fink’s company and 
  investors

What? The sentence indicates a deep misunderstanding of the subject which the author writes about. BlackRock is (mostly) a fund manager: they earn money on assets under management and not (broadly speaking) when the market goes up or down. If the ETFs BlackRock are buying go down, it simply means they are propping up the underlying holdings - the actual corporate bonds. They will then "create" ETF shares and give them to the Fed. Think of the ETF simply as an IOU.

BlackRock has also said they will be waiving the ETF fund management fee.

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Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp... by exclusiv on Thursday June 04, 2020 @09:05PM (#23423954)

> they earn money on assets under management and not (broadly speaking) when the market goes up or down

Broadly speaking? Ok well what happens to the AUM when the market goes up or down? More or less AUM. More or less money no?

Am I missing something? Wouldn't they have a ton to lose during these times?

> Today, BlackRock has been selected in more no-bid contracts to be the sole buyer of corporate bonds and corporate bond ETFs for the Fed’s unprecedented $750 billion corporate bond buying program which will include both investment grade and junk-rated bonds.

Seems like a nice setup. Especially now.

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Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp... by arkis22 on Thursday June 04, 2020 @09:47PM (#23424193)

You are correct that BlackRock has an incentive to maximize their AUM to maximize their revenue.

A critical distinction though is that the Fed isn't buying BlackRock's bonds. They are buying bonds that are represented in BlackRock's exchange traded funds that are meant to mirror prices of real bonds.

You're not wrong that it's a sweet set up. It's better to be in BlackRock's place. It is better to be buying coronovirus bonds for the government rather than selling them to the government. The latter implies your company is under severe cash flow pressure.

You shouldn't be distrustful of BlackRock because they maximize their revenue when they maximize their AUM. If they maximize their AUM, that probably means that your income is maximized as well.

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Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp... by anonu on Thursday June 04, 2020 @10:02PM (#23424270)

BlackRock is the new vampire squid. They're making out like bandits no doubt. But the reporting is sensationalist by being wrong...

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Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp... by JumpCrisscross on Thursday June 04, 2020 @05:07PM (#23421806)

This article is polemic. For a better-informed (but still critical) perspective, I recommend Matt Levine.

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Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp... by earth2mars on Thursday June 04, 2020 @05:15PM (#23421904)

is this doc on Fed site related to what they are saying. https://www.federalreserve.gov/monetarypolicy/files/smccf-tr... I see BlackRock all over the spreadsheet

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Re:BlackRock Is Bailing Out Its ETFs with Fed Money and Taxp... by whatok on Thursday June 04, 2020 @05:45PM (#23422266)

Yes, that shows ETF purchases up until the date mentioned. The dollar value of purchases in there for Blackrock ETFs is around 48% which is around their existing market share for qualifying ETFs.

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