Operator: We’ll move to our next question with Craig Siegenthaler with Bank of America. Please go ahead.
Craig Siegenthaler: And Gary thanks for your help over the last nine years. I’m sure you’re going to really miss these quarterly earnings calls.
Laurence Fink: I could tell you he’s going to be sulking.
Gary Shedlin: I’ll miss you, Craig.
Craig Siegenthaler: So just a follow-up to Rob’s comments on the first question for the potential for fixed income rebalancing, do you think passive will win the majority of inflows like we’ve seen in equities for the last decade? Or do you think active will grab a healthy split of share as we’ve seen in fixed income really up until just this last year?
Laurence Fink: Great question. So the majority of investors in fixed income ETFs are not passive. They’re active. We’ve been talking about this — actually began talking about this in 2012 where we believe the simplicity, the liquidity, the operational abilities to use fixed income ETFs to get your factor exposures, the duration, the convexity, the credit exposures you’re looking for, you could do that through investing in these index instruments, but you’re certainly not passively navigating or managing them. And I truly believe what we saw in 2022, movements out of mutual fund into ETFs provides much greater precision expertise to manage your fixed income exposures through ETFs. And I believe this is going to become one of the most important transformations in the entire capital markets, that more and more bond exposures are going to be utilized through ETF purchases, and it is not passive.
It is highly active, and that’s where people get confused because they think about ETFs as a passive instrument, both bonds and stock. And what we have been trying to identify over the years and now, most certainly, we saw that in 2022 in bonds that is far from a passive instrument. It is an index liquid investment to allow you to get your exposures that you’re seeking, and you’re able to navigate those exposures. Look, I believe in how investors are going to use it. They’re going to use it side-by-side with their true active bond investing. So I’m not trying to suggest bond active investing. Buying individual bonds is going away, it’s not. But for the bulk of most fixed income portfolios, you do not need to have all individual bonds. You can express a large component of that through ETFs. And then if you have the great credit expertise, mortgage expertise where you could really find true value in individual bonds, you’re going to do that.
But let’s be clear, most organizations can’t do that in totality in their entire fixed income universe. And so, I believe ETFs are going to continue to grow, especially in fixed income. Rob talked about how we believe this is the beginning of a major expansion of bond ETFs as a component of the entire bond market. And we believe this is going to simplify investing. It’s going to make investing in bonds easier with more liquidity, and it’s going to be cheaper. And I believe this is only the beginning, using index-like instruments like bond ETFs to actively invest to actively express your exposures that you’re seeking, alongside side-by-side in individual bond selections. And we are seeing that with every, if not all — but I’m going to say every active bond investor is now using ETF as a component of their active expression of exposures.
