A summary of 2025 Annual Letter to Investors of Larry Fink, BlackRock chairman.
The future-shaping assets such as data centres, ports, power grids, and the fastest growing private companies in the world are not available to most investors as they belong to private markets which are closed behind high walls, with gates that open only for the wealthiest or largest participants.
Risk, Illiquidity and Complexity make such assets available only to fewer investors. However, nothing is immutable in finance. Private markets need not be so risky, opaque or out of reach. Over the past year at BlackRock we worked on innovation.
Despite being a traditional asset manager, BlackRock always kept one foot in the private markets.
In the last 14 months, we announced the acquisition of two leading companies in the fastest growing sectors of the private markets: infrastructure (Global Infrastructure Partners, editor note) and private credit (HPS Investment Partners, editor note). We also acquired a firm that allows us to obtain better data and analysis (Preqin, editor note) so that we can better appraise risk, identify opportunities and unlock access to private markets (…)
The majority of people associates the word market to public exchange (shares, bonds, commodities). However, it’s not generally possible buying shares in a new high-speed railway line or a new generation power grid on the LSE or NYSE. On the other hand, it’s possible to allocate resources in infrastructure projects only through the private markets that require higher investment tickets and are available to persons with a certain amount of income and net wealth.
The same barriers apply to most companies in the world. Only a small fraction of them is listed and shrinking. Raising funds through an ipo, the route BlackRock took 25 years ago, is becoming increasingly rare. The large majority (81%) of US businesses with a turnover of above 100 million US Dollars are private. The percentage is higher in the EU and even higher in the UK.
However, these firms still need money to innovate and grow. For decades they turned to banks, just as households turn to lenders for mortgages. But that era is rapidly waning. Today, banks alone cannot meet the capital demands of growing companies.
The private credit sector is stepping in to fill this gap. Private credit assets could indeed double by the end of this decade. However, as in the case of infrastructure, many individual investors are unable to participate in this growth. Even some large institutional investors find it difficult to construct a portfolio that allocates these assets as they would like to.
The beauty of investing in private markets is not owning a particular bridge, tunnel or medium-sized company. It is the way these assets complement stocks and bonds: diversification, the only free meal available in finance.
Nobel laureates Harry Markowitz and Bill Sharpe developed upon it the Modern Portfolio Theory, the ground for a standard allocation of 60% in equity and 40% in bonds. Generations of investors performed well with this approach, owning a mix of the entire market rather than individual stocks. But as the global financial system continues to evolve, the classic 60/40 portfolio may no longer represent true diversification.
The future standard portfolio could be more like a 50/30/20: stocks, bonds and private assets such as real estate, infrastructure and private credit. The attractiveness is clear. While these private assets may carry a higher risk, they also offer great advantages (…)
However, the challenge lies here: the sector’s structure is not ready for a 50/30/20 world. The majority of traditional wealth managers only focus on 50/30 (equity and bond) while few private capital firms dominate the 20 (private assets).
Bridging the gap between 50/30 and 20 is almost impossible for most individuals. Even those who can afford it face another problem of diversification within that 20%. They often barely have enough capital to meet the minimum for one private fund, and allocating 20% of the portfolio into one locked investment does not really mean diversification.
We can help investors achieve a better result. The gap between public and private markets is a difficult problem, but BlackRock already solved market challenges like this (…)
With clearer and more timely data, it will be possible to index private markets just as we do now with the S&P 500. Once that happens, private markets will be accessible and simple. Easy to buy. Easy to follow. And that means capital will flow more freely throughout the economy. The flywheel of prosperity will turn faster, generating more growth, not just for the global economy or for large institutional investors, but for investors of all sizes around the world.
