BlackRock Seeks to Become the Next Berkshire Hathaway
BlackRock Inc., the world’s largest money manager, is seeking to raise more than $10 billion to buy and hold stakes in companies. In this way, BlackRock CEO Larry Finks seeks to follow Berkshire Hathaway’s strategy, by buying and holding stakes in other companies. The move comes as Berkshire plans for the eventual retirement of investing icon Warren Buffett. Two longtime insiders, Gregory Abel and Ajit Jain, were appointed to the board last month, with Buffett signaling that one of them may eventually succeed him.
BlackRock, which oversees about $6 trillion in assets, is seeking capital from sovereign-wealth funds, pensions, and other big investors for an effort named BlackRock Long-Term Private Capital, according to a recent report by the Wall Street Journal.
The new vehicle would make investments between $500 million to $2 billion on long-term themes like diverging demographics globally, the growing middle class and millennial spending patterns. An example of an investment might be a minority stake in a family-owned business. Similar to the approach of Berkshire Hathaway Inc., BlackRock would look to hold on to its stakes for a long time. Unlike famed investor Warren Buffett though, the fund might not buy a whole business.
BlackRock’s growing iShares ETF business has more than $1.5 trillion in assets under management. While exchange traded funds are traditionally low-cost and index-tracking, they have seen further drops in fees in recent years, compelling firms like BlackRock to attempt to look for new sources of revenue. Against that backdrop, private equity firms and asset managers are seen competing for higher-fee investing products. The move may position BlackRock to compete with private-equity giants such as Carlyle Group LP, Apollo Global Management LLC and Blackstone Group LP. Fink co-founded BlackRock as a unit of Blackstone in 1988 but separated from the firm in 1994.
BlackRock began in the headquarters of Blackstone, its first financial backer, which gave BlackRock a $5 million line of credit for a 40% stake. While business was picking up, the relationship between BlackRock and Blackstone became tense. Fink had a falling out with Blackstone co-founder Stephen Schwarzman in 1994 over BlackRock’s independence, resulting in the sale of BlackRock to PNC Financial Services Group Inc. for $240 million.
BlackRock hopes to complete the fundraising by the middle of this year, the person said. The initiative will be overseen by Mark Wiseman with David Blumer, head of alternatives at the New York-based company. BlackRock hired Wiseman, the former head of Canada’s largest pension fund, in 2016 to run its global active equity business.
BlackRock and Neuberger Berman Group are among firms that California Public Employees’ Retirement System, the largest U.S. pension fund, might look to partner with as it seeks help to manage its $40 billion private equity portfolio, people familiar with the matter said last month. The retirement system, which oversees more than $350 billion, sent requests for information in December to a group of asset managers seeking a “strategic partnership” for its private equity portfolio, according to a document released by Calpers.
Citations
- http://for.tn/2ESkOUm – Fortune
- http://bit.ly/2BMNHTg – Investor’s Business Daily News
Retreat of the Nerds?
Economists are increasingly focused on the importance of so-called “soft skills” for labor market success. The evidence is overwhelming that these skills—also called “non-cognitive skills”—are important drivers of success in school and in adult life. Yet the very term soft skills reveals our lack of understanding of what these skills are, how to measure them, and whether and how they can be developed. The job market is way ahead of the ivory tower in emphasizing soft skills. Employers frequently list teamwork, collaboration, and oral and written communication skills as highly valuable yet hard-to-find qualities in potential new hires.
New research finds that from 2000 to 2012, jobs that require non-cognitive skills, such as the ability to communicate and work in teams, grew much faster than jobs mainly requiring skills measurable by IQ or achievement tests. Our picture of the job market is still shaped by the period from 1980 to 2000, when there was strong growth of employment in STEM occupations—science, technology, engineering, and mathematics. But things went into reverse over the next dozen years, says David Deming, a Harvard University economist who summarized several recent studies by him and others in an article in the December issue of the National Bureau of Economic Research’s NBER Reporter.
That is not to say students can ignore their math homework. “We are not witnessing an end to the importance of cognitive skills—rather, strong cognitive skills are increasingly necessary—but not a sufficient—condition for obtaining a good, high-paying job,” Deming writes. “You also need to have social skills.”
His report shows that many of the occupations that shrank from 2000 to 2012, as a share of the labor force, were those that primarily require STEM skills. Only a few of the jobs that experienced growth were STEM jobs, including: mathematicians, statisticians, actuaries, medical scientists, and operations researchers.
In Deming’s NBER Reporter article, he ranks occupations by the increase or decrease in their share of the labor market. For example, teachers had the biggest percentage-point share increase, from 3% of all jobs to 3.6% of all jobs, so teachers stand out in his report. If you look at the numbers to show the percentage growth in each occupation’s share, economists and survey researchers rank first, with 137% growth in their share of the labor force, albeit from a much smaller base: from about a tenth of a percent to a little more than two-tenths of a percent.
Why are social skills valued in the labor market, and why have they become more important in recent years? One possible cause is technological change. In a review article about the history of workplace automation, David Autor argues that new technologies generally increase the importance of skills and tasks for which there is still no good substitute. Machines are generally quite good—much better than humans—at performing routine tasks that can be codified according to a set of explicit rules. However, people are still much better at open-ended tasks that require flexibility, creativity, and judgment. Often we perform these tasks with great skill despite lacking any explicit understanding of “rules,” as when we divine the motives of a person we just met, or when we quickly determine whether it is appropriate to laugh at an off-color joke.
One might quibble with some of his categorizations. Economists are pretty nerdy, but they are in the non-STEM category, perhaps because they were paired with survey researchers, who need people skills to get people to answer questions. In an interview, Deming says, “I always joke that around academics, I might have above-average social skills—but relative to the general population, I’m probably just average.”
Citations
- https://bloom.bg/2C2iffh – BusinessWeek
- http://bit.ly/2FWN73i – National Bureau of Economic Research
The Good News Is . . .
- Initial jobless claims were 221,000 in the February 3 week which takes the 4-week average to 224,500 and a new 45-year low. The average is down more than 25,000 from early January which points to strengthening conditions in the labor market, specifically to declines in what is already a low level of layoffs. Continuing claims are also down, 33,000 lower in trailing data for the January 27 week to 1.923 million. This 4-week average is down 12,000 to 1.934 million with the unemployment rate for insured workers unchanged at a very low 1.4%.
- Walt Disney Co., a leading global producer and provider of entertainment, reported earnings of $1.89 per share, an increase of 21.9% over year-earlier earnings of $1.55 per share. The firm’s earnings topped the consensus estimate of analysts by $0.28. The company reported revenues of $15.4 billion, an increase of 3.8%. Management attributed the results to the strong performance of its parks and resorts business segment.
- Xerox announced that, after 115 years as an independent business, it would combine operations with Fujifilm Holdings of Japan. The deal signaled the end of a company that was once an American corporate powerhouse. Xerox has struggled with the rise of email and the move by offices around the world to send and share documents electronically. Less paper and fewer copies undermined the company’s once lucrative franchise. In recent years, Xerox moved to recast itself more as a business services supplier, helping companies streamline their flow of documents and work in fields like health care, human resources and financial compliance. Yet none of its efforts delivered a sizable profit maker to make up for its declining copier business. Under the deal announced on Wednesday, Xerox, of Norwalk, Conn., will become part of an existing Fuji Xerox joint venture, which sells office products and services in the Asia-Pacific region. As part of the transaction, it will issue a combined $2.5 billion in cash dividends to its shareholders.
Citations
- https://bloom.bg/2eVhfSb – Bloomberg
- http://cnb.cx/2lwnm3s – CNBC
- http://bit.ly/2G0xPdR – Walt Disney Co.
- http://nyti.ms/2sgR4xD – NY Times Dealbook
Planning Tips
Guide to Common Mistakes People Make Enrolling in Medicare
Although Medicare can help you cover certain healthcare costs, it is a very complicated system to navigate. One solution for navigating this process is to consult with a Medicare advisor or health insurance advisor who can help you determine whether or not you are eligible for Medicare benefits. Medicare decisions are complex and are best made in the context of an overall retirement income plan. It is important to also do your own research, and sometimes the best place to start is learning what not to do. Below are some common mistakes people make when it comes to Medicare.
Leaving Your Job and Missing the Deadline for Medicare Enrollment – Are you 65 and still working? If so, you might be receiving health insurance coverage from your employer. If that is the case, you might not have to sign up for Medicare, which allows you to avoid the premiums of Part B. However, if you happen to leave your job, that means you must enroll within eight months or you will have to wait for the next period of enrollment, which could mean going without coverage for several months and perhaps having to pay penalties. Also, not all employer plans are superior to Medicare, so make sure you compare them.
Not Signing up for Medicare Because You Are Not Getting Benefits from Social Security – Are you receiving benefits from Social Security? If you are, you may already know you are automatically signed up for Medicare Parts A and B once you turn 65. However, if you are putting off filing for Social Security benefits until you are at retirement age or even later, you need to sign up for Medicare on your own. That means that you have to sign up within a seven-month window. This will be three months before the month of your 65th birthday and up to three months after that month. Since Part A is free for most, there is no reason to wait to file.
Thinking Your Medical Providers Will Always Have Coverage Under Your Medicare Advantage Plan – The Medicare Advantage (MA) plan can cover medical expenses and prescriptions. However, to get the lowest co-payments possible, you might need to use the network of doctors and hospitals on the plan. Make sure your hospitals, doctors, and healthcare providers are covered every year. If necessary you can switch your plan from October 15 to December 7, the period of open enrollment. You can use a Medicare plan finder to find the right plan for you. Sign up at www.medicare.gov to compare plans in your area and the costs associated with each plan. Contact an insurer and your doctor once you have narrowed the list to a few plans to make sure they are in the network for the upcoming year.
Selecting the Wrong Medigap Policy – Buying a Medigap policy within six months of signing up for Part B means you can get any plan available in your area, even if you have a pre-existing medical condition. If you want to switch plans after that, a lot of insurers might reject you or even charge you more due to your condition, so it is important to select a plan wisely.
Not Getting Part D – Medicare Part D covers prescription drugs. Review your options during open enrollment, as cost and coverage can change every year. Look for increases in your share of costs or premiums. If you can now use generic drugs or have gotten new medications, switching plans might mean a better deal.
Citations
- http://bit.ly/2H2szaC – AARP
- http://bit.ly/2C68rAI – Kiplinger
- http://bit.ly/2EddeCi – Investopedia
- http://ti.me/2GXoPay – Time
- http://bit.ly/1ALOL0g – MyMedicareMatters.com
