BlackRock, Inc. (NYSE:BLK) 13th Annual Deutsche Bank Global Financial Services Conference Call May 31, 2023 12:10 PM ET
Company Participants
Larry Fink – Chairman and Chief Executive Officer
Conference Call Participants
Brian Bedell – Deutsche Bank
Christian Sewing – Chief Executive Officer, Deutsche Bank
Brian Bedell
Alright. I think we’ll get started. Well, welcome everyone to our lunch keynote conversation with Larry Fink; and our CEO, Christian Sewing. For those who you don’t know me, I’m Brian Bedell, I cover the Asset Management Space here for Research at DB. And so, we’re always delighted to have this very insightful conversation. I think this is, we were talking before, this is the eighth time that Larry’s been here talking with our CEO. And it’s always great to hear your perspectives. And this time, we’re live I think the last two times you guys did it together, it was virtual.
So, great to be here live in our offices. I have to always say this is, you know, this is my favorite session of the of the conference for the last, you know, many years, 8 years. And, you know, I think people will really get a lot out of it and it will be really great to hear your insights on number of topics that are really on top of investors’ minds that we’ve come up with. So, anyway, so why don’t we get started?
So, maybe we’ll start off Larry with you on everyone’s curious about the global economic outlook. Maybe if you mind, I mean, share your – first share your thoughts on where you think the fed stands in fighting inflation? And is that going to lead to a soft landing or a hard landing? And then Christian, your view from the European side and maybe both of you can share how you think about that from a global perspective.
Larry Fink
Well, thanks Brian. And it’s great to be here at Deutsche Bank’s offices. Christian is always good to be together. So, I want to thank you for our partnership. Well, I wrote this in my Chairman’s letter, CEO letter 2 months ago. I think inflation is still too strong, too sticky and the Fed is not finished. I think they have two to four more tightening, probably closer to closer to 2 [25, 75s] [ph]. But I think they have ways to go to – if they continue to believe that their target is 2%.
I mean, I think inflation is going to stay in the 4% to 5% range for some time. Much of it has to do with governmental policy. We have three massive fiscal stimuluses going on. The debt ceiling resolution is actually going to stimulate more growth by accelerating permitting, but when you think about the IRA and its magnitude and what it’s going to do, the Infrastructure Bill and the CHIPS Act, we have very stimulative fiscal stimulus at a time when the Central Bank is trying to rest inflation.
Our policies related to immigration, we have labor shortages and think about what we are going to have when these projects, these infrastructure projects start really accelerating, where will be the employment coming from? And it’s just going to be taking from different areas. And so I just see more structural growth issues that create inflationary pressures in the United States. And then you overlay the fragmentation of supply chains, which is accelerating.
There’s a reason why most companies have been in China because it is most – historically the most productive, cheapest way to manufacture. And now as companies are now migrating supply chains to whether it may be in Mexico or India, Philippines, Indonesia, Vietnam, it comes at a cost. And so, all of this is, we’re embedding, which is very different for the last 30 years. We’re embedding more structural inflation in our policies.
And with that in mind, unless we have a deep recession, which I don’t think we’re going to have, to answer your second part of the question, I don’t – I think our recession is going to be modest if we even have one because of all the stimulus. And if you think about – if you look at some of the supply chains, some of the supply chains are still evidence of shortages, that there’s still more demand than there is the ability to create the supplies.
And so, we have those issues presently right now. And so, this all leads to my view that the Fed is going to have to be more vigilant. The economy is more resilient than I think the market realizes. And then that doesn’t mean we’re not going to have pockets of problems. Everyone that looks at commercial real estate, yes, that’s going to be a problem. But I think it’s going to be offset by a lot of stimulus related to infrastructure and fragmentation and onshoring supply chain. So, I’ll leave it at that.
Brian Bedell
And do you ever think – you think we’ll ever get to a hard landing eventually or really that will be managed a little bit better when the Fed will pull back?
Larry Fink
I don’t see a hard landing. I mean, can we have a soft landing? Can we have a modest recession? Sure. But I think the market is wrong related to rates right now. We’re going to have a – we’re going to – if you think about it, once the debt ceiling is passed, Treasury is going to have to finance $1 trillion of bills in the next month or so to bring it back into the reserves or 800 billion. And so, we’re going to have more steepening, which creates other issues. But I just don’t see the evidence around a reduction in inflation or I don’t see the evidence that we could – we’re going to have a hard landing.
Brian Bedell
Christian, your view from here?
Christian Sewing
Well, first of all, let me also thank Larry for, again, doing this session. Brian, it’s not only your favorite session, it’s also mine, not because I’m sitting here because these kind of clarity and these clear and directional views, you hardly get from anybody else than from Larry. So, thank you very much for enriching our conference. Really appreciate it.
Look, I think there are a lot of parallels, but also some difference between Europe and the U.S. And I’m not trying to – actually, I agree with Larry on the U.S., and he is obviously in a much better position to judge that than I can do this. First of all, inflation is also far more persistent in Europe than a lot of people think. And therefore, I do believe that also in Europe, we will see at least two other, if not three other rate hikes.
My personal view is still that we will see a deposit rate which goes to 4%, potentially even higher. Because the real core inflation in Europe, if you take out energy prices, you think about Germany is around 7%. And that is simply to give you another data point that Deutsche Bank is also owning Postbank. And Postbank has 15 million retail clients. This is retail, retail and a good percentage of – double-digit percentage of people in Postbank, of our Postbank clients cannot match their monthly expenses with their monthly income.
Now, they haven’t stopped consumption yet because they are living off their savings, which accumulated through COVID. But that tells you how big inflation is. Now, the one side is saying, well, it will get healed with the salary increases. We are talking 10% to 11% salary increases in Germany now, which has been just recently negotiated, but that obviously spikes the next round of inflation. And therefore, I do believe that inflation will be with us at least for the next 12 months to 18 months, above 5%.
I think we will have an inflation which is far above the 2% for the medium-term. And hence, the next point is not only that we will see interest rates rising to 4% or whatsoever. But then the real part of the Central Bank starts if they cannot immediately reduce. I think it will stay there actually for 12 months or 15 months before they can actually relax a bit. So, therefore, I do believe that this cycle, which we are seeing now in Europe, will go on for the next 12 to 18 months.
Number two, I do believe that this will actually also mean that we will see some sort of recession. In January, when we were all in doubles, everybody was positive that Europe will not face a recession because the winter was warmer, China is opening again. Just think about what happens to the retail clients if their savings comes to a level in Germany, that they stop consumer. Because, for instance, the Germans, they are not going on credit cards. They are reducing consumption. And I can see that happening actually in the second half of 2023.
And therefore, I also do believe that from an economic point of view, we will see a situation which may result in a mild recession in the second half of 2023, first half of 2024. But it is certainly not something that without any doubt, we can avoid a recession. Now still, the resiliency of the European economy, of the European corporates, very strong. Nobody has actually thought last year at this point in time that Germany or other European countries will go through the situation, which we have faced with that kind of outcome.
The real issue for Europe and that’s the difference in my view to the U.S. is not – is it a soft or a little bit more than a softer recession. I think this is all doable. The real issue for Europe is where is coming the growth from 2026, 2027, 2028. What are we doing in terms of structural reforms? How can we avoid bureaucracy? How can we make sure that investments are improved in a faster way?
If you ask the corporate CEOs of the DAX companies in Germany, and you go and you discuss with them the reduction inflation – the Inflation Reduction Act, the real issue why they invest in the U.S. is actually not the money they receive. The real issue is the speed of approval you have here and that the business case is turned into a positive in 2 years to 3 years. While in Europe, you wait for approvals, it takes longer and the business case is profitable in year 4 or 5. And that’s what we need to tackle in Europe.
So short term, we have, in my view, similar challenges, and we will go through this. The real issue about Europe is the long-term growth.
Brian Bedell
And are you optimistic that can change in Europe?
Christian Sewing
Yes. It can change because Europe has always shown that when it’s under pressure or what you have also now seen, how Europe has reacted in the last 12 months in terms of what is the response to Ukraine, how is the region coming together? I think Europe has the potential. Europe has the engineering capacity. Germany has the engineering capacity.
We have resilient corporates. But we need 3 or 4 clear decisions, and that is a lot has to do with regulation, bureaucracy, speed of approvals, and last, but not least, making sure that the investors think that there is secure energy for competitive pricing. If we move into this direction and I think the European Union can move into this direction, I think we’ve a real chance.
Brian Bedell
That’s great. And we’re going to shift over later to ESG and we can talk about energy there as well. I do want to say, I’m going to give you two more questions, and I do want to open it up to the audience for Q&A as well after that, too. So, maybe we can shift to talking about bureaucracy, the U.S. debt ceiling negotiations. So hopefully, we have a resolution finally coming with this.
I guess my first question, Larry, will be do you think we actually will have a resolution will get passed? And then – so if that is the case, that’s a sigh of relief, of course, but how do you see this impacting the U.S. dollars, reserve currency status, and you mentioned, obviously, the liquidity issues or the funding that will need to happen as well?
Larry Fink
Well, I believe we’ll have a resolution. I always believed we would have one. It looks like a good bipartisan resolution, which is nice to see. No one’s happy, so it’s perfect. Both sides got something that they wanted. But let’s be clear. United States is jeopardizing its reserve currency status through this drama. It’s not going to change anything dramatically, but it’s just another chip, another problem. And when you have a $31 trillion deficit, then you have 40% of our treasuries or debt is financed overseas, it just poses bigger and bigger questions. And I think just the status of the rating agencies questioning, should the U.S. be downgraded again?
It was not watched. All of that is just destabilizing. I’ve had conversations with many heads of central banks, and their fear of ownership of too many dollars is becoming louder and louder. The fear became more magnified when we put the sanctions on the Russian Central Bank and the ability to – so, that in itself, created a lot of fear with many other central banks. And all these issues just presents that question, and historically, no one ever thought about the validity of the dollar and the strength of the dollar, and we’re now raising those questions.
Now, the positive side is what’s the alternative. In some areas, you have – I mean, think about the alternatives. If the Middle East decided to accept, let’s say, RMB for their purchases, for Chinese purchases of energy of oil and gas, what would that do? China owns $2 trillion approximately of our debt. They own it because they sterilized the trading imbalance. But if they could start using their own currency as an exchange for energy, there is a good example, that would be quite destabilizing for the dollar.
And the question is, do these other central banks, these other governments one day is saying, do I have too much risk? Do I have too much emphasis on one currency? Now, historically, as I said, no one questioned that. But I can tell you, in my conversations, those questions are being raised and being asked. Now, I don’t see any meaningful change. So, I’m not trying to be an alarmist by any means, but just even a sense of the conversations to me is an erosion of trust. And we are eroding some of that trust and – which is in the long run, we need to rectify and rebuild that trust again.
Brian Bedell
And Christian, how do you see it from Europe? What are the financial communities saying there?
Christian Sewing
Well, I would say that there was far more interest in this question now than ever before in the previous instances. And I think this goes back to Larry’s point. In those items where you have these geopolitical upheavals which we have, and now we’re talking about Russia and Ukraine. We know that there’s a potential conflict ahead of us when we think about China and Taiwan. If then, the biggest ally you have is having these kind of discussions, then obviously, there is nervousness because at the end of the day, you look for trust, you look for credibility, you look for resilience.
And hence, there was a lot of interest in Germany and in Europe how this is resolved. And I think everybody somehow thought it will get resolved like it is now resolved. But nevertheless, there was – yes, there was a nervousness left. And I agree with Larry, it should not happen too often, not only because of the capital markets, but also in times where you have these geopolitical issues, in these times where democracy in a lot of countries is at risk and then the largest democracy, which we have in the world is having these kind of discussions. I don’t think it really helps to put comp to the market and provide the security, which we all need. And one thing is clear, without a functioning U.S. market, all the other financial markets do not work. And hence, there was worry.
Brian Bedell
Do you think it will ever change or will we get these periodically or the…?
Larry Fink
Well, we’re not going to have it for two years.
Brian Bedell
At least we have that, right? Two years from now, [indiscernible].
Christian Sewing
But I think to this point, and that’s, by the way, another item [Europe also] [ph] needs to answer. And you might have heard that we have, in Germany, a huge discussion on the right level of debt for the time being because we have sort of saved the debt brake also in Germany, and there are political parties who are saying let’s relax it like for the whole European Union.
I do believe that we really need to think how do we deal with that over the next 10 years to 15 years because an ever increasing debt side, I mean, that’s what we learned in school. That’s what every entrepreneur is learning. At some point in time, you need to refinance it. And hence, I do believe we need to think outside these events like Ukraine and what all happened and the pandemic, how are we actually dealing with this issue? And that is for me, [un-responded] and until we have the solution for that, these kind of happenings will happen again. And by the way, we will have that discussion in Europe pretty dramatically.
Larry Fink
If you look at the macro trends, demographically, these deficits are going to be a big problem in the future because we have fewer workers, more retirees. And that’s going to be a problem in Japan and Europe, China, and the United States. So, we do have a demographic time bomb related to the deficits. And the only way to resolve that is growth. We could – if we have consistent 3% growth in the world or in the U.S. economy and 4.5% growth in the world, we could overcome these deficits.
Question is, with declining demographics, with all the other issues, can you achieve those type of growth rates in the amount of time? And so, these are some of the issues that we all have to be thoughtful about, but the demographic time bomb is just – because it’s not today’s bomb, we underestimated, underappreciated. I mean, one of the big issues that we had more negative information about the Chinese economy over the last few days, China has the biggest demographic time bomb.
Its worker-to-retiree by 2035 will be 1:1. And now the Chinese are saving 50%-plus of disposable income. That’s one of the reasons why the China reboot has not happened. And all of this is just going to – if we don’t have that type of – if more and more money is just kept in a bank account and not invested for the future, we’re not going to have those growth rates. And China is a really good barometer of that right now by watching all the potential, with all this massive savings at the personal level and yet the savings is not – it’s not moving.
And these are some of the things that I’m watching. I’m watching it in the world. I focus on, at BlackRock, because we are the largest retirement manager in the world. We’re the ultimate hope – we sell hope. Why on Earth would anybody invest for a 20-year or 30-year outcome if you don’t – if you’re not hopeful about the future? And what I’m seeing is more fear, and more fear means more savings in the short-run. And some of these things are, to me, really posing some big growth issues going forward, which will have a big impact on deficits in the future.
Brian Bedell
Yes. Speaking of fear, maybe I’ll ask just one more question and then we’ll open it up to the audience. But the banking crisis. It seems to have settled down a little bit for now, but what do you – what do both of you view as both the short-term and long-term impacts of the recent failure of SVB and the acquisition of Credit Suisse? And being through several cycles for both of you, what are your views on how this one might play out versus…?
Christian Sewing
Look, I do think from all I can see from Europe looking at the U.S., that the regional bank issue is a structural one. And without having names in mind, but I don’t think that we have seen it all because, in particular, if we now just take Larry’s narrative and think about 2 or 3 other rate increases, you will see that the problem will get even worse for some. And I just said before that I think all over, the credit conditions in banks will, in principle, further tighten their underwriting standards.
I think credit spreads will further move out, and hence, the situation is not off the table. And therefore, I think we need to focus on that. And that brings me back to sort of say, the defense of a bank, how you need to set yourself up and there’s what I said before. And I think why I don’t think that it plays over and it’s contagion for European banks because the four items which I can see in Europe, throughout the European banks, and of course, also for Deutsche Bank is, it’s a capital and liquidity question first. And on both items, also for the regional banks in Europe, we have significantly improved because regulation is, kind of the same for all.
Number two, liquidity is always to be seen in linkage to the diversification of deposits. And that is the one area where you can also see a difference to SVB, partially also to Credit Suisse. For Deutsche Bank, I can tell you in the days where we got the attack end of March of the 600 billion of deposits, 330 billion is in retail Germany, but real retail Germany. Nothing moved, nothing. It’s, by the way, today, almost the same like 8 weeks ago.
The real item is the more concentrated you are, the more dangerous it is, and therefore, the linkage between the capital ratio, which is sufficient, liquidity ratio, but then the diversification of deposits is key. And the fourth one is, you need to be sustainable, profitable. And I think we have done a lot in order to turn that around. So, if those four items plus an adequate regulation, which has not softened for smaller banks, I think that this is, in my view, the best defense. And therefore, I’m not nervous about the European banks.
Now, does it mean we have no volatility? No. There will be volatility going ahead. And again, I, again, see also inflation is not going away. I think we have, on the credit side, at least some, I would say, not difficult times, but you have slightly elevated credit provisions over the next 12 months to 18 months, which is all part of our plans. But I can’t see that European banks are really be affected by that what we see in the U.S. And in the U.S., it is, in my view, an issue for the regional banks. And I think there is – we don’t need to even discuss the large banks in the U.S., which are anyway far ahead of ourselves.
Larry Fink
Yes. Well, I would just say in a more macro basis, there’s nothing wrong with failure. We’re going to always have some type of failures, whether it’s in corporations or financials. We have new companies, new technologies evolving so I don’t look at this as a real crisis. It’s just the evolution of needs, the reaction to these failures, though, was vast amounts of money moving out of the banking system into the capital markets.
I actually believe that trend began 25 years ago, 35 years ago, where more and more action is now – activity is in the capital markets. Actually, today, more economic activity is in the capital markets than the banking system. That was not the case in 2007 or earlier. And so all of this is just accelerating more economic activity in the capital markets. That’s fine. That’s just an evolution.
I mean, we could all raise the question, well, what does it mean for regulation and all that? But the reality is, we are going to see an ebb and flow, where we have 4,200 banks in the United States, more than any other country. Some bank failures is just a natural action. In the case of the banks that in the United States was more of a duration mismatch, okay, that happens.
If we do have the rate level that I think we’re going to have, we’re going to probably have more credit issues, as Christian just said, maybe in commercial real estate. And then we’re going to have some other banking issues related to credit quality and all that. But I don’t – I never felt this was a crisis because I think the evolution of have in these two systems, the banking system and the capital markets and how they play off each other, and the – I think this is fine.
And I actually – we could all raise questions about how do we regulate as more and more activity goes into the capital markets and how that plays out? But overall, we really didn’t miss a beat. Now, obviously, the depositors of Silicon Valley Bank that Saturday after it failed, okay, there was moments of real fear and what does that mean? Obviously, it was resolved before the weekend was over, but the reality is all the other issues, it was a natural evolution.
And so, I don’t look at this in a negative way or a positive way. It’s just we have the luxury in the world today of having vibrant capital markets. And probably if you think about post financial crisis, the growth of the European capital markets and what’s going on in private credit in Europe. And obviously, we’re seeing that in the United States. And so, I look at this all is just an evolution. And I do believe the role of the capital markets is going to become larger and larger and larger, which is good for all the investors, by the way. There’s going to be more opportunities.
And I think I wrote about this. I mean, the foundation when we built BlackRock was the capital market is going to play a bigger role, and this is something that we use as the foundation of building up the company. And I do believe that the capital markets will become a larger driver of global economic activity as we grow, as India becomes more involved in the markets and other countries like that. But it’s – so we look at this as not as a positive or negative, but just an evolution of how our markets are evolving.
Christian Sewing
Interesting. We should have – I don’t know whether we have filmed it, but just the last 3 minutes, we should bring it to Brussels, to Berlin, to Paris in order to ask for European capital markets because what you just argued is that the banking crisis in Europe would be far worse, obviously, right, is because we don’t have such a deep capital market like you have in the U.S. and therefore, it’s another protection scheme.
Larry Fink
Correct, it is a protection scheme.
Christian Sewing
And from that angle, it’s another argument why Europe must move ahead with the capital markets [union right?] [ph].
Larry Fink
Totally agree.
Brian Bedell
Great instruction for [Technical Difficulty]. I do want to leave some time for questions. If anyone has any questions? I don’t see any hands raised.
Question-and-Answer Session
Q – Unidentified Analyst
Thanks so much guys. Larry thanks for coming into Deutsche Bank. Maybe, combine, sort of the bank commentary that you had been talking about – you and Christian had been talking about with the growth of money markets. And do you see any issues there? It’s obviously another part of BlackRock that you do a fantastic job as so many other areas. Maybe just, are there any issues that you foresee as money markets continue to grow? Are there actual flows there? Some of the other – some of your competitors are not seeing them as expected. I think we’ve probably written about the hope for a surge in money markets for you guys. So, maybe just to take that. Thanks.
Larry Fink
So, I would say two things. As more and more money moves to the capital markets, whether in the short-end or the long-end, first of all, the net positive is, and I think the Federal Reserve wrote a piece on this recently, it actually is more liability matched, okay? When – like when you think about private credit for a second, I mean, we are a liability matching everything. We’re taking less duration mismatch and/or [morally] [ph], we don’t have leverage like banks, but that’s the negative side.
If more activity goes to the capital markets, the problem is capital markets are – cannot leverage itself like the banking system. The banking system’s beauty that it has the ability to leverage 8:1, 9:1 depending on its capital ratios. And so, the banking system does provide that economic stimulus that the capital markets can’t provide. And so, that’s why we have to have a strong banking system, at the same time, a really strong capital markets, and they have to play off each other.
Related to money markets, look, most of the money went into government funds. Almost 95% went into the government funds. So, it – most of the – the big problem we had over that SVB weekend was, should every corporation who had excess cash sitting in a bank, should they be sweeping it into the holding company every night? And by the way, some companies are not doing that. They’re sweeping it in and whether they’re using the money market funds of a bank or they’re outsourcing a lot more of that. To me, that’s always the problem.
When you have fearful, being frightened of your payrolls being met and your cash is being frozen, it leads to a lot of corporate treasurers asking themselves, do I want to have that much exposure even in my short-term liquidity pool the bank payrolls? It was an existential problem. And let’s be clear that one-day problem raised a lot of questions with a lot of corporate treasurers and what should I do with my excess liquidity? And how should I play that out? And that’s why we saw this surge of money.
It’s going to take time and all that, but do I see any embedded risk that money went into a lot of government funds? Not necessarily. I’m not – we’re not – I’m not witnessing with the – our competitive money market funds, vast, I would say, credit arbitrage. I mean, you think about in 2007 and 2008, you had, obviously, the reserve fund that did a lot of variable that give you 3 extra basis points of return and people ran there. And obviously, that was in the form of only a lot of Lehman paper and they blew up. There’s not – you don’t have that credit arbitrage. The range between the Top 10 money market providers maybe is a basis point. And it’s generally based on where they are on the yield curve.
Do they have a 28-day average inventory or a 32-day average inventory. That’s shaping it differently or you’re keeping it all in the short and 7-day to 10-day. We’re going to see a big shift as a treasury when the debt ceiling is all passed and you’re going to see treasury issuing a lot of short-term bills. You’re going to see a lot of movement in the money market funds and probably – and let’s be clear, money market funds are paying higher than most bank deposits. And that’s only going to be enhanced with this surge of bill issuance in the next few weeks. So, interesting to watch.
Unidentified Analyst
Maybe I could [Multiple Speakers] Thank you very much. You mentioned you’re in the business of selling hope. So, I was just wondering what’s your hope for returns this decade because we can discuss whether it’s a perfect comparison, probably not, but in the 1970s, I believe real returns across asset classes were not positive. So, maybe any – would be interested in any thoughts you have on that. And maybe how that impacts the public markets versus private market debate?
Larry Fink
So, I built BlackRock on the idea that the future is going to be better than today. So, I have not changed that view, that long-term investing will produce better outcomes than keeping your money overnight over the long run. The only – to really believe that we’re going to get those 3%-plus growth rates, to really make better returns in the long run for long-term investors, you better hope that things like AI really produces those separate productivity increases.
Obviously, the market is [bull’s up] [ph] on AI right now. At BlackRock, we’re spending a huge amount of time on it right now and what it’s going to do and how we’re going to reshape the firm. We spend a lot of time with different technologies. You know a lot more about this than I do, and they believe things like that will increase productivity by 30%. Now, if that’s the case and then you have – you don’t have to own just these AI companies. It’s going to produce a really good outcome for a lot of other companies.
If we don’t have a real technological change and it’s harder to be as constructive. We have not really had any real technological transformation in the last, I would say, 10 years. The last real technological changes that really changed and shaped what we are doing is the smartphone and the cloud. And then I will have – both of those were developed in 2008 – 2008, and that was long – when you think about it. We have not had that endurance from those two, we have some changes.
And so the key is, now is AI or other forms of that is going to really reshape how we live. I mean, think about can you live without your smartphone? Can you go back to 2007 when you – and think about what that phone is doing to your life today and how we think about streaming and all the other things? All of that. So, all of that has transformed how we are living and doing.
Will AI be the same thing and change how we live and how we think and how we organize and how we manage? But overall on that, I’m pretty optimistic that we’re going to have positive net returns over the coming next 5 years to 7 years through the – I do believe – I like markets better today than I did 18 months ago when everything was at fever pitch levels.
I am really excited that we could actually earn returns being in the bond market versus 2020 and 2021. So, I actually – if you think about a long-term pension fund, the worst time to be a pension fund was actually in 2020 and 2021, where you could own a bond, you get your returns. You had a short liquidity by owning a lot of privates. And today, now you can actually have a more blended portfolio with dramatically less risk to get to your liability target of [indiscernible] whatever that pension fund is.
So, I would argue the opportunity for returns today safely is better than it was when we saw a few years ago, when everybody was bowled up. So, I would just leave it at that. Christian, do you have anything on that?
Christian Sewing
No, I just wanted to have one further thought on AI because we are obviously also testing and reviewing options how to use it. If you just think about in the retail bank, how many people are, on a daily basis, answering the same question of clients and how more efficient you can do this. We have 3,000 people in our phone hotlines and so on. And actually, I can tell you by heart the 10 most asked questions, and I’m sure AI can do this far, far better.
I only think what we also need to do and what we shouldn’t forget is, if you ask people outside this room, the normal people in the street, they are afraid of inflation. They’re afraid of geopolitical changes. They are afraid of changing employee markets like – now this is coming. So, we need to be also always mindful of what that means for society. And I’m the biggest promoter of that, but we shouldn’t forget that one because I think that is also our leadership responsibility to put it into a system where people can walk with it, can grow with that and understand it.
My biggest fear, what I’m seeing right now, and I overall agree with all the points Larry made also when it comes to returns, and that there are more safe returns now than 2 years or 3 years ago, the belief of people in democracy, fairness, actually reduced over the last 3 years or 4 years. And we should never forget that.
Larry Fink
There’s more fear in the world today than probably any time in our lifetimes.
Brian Bedell
Hopefully, next year will be – would be a little bit more optimistic with if the fears subside and…?
Christian Sewing
I’m not – that doesn’t mean I’m not optimistic. You know what, it’s like in your company. If you have detected a weakness or an item, which you have had in mind, then 80% of the job is done because then you need to work on it. I simply want to remind people that this is something which puts fears into 80% of the population down there. And those people, you may have to say at the end of the day, rightly so, and that’s what we need to keep in mind.
Larry Fink
So, that’s why if you believe in building your firm out, you have to be hopeful. You have to build hope. You have to build a hope to all your stakeholders, to your employees, your clients and your community and [you do that, your shareholder] [ph] is going to be the biggest beneficiaries. To me, it’s a responsibility.
Brian Bedell
We could [indiscernible] I think, and then continue to talk about this as fascinating, but we are out of time. So, I think I’ll have to close it there. Please join me in thanking Larry and Christian.
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