BlackRock's Rieder: Weakness in European Financials 'Overdone' Ahead of Italian Referendum

Nov 29 2016 | 5:12pm ET

Rick Rieder, BlackRock’s chief investment officer for fixed income, has been increasing exposure to European banks and other downtrodden financial industry denizens ahead of the upcoming vote in Italy. 

Italians go to the polls on December 4 for a constitutional referendum that will broadly determine whether the organization and powers of Italy’s parliament, as well as those of internal administrative entities like states and regions, will be reformed. Italy’s prime minister, Matteo Renzi, proposed the referendum and has threatened to resign if it fails.

The looming vote has unsettled investors already spooked by Brexit and Trump’s victory in the U.S., since the fall of Italy’s current government would result in early elections and the potential for significant gains by Italy’s populist anti-EU factions – which in turn has raised the specter of increased economic, financial and political turmoil in one of the EU’s largest members.

The upshot for some investors, including BlackRock’s Rieder, is bargain-level prices for some of Europe’s leading financial companies. Stocks in the Italian banking sector, for instance, are down more than 50% in the past year, according to Reuters. 

"Some of the banks and financials in broader Europe have traded at cheaper levels because of the 'risk'," Rieder told Reuters in an article Tuesday. "We have definitely added some banks and financials because we think they've gotten reasonable." 

Rieder also continues to hold Italian sovereign debt, the article said, and he believes the current level of fear about European banking stability may be overdone. "We think [it] is somewhat overstated," he said to Reuters. "It's making a series of assumptions. One is that Renzi resigns. Two is that you're giving up on any plans to help stabilize the banking system. And both of those are big assumptions."

BlackRock has more than $120 billion in assets under management across alternative investment strategies. It is largest asset manager in the world with AUM over $5.1 trillion deployed across alternatives, mutual funds, ETFs, and other pooled investment vehicles.


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