Arkansas Firms Feel BlackRock's Trillion-Dollar Presence

by George Waldon  on Monday, Aug. 15, 2011 12:00 am  

Flipping through securities filings for public companies, one name seems to be everywhere: BlackRock Inc. The New York firm is the largest asset manager in the world, overseeing a $3.6 trillion trove of stocks, bonds, real estate, cash and more.

"They manage money for people all over the universe and entities all over the planet," said Rush Harding, CEO of Little Rock investment banking firm Crews & Associates.

The Arkansas investment community is no exception to the reach of BlackRock's global shadow. The firm is listed as a beneficial owner in nearly every Arkansas public company, from the biggest to the smallest.

The value of those corporate stock holdings ranges from $3.6 billion at Wal-Mart Stores Inc. of Bentonville to $53,734 at Harrison's First Federal Bancshares of Arkansas Inc.

Though BlackRock is deemed to have sole voting and investment control over the shares, the company doesn't take direct ownership positions. It

manages assets for pension funds, banks and governments.

"Companies like BlackRock become the place for sophisticated risk-oriented money to go," said Curt Bradbury, COO of Little Rock's Stephens Inc. "They represent very, very smart money.

"I think it's a positive thing for our capitalistic economy for companies like BlackRock that spring up and do what they do. It's a great American success story."

BlackRock's combined investment positions for its clients often represent a significant piece of a company's outstanding shares. The company's biggest stake in an Arkansas concern is 8.9 percent of Arkansas Best Corp. of Fort Smith.

"It's not unusual at all to have a very large shareholder who you don't have a lot of contact with," said David Humphrey, vice president of investor relations and corporate communications at Arkansas Best. "We've met with their analysts at various times, but there's not really been a whole lot of direct contact.

"They have less contact with us than many investors do. But that doesn't necessarily mean anything. That's their approach."

Ten Arkansas companies report that BlackRock controls 5 percent or more of outstanding stock, according to the latest batch of proxy statements on record.

BlackRock's name crops up on the institutional shareholder list at six more Arkansas public companies.

"They're big, but they do it without making noise," said Alex Lieblong, president of  Lieblong & Associates of Little Rock and a director of Home BancShares Inc.,

where  BlackRock controls 6.2 percent of the outstanding shares.

Advanced Environmental Recycling Technologies Inc. of Springdale and ThermoEnergy Corp. of Little Rock are the only Arkansas public companies that haven't drawn BlackRock interest.

A public company itself, BlackRock shares have traded as high as $207 in February, March and June this year. The 52-week low was $139 in November, and shares recently closed at $148.

BlackRock earned a whopping $2.06 billion in 2010 on revenue of $8.61 billion, placing it at No. 282 on the most recent Fortune 500 list of public companies ranked by revenue.

The company is led by Laurence Fink, chairman and chief executive officer since its inception in 1988.

Fink, an alumnus of First Boston Corp., is known for traveling against type, flying commercial instead of corporate jet.

Ivan G. Seidenberg, chairman and CEO of Verizon Communications, is a director on the BlackRock board, which features a global flare, including an executive of the Arab Fund for Economic & Social Development.

Mutual Funds & Bonds

The Arkansas Teacher Retirement System has about $710 million invested in three of the many mutual funds created and managed by BlackRock. The state's largest pension fund stake in the BlackRock funds is divided among bonds, $300 million; global equity, $295 million; and domestic equity, $115 million.

"They are just another one of our fund managers," said Rod Graves, ATRS investment manager.

Elsewhere in the investment equation, Arkansas companies are part of the BlackRock family of funds.

Shares in Murphy Oil represent the fifth-largest piece (3 percent) of the $551 million BlackRock Natural Resources Fund.

Through June 30, the mutual fund averaged an annual return of 9.7 percent since it was established in Oct. 21, 1994. That performance was scarred by the summer's bear market.

The stock mix of natural resource firms produced a year-to-date loss of more than 14.5 percent countered by an annualized loss of nearly 5 percent during the past three years.

More than 1.5 million shares of Tyson Foods are included in the $3.3 billion BlackRock U.S. Opportunities Fund, founded May 1, 1998.

Through the first days of August, the year-to-date performance of the mutual fund was hammered down to a 17.7 percent loss.

"BlackRock is one of the places the world goes to do business," Harding said. "They're very business savvy and do an excellent job for their customers. We compete for their business.

"If they're selling securities, we try to purchase them.When we're selling, we articulate the value of the bonds, and hopefully, they will purchase them."

On a recent morning, BlackRock had 81 bond items on a bid list that covered nine pages. Is the company freeing up cash to go bargain hunting for stocks ravaged by the recent bear market?

People notice when BlackRock is moving in the market, whatever the motivation for adjusting the investment position of its clients.

Crews & Associates has done business with the company for about a decade. Ten years ago, BlackRock had only $239 billion of assets under management. Organic growth and acquisitions sent the firm's portfolio to trillion-dollar status by 2006.

"If you're doing business with BlackRock, you're worthy," Harding said. "If you're going to come to that table, you're going to have to have game.

"To do business with BlackRock, the competition is strong and fervent."

 

 

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