Rencontre avec Jean-François Cirelli (Chairman de Blackrock) : recrutement, marché, conseils…

Well, the same as Sciences Po Paris and then I don't know what. So you are from Sciences Po Paris, you are in all the great schools of engineering. Well, the great schools and the rest, there we are the best.

It's always the same when you are the first in your sector. So, there is a big problem which is to stay first. It's difficult to run in front. We have to put effort into not being caught by the seconds, it's always complicated. But you attract the best. So, we have enormously many people who want to come, we propose internships. Then, you have to register on Black Rock's website called Internship, Black Rock Internship. And there, the teams choose the best profiles and we manage to have excellent French interns as well as other nationalities.

You have to work and have a bit of luck in life, that's all. Luck also counts, huh. But you still have to fall a bit, you know. You still have to work a bit to succeed. There are not so many other successes.

I thought they were talking about someone else, so I wasn't ready to come on stage. Hello. Hello and thank you to Harold and to the Chinese Business Club for this beautiful invitation. Thank you all for being present. Always very pleasant to find many known faces and as one should never keep the kitchen waiting, right dear Guillaume Gomez, and as the son of a hotelier-restaurateur, I am more than others. I know there are many hoteliers-restaurateurs here. I greet them all because it's a profession. I will try to be brief, which usually means we'll be longer than usual. And it's a message for him, he told me 'You have 8 minutes,' I said 'But me, in 8 minutes, I won't be able to say what I want to say. So it might be a bit longer than the 8 minutes.' He told me 'I will interrupt you.' Well, then signal him. Four points to tell you today. A bit of grammatical lexicon on the notion of fund which is used everywhere. Not the sauce base but the funds with an S and without the D. Then, talk a little about Black Rock quickly to demystify the great American mastodon. Thirdly, tell you a bit what is changing in investments around the world in bullet points. And then a few general reflections that I called my parietal messages. So, the first point, fund and the job. In France, there is quite a bit of ambiguity in French on the notion of fund because we have the famous pension funds which is the English expression to say retirement fund. I admit that it's nicer and prettier to say pension fund than retirement fund. Well, it's retirement funds. There are investment funds which are capital investment funds. In English, private equity, PE. That's not me, it has developed enormously in the last 20 years and it's actually wonderful. And then there are asset managers, which is what I am. So people say 'You are a pension fund?' No, I am an investment fund. No, I am an asset manager. Which generally leaves people speechless, they say they don't know what it is. There, we are nearly 700 in France. So you see, it's a scattered profession and we propose to people to invest and we invest in envelopes called funds. So there are funds all the time but not the same ones. So be careful with the word fund. It's a profession that is not very well known for several reasons. The first is that we do B2B essentially. So B2B means you are far from the final client. There is no Black Rock boutique. You could come in asking what I can invest in. Our clients are those who have the supermarkets of savings or contributions. And so in France, the supermarkets of savings are banks and insurers. In other countries, it's retirement funds or other systems. And so when you go to your bank to invest, you don't think of the asset manager, you think of the bank name. So you go to such a bank, but actually it's not the bank, it's the asset manager but you don't necessarily know it. A small point along the way: B2B means my clients are called AXA, BNP, Société Générale. You have to think that these people don't say 'Here, I give you a billion, place it as best you can and we'll see.' No, they are extremely sophisticated people who know what they want and so we work with mandates from these people. And so, the idea that Black Rock could overnight say 'End of France, end of gold, invest there.' Not at all. It's the clients who decide where they want to invest and we try to give them the best. Well, then the job objectively is quite simple. There, people entrust you with money, it's not yours, it's not on the balance sheet, you place it, it's theirs and you take a small commission along the way. So it's a very nice model, no balance sheet, just the commission, it's really what we do best. After, people have to want to lend you the money, that's for sure. So they will be better in what you do. But actually, so we are still despite our size a small enterprise because we have a turnover of 20 billion which is the accumulation of fees on the 11,600 billion we manage. So, it's not enormous, there are much better. Our stock market capitalization is 150 billion dollars. That is to say that Hermes for example or LVMH have half the stock market capitalization. So you see, there is better in life if I may say. The beauty of the job is that we are aligned with clients. When you take fees, if the value of your portfolio increases, you earn money and we earn more. When it decreases, we earn less. So this alignment with clients, that is a great competitive advantage. And if tomorrow you want to be an asset manager, I lend you money, you will invest it. What are the two subjects? There aren't 36, there are two on which you will be interested. Well, the first is risk. I was lent money, I invest it, but if the guy goes bankrupt, if he doesn't return the money, I am in trouble. So the core of the job is risk management. It's the core of an asset manager. Put money while ensuring that it is returned someday. And the second characteristic is that generally people who lend you the money also want to take it back when they want. And so most of the products we sell or you invest in through your life insurance for example, I am sure half or three-quarters of the room, well if tomorrow you have an operation, you want to take back your money, well you wouldn't find it absolutely intolerable to be told 'Ah but wait, it's not today, it's in 2 years or in 3 years.' So liquidity means I must return the money, so I must invest in stocks and very important and liquid bonds. You must not come to me saying I have a small startup that will do something. It's worth 20 million. Can you buy it? But I can't buy it because if tomorrow I put 20 million and you say you want them the day after tomorrow, it doesn't work. So we are essentially in liquid assets. It has changed a bit. We'll come back to that now. Secondly, on Black Rock, undeniably a great success. What does that mean? You tell me to raise the hand? Oh really? Excuse me. There, it's undeniably a great business success. The company is 37 years old. It was founded by six people including the two current bosses. So they have been bosses for 37 years, Mr. Larry Fink and Robert Kapito. And founders at the helm, it's a real tandem. So objectively you who are in companies, real tandems at the helm that work, I speak from my own personal experience too, it's not easy to find. They are an incredible couple. They started, they were fired from their company. They had made bad deals in the bank where they were. They said 'We are going to set up an asset management company.' They started with 80 million 37 years ago. As I said, we are at 11,600 billion today. You have to think in a very fragmented world with thousands of equivalent companies that they have a certain talent, huh. Going from 80 million to 11,600 billion, it doesn't happen as you imagine, not alone. We are 18,000 in the world, it's not enormous. It's not enormous. It's not the battalions of large international banks. 250 in France. What I am most proud of and perhaps the only thing to keep from today is that there are 56 billion of French savings entrusted to us. So I manage 56 billion in France of your savings, but we have invested as Black Rock 240 billion in this country. That is to say that we are a net importer of capital for financing the growth of the French economy to the tune of 158 billion, 156 billion. So that is what we are most proud of. We attract to France more money than we invest with French savings. In Europe, we are the first European investor. We have 1,600 billion invested in Europe. That's about 30% of Black Rock's results and turnover. So for an American company, Europe is very important at Black Rock because you have more than 30% of your results on this continent, so you have to be there. The great idea that Americans, I will come back, take the money to put it elsewhere, is really not true at all. And we have made three or four acquisitions in the history of these 37 years, not many. A bit to increase size, in 2009 to invest in something called passive management, which I will tell you what it is. And then more recently, last year, we opened the portfolio. There, it was madness. We bought for 30 billion, it had never happened before, in two areas: infrastructure. We bought a company called GIP which is co-shareholder of ADP. So there, we return to ADP, if I may say, in France anyway, we have airports in London notably and then in private debt, private debt which is a new asset class that is growing enormously in the United States. Companies today are financed more by asset managers and private debt than by banks. It's a considerable change. We have 1,000 billion in funds out of 11,600 on sustainability, as they say today. Which means that whatever you may hear about Black Rock, have we changed on ESG, to what extent etc., it's the first asset manager in the world that has the most money in sustainable funds. 1,000 billion, no one matches us in the world. There, so that's what I wanted to tell you on that subject. Two types of management in this job. Active management: I want to invest in the automobile. Do I take Germany or France? Do I take if I take France, do I take Renault or Peugeot? Well, there are people who do that, who do research, it's better to do that. So they choose the stocks. Passive management is indexes, what we call ETFs which are developing enormously a bit less in France for local reasons but that's good. That means there you take indices, the total index instead of being exposed to two or three values, you are exposed to the entire American stock market or a particular sector. As we are, I told you, very invested in large companies, we are invested in the 2,000 largest companies in the world where we have on average between 3 and 5% of the capital. That means that with 18,000 people, we cannot be on the board of directors, we cannot be in the management of these companies, it would be too complicated. So, we are never in the management of companies, never on the board of directors. There are annual engagements with the largest to discuss strategy and subjects and the essential of the relationship translates into finally voting at general assemblies. Pass to the third point quickly. What is changing in investment? It's a bit bullet points for you to look at that in mind. The first change in a few years is the rise, the consideration and the rise of sustainable investment, notably in Europe. It's more complicated in the United States, it was already under Biden, it's even more complicated with the new president as you think. So, the problem of all this sustainable investment is that we don't know what is really sustainable. So the regulation changes all the time, it's very complex. If we had held this meeting 3 years ago and I had said 'Here, I put defense in ESG,' three-quarters of the room would have said it's impossible to do such things. It's not ESG compatible today. Fortunately, things are changing a bit. So you see that sustainability is important? Frankly, not for moral reasons. We are not there to moralize. There are politicians and you and elected officials for that. We are there to tell you that climate risk is an investment risk. If you don't take it into account, well you will have a risk on your asset. The second element that is changing is the rise of passive management, which I told you about, ETFs that are developing everywhere for two reasons: they are very transparent and they are not expensive. Well, as they are not expensive, we sell them less expensively and there are some networks that don't want to sell less expensively. It's still everyone takes their fees in this job. You understood. The third point is the development of private markets. This is something new for individuals. Private equity, infrastructure, private debt, hedge funds, all that. When you go to see your banker, generally he offered you bonds and stocks. Today, that is developing. So, we are still at the beginning. That's why Black Rock has entered strongly into these private markets because it's going to be and besides the French law now on green industry leads us to have private assets necessarily proposed in your portfolios between 5 and 15%, so it will become substantial. So that is changing but worldwide. What is changing also, fourthly, is the famous 60/40 of this job. Generally, you are told 'Well listen, if you want a balanced portfolio, 60% stocks, 40% bonds, that's the good formula.' Everyone lived on that for a long time. Today, since there are no longer the correlations we had, it is more difficult to invest today than it was 4 or 5 years ago. And so all this is in full turmoil. But invest where and how and what to do to try to succeed. And the last point is naturally the development of crypto, cryptocurrencies and asset classes. We have changed opinion. We were totally against. We said oh there it's too risky. Today, we consider it an asset class like any other but naturally it's not necessarily for all audiences and it's a few percent of your portfolio. Last point because I am already too long, huh Harold. A few parietal messages. So, first point I wanted to tell you: curious country that France, a country of finance, we have the most beautiful European banks are French. In private equity, we are the main one, we have superb companies in France in private equity, very successful in asset management. Unfortunately most of my, I won't cite them, I never cite competitors anyway, but most of the competitors are French. So we are a country of finance and yet it's one of the countries where financial education is perhaps the most frustrated and the most limited in Europe. Frankly it's not top. You can do your entire career bac plus university without having done an hour of financial education on how to do things. That is still a subject. So we have many reasons for that. Many reasons. The day when national education will decide to do it, it will be a big moment but I think it's not for tomorrow. And then we don't have a capitalization retirement system where people individually look at all their money. That's something that pushes that. And so there we do a lot of financial education at Black Rock. We try to develop that because we think it's very important. Second point as a consequence of this frustration, we talk quite little about performance. I am always quite struck when we talk to clients. They find it already pretty good that they return the money they lent. Ah if my capital is guaranteed, it's already good. The idea of making it grow but you think the English and Americans have a very beautiful expression, it's called putting money to work. Why would only the head or our arms succeed in having money? Let's put money to work. In France, we don't put enough money to work. People don't invest enough. They keep it in cash. Besides, right now, we are at a peak which also reflects a certain uncertainty of the French regarding the current world since more than 40% of savings is not at all invested, not even in the Livret A. It's still incredible. Well, so you have to put money to work and so you look at performance. Look at performance, not everything is worth the same. Third element, the decarbonization of our economies. It's an incredible need for investment, we know it, it's written etc. Now, we have in addition defense to add. Perhaps something else to add. The public sector will not be able to finance all that. It is very indebted nearly everywhere, a lot in us. But so given the investment needs to decarbonize the entire economy, housing, finally everything, without private money, we won't manage. And so the solution is to put public money and private money. It's not won. It's not won because we are in a country that doesn't like mixing private money and public money. Just look at what politicians think, for example the privatization of motorways, it was coming into France, it was coming into debate. The PPPs that we had launched during the time of Raffarin on public-private partnerships were devolved. The French administration has a horror of private money because it doesn't have the means but at the same time it doesn't like that we make money on infrastructure or on things like that. So it's not won. But if we don't manage in one way or another to put private, public, we won't manage. To succeed in mobilizing this savings which can be perhaps the only advantage of Europeans, it's our savings rates. Europe remains a continent with enormous savings rate and so if we want to invest, we at least have the money. We need less uncertainty, there we are still at the top and we need capital markets. The great success of Americans is still the American capital market, the capital markets in the United States. And that is why we ardently wish that Europe creates a capital market. Well we started well since the previous one was called the Union of capital markets, it didn't work and so we did what was necessary, we changed the name. So it's called no longer the union of capital markets, I believe I have already forgotten the new name but it would need a bit of substance behind. And last point, we have often discussed recently on the famous 300 billion. Do you realize? 300 billion of European savings that will be invested in the United States, it's horrible. Generally, by pointing a bit at people like me because yes, it's still the Americans who repatriate the money. Well that, I want to say that is still a fantasy. I say I am the first investor in Europe, I want to remain so. Ah there was still a good reason to go to the United States in recent years. When the stock market does 25% in 2 years, people say 'Well why not go there?' Well doing 25% in a third year, it might be a bit harder. We are not leaving there this year for that. Innovation seemed to be there. Deregulation, the IRA, everything you want. Growth perspective. I believe we underestimate the European crisis in terms of growth between us. We have lived these last years, we continue to live in a continent that does not really create wealth and growth. Perhaps we should react so that it moves besides. And so everyone really had stars in their eyes for the United States and that is well why everyone invested there. It has changed since the beginning of the year to leave. So don't make me say what I say, what I will never say, but there is still more uncertainty in the United States since the beginning of the year than we thought at the end of last year. And so it's a real opportunity for Europe. It's a real opportunity for Europe to seize. Our political leaders have started to understand and say it the French for a long time since President Macron. But the new German chancellor who at the time I speak, I understand is still not elected, said 'It is time to know if Europe must exit history or not.' That's still strong words from a German chancellor. The reports are done, Draghi's are excellent. For once, there are not only diagnoses, Europe is not doing well. There are even solutions because when we talk between ourselves Europeans, we pity the situation and then when we say what to do, well there are fewer people. Well there, we have everything in the reports but it's not yet totally decoded in the administrations. Not everything has been trickled down. I give only one example that stuns me. I said it three times, thank you. The Draghi report is September 9th, it's May 6th. It is still not translated into French. If that, three times, I say but translate the report into French, it takes 10 minutes on Google Translate or DeepL. After it can be 2 hours to reread it to be sure we haven't made false meanings and at least one can read the report in French. On government sites, this report is only in English. Why? To know. So it must, you see we have the feeling that not everything has trickled down. There, we will pass to dessert. And so the last one is that you have to make the right choices of sovereignty. That's perhaps my message. It is true that European sovereignty is needed, but let's make the right choices and stay open. We still have foreign capital. And so after a decade where Europe frankly was not top in terms of growth, in terms of political paralysis of the institutions, it's perhaps our moment. So Europeans really have to take it by the horns and we at Black Rock need our two feet. Strong American-North American foot 60% of our results. Strong European foot more than 30% of our results. So we are there to continue to invest better and more in Europe. Thank you and enjoy your meal.