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BlackRock cuts 3% of its workforce: Is the political backlash sparked by ESG behind the push to develop Bitcoin ETFs?

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BlackRock cuts 3% of its workforce: Is the political backlash sparked by ESG behind the push to develop Bitcoin ETFs?

Fox News reporters frequently discuss Eleanor Terrett Blackrock's Bitcoin ETF news. After this week's rumored earliest approval was debunked, most expectations are now looking towards next Wednesday 1/10. Additionally, understanding Blackrock's recent changes in operations may shed light on why the company is seeking a Bitcoin ETF.

Major Changes at the World's Largest Asset Management Company

BlackRock, as the globally recognized largest asset management company, is undergoing a significant transformation. The company is preparing to announce a layoff plan involving about 3% of its global workforce, which means nearly 600 employees are facing cuts. This decision is described as part of a routine assessment, similar actions were taken last year as well.

It is speculated that one of the motivations for the layoffs is that BlackRock, after years of crazy growth in assets under management (AUM), is entering a more moderate phase; thus analysts expect a consensus estimate of a 2.46% year-on-year decline in fourth-quarter earnings to $8.71 per share.

Financial Rebound and Strategic Shift: ETFs Shine

In 2023, BlackRock saw a recovery with a 6% increase in stock prices, a turnaround after a 21% decline in 2022. This recovery, driven by its strong ETF business, attracted new client funds amounting to an astonishing $187 billion inflow.

Frontiers of Cryptocurrency: New Bitcoin ETF

BlackRock is expected to obtain approval from the Securities and Exchange Commission (SEC) for an innovative Bitcoin spot ETF. It will be a significant milestone bringing a cryptocurrency investment product that tracks daily Bitcoin prices into the stock market. Fox reports that approval is expected to be granted next Wednesday, 1/10.

Facing Pressure: ESG and Asset Management

Despite these developments, BlackRock is facing headwinds in its environmental, social, and governance (ESG) investment.

ESG, once highly regarded, has now become a controversial focal point, leading to significant strategic shifts at BlackRock in the United States. Reports indicate that the company is reducing its ESG business in the U.S. and no longer requiring fund managers to consider ESG criteria in portfolios. In 2023, investments in sustainable energy products failed to yield significant returns, and green investment funds underperformed. CEO Larry Fink also mentioned that the term ESG will no longer be used.

Political Dynamics and Corporate Strategy

The ESG controversy has drawn political attention, including from key Republican figures, such as presidential nominees, who have criticized BlackRock's ESG strategy. Republicans argue that ESG policies impact investment freedom and advocate for multiple anti-ESG measures. This political backlash has resulted in tangible financial consequences, with approximately $6 billion withdrawn from BlackRock funds by conservative state pension funds.

BlackRock's Future: Beyond Stocks and Bonds

Insiders reveal that the funds saved from the upcoming layoffs will be reinvested in emerging areas like technology and alternative investments. While ESG faces pushback in the U.S., the concept continues to thrive internationally, especially among BlackRock's foreign clients, including major sovereign wealth funds.