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Arbitraging before the ink has dried

Written by Ulf Erlandsson

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"The biggest capital markets arbitrage of my lifetime" is a comment from the world's biggest asset manager that necessitates some analysis. We look at positioning in the private vs public market divide.

Here, we try to distil our thinking of the reasons for Larry Fink, CEO of BlackRock, to call out the “biggest capital markets arbitrage” of his lifetime, seemingly without a blink. When a USD10trn asset manager calls out a great arbitrage, something is likely to be going on and it’s a not-so-subtle wink.

First, we find that Covid did not even generate a kink in the curve in the demand for private assets, and they have higher fee potential. We base this on a recent article that covers how BlackRock Inc, the world's largest asset manager, is pushing more aggressively into private market investments. Second, infrastructure - a core component of the ‘private’ asset class - plays a part to not shrink oil production opportunities in Saudi Arabia.

This in turn is based on an article the details how BlackRock has been hired by Saudi Arabia to advise a new investment fund established to help finance a drive to upgrade infrastructure across the world’s biggest oil exporter. Third, private assets are incredibly cheap on a relative basis, even arbitrageable, as they are not scrutinised on climate/ESG grounds the same way as public assets.

About the author

Ulf Erlandsson

Ulf Erlandsson

Founder, Board member

Dr Ulf Erlandsson founded the Anthropocene Fixed Income Institute and was its first CEO. A pioneer of climate-focused fixed income portfolio management, he was named Environmental Finance’s Bond Personality of the Year 2022.

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