BlackRock, While Predicting ‘Sharp’ Recovery, Is Building a Strong Cash Position

Even BlackRock, the world’s largest asset manager, is pushing a strong cash position while at the same time predicting a “sharp” economic recovery, owing to Congress’ passage of the largest fiscal relief package in history.

“We emphasize portfolio resilience through a benchmark allocation to government bonds, quality equities, cash, and sustainable investing,” read the most recent market outlook from the world’s largest asset manager. BlackRock, which manages almost $7.4 trillion in client assets, emphasized that enhancing its cash stash is a vital move to make now.

The institutional investor said it sees cash as a guard against a negative supply shock that could drive stocks and bonds lower. BlackRock, whose own balance sheet boasts about $169 billion in assets, holds just $4.8 billion in cash and cash equivalents as of December, according to its financial statements. The company’s pumping up of its cash position is part of a trend among large companies.

A host of corporations, including financial firms, have been raising their cash reserves to weather the market downturn. For instance, leading entertainment companies Comcast and Disney respectively raised $4 billion and $6 billion earlier this month, according to Deadline. They sold debt securities as they shuttered theme parks and shifted movie production schedules.

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But BlackRock believes the markets will recover in one or two quarters following a sharp downturn, especially after the $2 trillion economic stimulus package that was passed Friday.

The asset manager last week was tapped to take over the Federal Reserve’s bond-buying program, the second time BlackRock was asked to support the government during a financial crisis. In the 2008 debacle, BlackRock was one of several Wall Street firms that Washington enlisted to sell off troubled assets, such as mortgage-backed securities.

Additionally, the asset manager said it prefers US and Chinese equities and credits, as the world’s two largest economies move to deliver swift policy response to the crisis.