Intervention de Jean-François Cirelli - BlackRock

Hello, first of all thank you to the president for these very warm words. I always feel like they are talking about someone else when I hear such a leitmotiv, and it makes me feel a bit like a dinosaur. I won't repeat my children calling me emblematic. I am very honored to be here and I thank the FTE and its president Florence. I am also a bit worried because I was told I am the first asset manager to open the FTF days, which puts pressure. Moreover, your association chose a newcomer with only three years of experience in asset management. I hope you don't regret it. I will first say a word about the economic environment since it's budget season. I will be brief. Our economists think the major recession that has been expected for two or three years is not yet for tomorrow, so we should live through 2020 without a major recession. What strikes me is the good performance of company margins - in the US they are expanding, in Europe they are back to formidable levels. This is due to technology and globalization, which supports stock prices. At BlackRock, we surveyed our clients and 75% think the cycle will continue until 2022 or 2023. However, personally I think we are testing the limits of the system: growth inequality, negative interest rates, and the future of pensions. In France, we need a capitalization pillar. Also, the transition to ESG is not easy. Consequently, we see our clients de-risking, increasing cash, reducing bond duration, and seeking yield in private markets and equities with high dividends. I will stop there and take questions. Then I want to speak about three subjects that struck me in this profession. First, the struggle between long term and short term. At BlackRock, over two-thirds of our $7 trillion under management is retirement savings. The only way to achieve returns for retirees is sustained global growth. So we are advocates of globalization, open trade, and deep capital markets. We want an orderly Brexit and a true capital markets union in Europe. Second, the development of passive management. BlackRock is a major player. When we bought iShares, the market reacted badly, but now it is the opposite. Passive products are 8 to 10 times cheaper than active, and more than 80% of active managers do not beat indices. At BlackRock, the majority of equity assets ($3 trillion) are passive. Fixed income passive is growing fast - in Q3 we collected $24 billion. Does that mean active is doomed? No, but it must evolve. Active management that simply replicates indices has no future. There will be room for conviction-based active with performance fees. The quest for alpha also involves using big data: we analyze language in earnings calls, track private jets, etc. We are only at the beginning. Third, passive management increases our involvement in company governance because we are permanent capital in indices. Voting becomes more important. We have a stewardship team of over 50 people who vote at thousands of AGMs. We face pressure to disclose individual votes but are moving towards transparency. Finally, technology is changing the business model. BlackRock differentiated with Aladdin, our risk and trading platform. We sell it to competitors; now we have 200 external clients, managing $20 trillion combined. We are incorporating ESG data. The industry faces pressure on margins and will likely see concentration. The top three globally have less than 10% market share. In France, distribution networks are strong.

Banks and insurance companies can no longer avoid revisiting and resizing their distribution networks. Technology is one of our top three priorities. At BlackRock, about 10% of our revenues (1 billion out of 14) come from technology. Our latest acquisition is a French company, iFronde, which does flow analysis for private equity. We also need to find new resources, such as alternatives. BlackRock is among the top five or six globally in alternatives. Cash management for corporates is also important; please visit stand 37. The most important topic is ESG. The evolution in the last three years has been stunning. Finance is not always the fastest to change, but ESG has accelerated dramatically. I experienced a similar rapid shift at Gaz de France: natural gas was once the preferred energy, but within a few years it became fossil fuel. Coal plants built in 2008 were sold at a loss. ESG in asset management used to be a niche for clients willing to accept lower returns for values. Now it's mainstream. BlackRock's tools like Aladdin now include carbon footprint and carbon price exposure. We are building a proprietary signal for 2020. Clients demand ESG products; TFG (Transition Finance) grew from zero to 25 billion in five years and doubled to 50 billion in one year. Voting pressure in general meetings is increasing. Transition is difficult but necessary. Fiduciary responsibility remains our mandate. Pressure on asset managers is immense. $22 trillion will transfer to millennials, who are two to three times more concerned about ESG. We are only at the beginning of this change.

I don't know if they will succeed, but they are trying. It's a bit annoying when I go to the US at BlackRock; we talk less about China. We do four times less business in China than in Europe. The vision of Europe's future is not sympathetic, but I believe in Europe's future. I saw the euro from the inside; we don't pay enough tribute to Jacques Chirac. China is the first economy of tomorrow; you can't ignore it. BlackRock does about 10% in Asia, 55% US, 5% Canada, 30% Europe. Europe is our development zone, especially continental Europe and Asia. Asia is where we need to double down, but it's not easy. Interestingly, more European clients are interested in Chinese products. So there is a new wind.

I'm not the biggest specialist on capital markets, but today we don't have the same regulations everywhere. We can't circulate the same things in the same way. We don't have the same regulators. There are many issues; capital markets in continental Europe are too fragmented. We need to create deep capital markets in continental Europe, especially after Brexit. We need liquidity, asset classes. There are many directives; I leave it to professionals to prioritize.