Interview with Lukas Daalder – Chief Investment Strategist & Managing Director at BlackRock

For the Dutch version, click here.

BlackRock is the world’s largest asset manager, founded in 1988 and based in New York City. It manages trillions of dollars in assets for both institutional and retail investors. BlackRock is known for its wide range of mutual funds and Exchange Traded Funds (ETFs). Lukas Daalder works at Blackrock Netherlands. Lucas Daalder is the Chief Investment Strategist and Managing Director.

In this interview, Lukas Daalder talks about his career. Lukas also talks about how BlackRock works, and he gives tips for students. For example, how to best use your time as a student. He also gives a brief explanation on preparing for a career at BlackRock.

Can you tell a bit about your childhood and studies?

I still remember my time in high school, especially that one enthusiastic economics teacher who organized a whole weekend of economics classes with his colleagues. That was a really great experience, with crates of beer, footballs and games. It was normal then, but something like that would probably not be possible now. That teacher inspired me enormously.

When I finished high school, I was faced with a choice. I was good at maths, liked physics and economics, but also had the idea of maybe becoming a doctor. The dilemma was that I would then have to commit to one specialization for 40 or even 50 years. Then at some point you specialize in big toes, then you spend 40 years fixing fantastic big toes, but of course you’re pretty stuck. That felt like a limitation, and I wanted to keep options open.

In the end, I chose economics, with all the choices you have in that field. You could go into trade unions, government, politics, financial institutions, and even PhDs were among the possibilities. My parents were not necessarily enthusiastic about that choice; they didn’t see it as the best investment in my future. It was not that they were negative about it, but rather that they doubted it was the right choice for me. Nevertheless, I chose my own path and I am still happy with that.

Your career once started at Rabobank, how did you come to this choice?

After graduating in 1994, I found myself in a difficult job market with few available jobs. I had an good track record, but there were more people interested. I found that applying for jobs was challenging. I had deliberately never applied to banks, but then the advertisement from Rabobank came along. To my surprise, I was invited for a job interview.

I received the invitation on Friday and had to appear as early as Monday. I had never owned a suit before, so on Saturday I quickly ran to the C&A and bought a suit. At home, the trousers turned out to be about five sizes too big, and I had no belt. With a safety pin, I buttoned the back. The interview was not flawless, but to my surprise, I was hired.

It was clear that it was not love at first sight from either side. My application was probably not taken seriously because of the cheap suit, I thought. The person conducting the interview asked why I chose Rabobank over ABN AMRO. To be honest, to me, a bank was just a bank; I didn’t even know Rabobank was a cooperative bank. Anyway, I was hired for a position in macroeconomics and international economic relations, which suited my background perfectly. And so began my career at Rabobank, albeit with a somewhat awkward start.

“Make sure you don’t get yourself in an echo chamber. I think that’s the most important tip.”

After Rabobank, you joined Robeco, how did this transition come about?

As a student, I had preconceptions about working in a bank, thinking they were all right-wingers and the wrong people. But when I applied for a job at Rabobank, my immediate boss turned out to belong to the PVDA, for example. It was an eye-opener that my preconceptions were wrong.

I started as an economist at Rabobank but was later approached to work in the dealing room. Despite my preconceptions of ‘right-wing grabbers’, I decided to accept the challenge. My image was again wrong, and I discovered that working in financial markets was fascinating. In 1999, during the internet hype, I transferred to Amstelveld, where I became an equity analyst and later a strategist.

My career took a different turn when I switched to IMC, a market maker. Here I was really in the ‘lion’s cave’, which was a totally different experience from doing research behind a computer. Emotionally, it was more intense; the fall of Lehman Bank even led to the demise of my job, due to the loss of liquidity in the market.

After my time at IMC, I joined Robeco, where I held various roles in financial markets, including fixing, equity research, market making, and eventually CIO for Robeco’s multi-asset products. My career in finance offered new challenges and an ever-changing perspective every year.

At IMC, the approach was very different from traditional companies. They took on a group of young people every year, of which only some remained. It was a risk, but working with sharp and driven people was inspiring. Unlike my previous experience at Rabobank, where getting a new computer was a bureaucratic process, at IMC, a new computer was arranged for you within an hour, without any application.

The culture at IMC was cutthroat and competitive, but also encouraging. I transferred with the understanding that I could keep my base salary but not participate in bonuses or half my salary and participate in bonuses, but I was willing to take the risk for the chance of high bonuses. It was a different model, where you had to work hard and manage your risks well to eventually earn that bonus.

The competitive environment also meant that people could go in and out of the company quickly. A two-day absence could mean that someone had been fired without any warning. This quick and direct process suited the culture of a trading company, where any employee could potentially pose a risk. It was an intense experience, but also one that exposed me to a different side of the financial world.

At Robeco, you eventually chose to join BlackRock, what was the motivation for this choice?

My time at Robeco, particularly in the multi-asset group, ended when it became clear that there was a shift to more focus on quantitative models. My role was more qualitative and active, based on my own research and insights. In pension funds, the emphasis was on deeper knowledge and broader asset class views, which required a different level of professionalism.

It became increasingly clear that Robeco wanted to focus more on quantitative models, with a focus on low volatility and factor investing. When BlackRock came along, I made the switch. Shortly afterwards, Robeco stopped institutional investing. It turned out to have been a good choice.

Does BlackRock make more directional bets than Robeco?

At both Robeco and BlackRock, there are opportunities for directional bets, but it is essential to distinguish between tactical (short-term) and strategic (long-term) decisions. At Robeco, for example, the focus was on tactical decisions for mixed funds, while BlackRock also dealt with strategic directional bets, such as the choice of certain assets like inflation-linked bonds.

In my current role at BlackRock, I focus mainly on long-term strategic decisions. We assess which assets are currently more interesting, such as favouring inflation-linked bonds over other bonds. We also take positions on the expected direction of capital market interest rates in the future, which is an example of a strategic directional bet.

While there are undoubtedly teams within BlackRock dealing with short-term directional bets, my focus in discussions with clients, mainly pension funds and insurers, is more long-term. Insurers have even longer-term horizons than pension funds.

What are your day-to-day duties as Chief Investment Strategist?

I provide a number of publications every week, such as the “Daalder op dinsdag” which is created on Monday and the podcast ‘’Daalder Denkt Hardop’’ which is published every Wednesday. I have also been writing a column for the Financieel Dagblad every Tuesday for almost 10 years. Furthermore, I also contribute a weekly chart of the week to IEX. My articles and columns are available for subscription.

Besides my writing work, I keep myself busy with many presentations at clients’ offices. We are in contact with almost all financial institutions in the Netherlands. Because of BlackRock’s size, we almost have a client relationship with nearly every financial institution in the Netherlands.

Can you describe BlackRock’s activities in the Netherlands?

After APG, the asset manager of ABP, we are the largest asset manager in the Netherlands. BlackRock acts as a kind of supermarket, where we offer a wide range of products, from private to public, bonds to bonds, active and passive management, infrastructure and cash. BlackRock Netherlands has been around for 25 years and has around 80 employees devided between offices in Amsterdan and Eindhoven. These employees are mainly focused on relationship management and support functions. The Investment platform, which manages and develops products, is mainly located in other cities such as London, New York and elsewhere.

A unique aspect of BlackRock is that we are also a technology company. About a third of our 20,000 employees work in technology. For example, we sell a risk management platform called Aladdin, which we both use internally and sell to clients.

BlackRock may not be a conglomerate, but it operates in several markets. Compared to Robeco, which has a fewer investment products, BlackRock offers a wider range of services, including Aladdin and cash management. We are also strong in transition management, playing a crucial role when a pension fund switches from manager 1 to manager 2. This process, with billions at stake, requires careful planning and is carried out by transition specialists. Globally, there are not many of these specialists, but BlackRock is one of them. It is hard to find a financial institution with which BlackRock does not have a client relationship, whether through Aladdin, transition management or cash management.

I had another addition, Financial Markets Advisory, our consulting arm, which has governments and financial institutions as clients

So the biggest part of BlackRock Netherlands is presenting funds and client relationship maintenance with Dutch clients?

Yes that’s right, what is also relevant is that in addition to the clients, we also serve other stakeholders and there are also other activities, such as the column in the Financieel Dagblad, which is indirectly for the clients, in addition we also work with our industry association DUFAS, and academic stakeholders.

Also an addition about our client base. About 50% of our AUM is pension money and the rest is a mixture of asset managers, family offices, major banks and distribution platforms.

How do you manage to combine all your side activities with your role as Managing Director?

I slowly grew into the work routine after graduation. It was tiring at first, but over time an efficient routine developed. I used to read 500 RSS feeds daily during my train journeys from Rotterdam to Amsterdam, but now I often listen to podcasts, even at 1.75x speed during activities like cycling or shopping. It’s a bit like Mickey Mouse, but it helps me scan information quickly and later re-listen to interesting bits at a slower speed.

How many hours a week do you work?

I usually get up early, sometimes as early as 5.30 am, although that is an exception. My normal rhythm starts before 7 am, because I am a morning person. In those quiet hours, I can already do a lot while my wife and children are still sleeping. If I then also stay in bed, I don’t get home until much later in the evening.

Could you comment on your role at the BlackRock Investment Institute?

I am part of the BlackRock Investment Institute, a team of around 70 people spread across London, New York and Budapest. We act as BlackRock’s think tank and focus on research on financial markets, asset allocation and portfolio optimisation. Our efforts extend to complex issues such as the impact of global warming on investment policy. We work closely with investors within BlackRock, such as those managing equity, fixed income or infrastructure funds. Our role includes formulating tactical and short-term advice, based on peer input and market developments. Twice a year, we host the BlackRock Investment Institute Forum, where the most influential people within BlackRock come together to discuss future themes and risks based on propositions.

What do you think is the most important current theme?

What I hear from my clients is mainly concern about capital interest rates, a crucial factor for pension funds in the Netherlands. The correlation between pension funds’ funding ratios and coverage ratios and the capital market interest rate is significant. If capital interest rates fall and you don’t take interest rate hedging measures, you run the risk of your funding ratio falling. During the transition from an old to a new pension system, most funds seek risk mitigation. Currently, there is a big debate about what capital interest rates will do, as this is one of the key issues. Regarding financial markets, although many think of equities first, as a member of the BlackRock Investment Institute, I have no involvement or opinion on equities as my role is focused on broader financial market analysis and policy making.

“I have found that my best strategy is simply to invest a fixed amount every month.”

Do you invest yourself?

Sure, I avoid individual stocks, which may sound boring, but it is a wise lesson I have learnt. While it is fun and instructive to choose individual stocks, I have found that my best strategy is simply to invest a fixed amount every month. This realisation came about when I got money after high school and my parents advised me to set aside 100 guilders to save. When I started studying economics, I started wondering why I was actually putting the money in the bank, and since then I have basically always put a fixed amount in shares.

My investment strategy is diversified, although it used to be not as simple as it is now with iShares. I just invest a fixed amount every month, without panicking when the market goes down. Timing is not an issue for me. In the past, I did buy individual stocks, tried to anticipate price fluctuations, like with Pharming. Now, by investing a fixed amount monthly, I buy at all levels and have no sense of doing well or badly, because I don’t really even know what the market is doing at the time.

Would a tip then be, say, to invest Dollar Cost Average in a world fund?

Yes, for example, well look, you can pretty much tweak that. In some periods, I found dividend stocks attractive, like during the dotcom bubble. While tech funds rose rapidly and later collapsed, dividend stocks kept growing steadily. When seeing expensive tech stocks, I tend to gravitate towards dividend stocks or European stocks, which look cheaper. I make such tweaks, but don’t focus on specific stocks.

When you did actively invest, what was your favourite and best financial investment?

Yes, a house in Amsterdam has been by far the best investment, you can’t beat that. But I have another story that I found very instructive. A friend of mine who worked somewhere and he had gotten a severance package, he was just laid off and got money in compensation and at one point he asked me, because I worked with shares, ”where should I put that in”? I’m pretty sure I would have said he should invest that in a spread and think about your risk profile and so on. But along the way, someone like that is going to look for himself anyway and read nice things about individual stocks so then I would have said anyway, ”if you are thinking about that then you should buy into ASML”. But that was disastrous, that was in the year 2000. Then it went down 85%. I thought shit then, because I was thinking about his whole pension, because he was a bit older than me. Fortunately, he held on to it. But then he also had what I had, that anchoring. Then he had figured for himself, he should have waited 15 years plus interest, at that level I take my profit. While after that it doubles easily anyway, but that’s too bad then.

Do you have any tips for people who are students now? And how do you prepare for a career in finance as a student?

When I worked at Robeco, I gave a lecture on valuation at the university in Rotterdam. During a conversation between the professor and students, I noticed that some students gave the CFA exam date as the reason for rescheduling an exam. I find this sad because it indicates that students are over-specialising. While a CFA looks good on a CV, I believe it is important to look broader as well. Financial institutions now recognise more diversity and value backgrounds such as world travel, rowing clubs, Olympians or veterans. Recruiters do not just want people who focus purely on studies and financial figures, but also broader experience and perspectives.

Do you think that as a student you should actually have more time left over for new fun experiences?

I would say, not just during college days, but always. New experiences go beyond just hanging out in the pub and regretting it the next day. If you are driven, consider learning a language or subjects outside your usual choices, such as history or political science. It broadens your horizons in a different way.

How long did it take you to complete your studies?

It took me 6 years, actually I finished after 4 years but I had gone back later to do another specialisation course and then I had started working in the university’s specialist journal, Rostra was called, then I was a journalist, a bit of what you guys are doing now, going to interview people, but also going over special topics and I really liked that. So what you are doing now is very fine.

Suppose you could be 20 years old again, what would you do differently?

That’s kind of interesting, I’m not inclined to think about that. My children are that age now. My son is now doing maths, which is also kind of fun to do. You can then think ”do I regret what I did?”, no. So I’m totally happy with where I ended up, I’m totally fine with that. But if I can go back and do it differently, I’m actually curious to see how it could be different, you’d prefer to actually be able to go back 50 times to be able to try all the possibilities to see where you end up.

Do you perhaps have a tip for your 20-year-old self who is in the middle of his college years? Not necessarily to make a financial career, but also about life.

Uhm, as a 20-year-old? Be open to innovation. That’s what I did too. Watch out for prejudice, watch out for being too deep in a bubble, that you all agree with each other too much. That feels cosy, like brothers among themselves, there’s nothing wrong with that, but you should also have the guts to look elsewhere, nothing is as funny as sitting down in an old-fashioned dick bar, although I have become an old-fashioned dick myself by now, so it’s becoming a bit sad. But going into a different kind of pub in your student days just to hear what kind of conversations take place there is intriguing, but at least make sure you don’t get yourself in an echo chamber. I think that’s the most important tip.

BlackRock’s CEO recently named bitcoin as a safe haven and BlackRock is also looking to release a spot bitcoin ETF, what is BlackRock’s long-term view on bitcoin?

Within BlackRock, where I work on the thinking centre and do research, we ask ourselves the question: ”What is the added value of bitcoin?” If it takes over the role of digital gold, the problem of determining value, similar to gold, arises. Since bitcoin has no cash flows, it is difficult to determine what its value will be in 10 years. One possibility is that it becomes digital gold, but the value remains unclear. The other possibility is that bitcoin becomes worthless. Without certainty about these outcomes, we do not advise on the percentage that should be invested in bitcoin. Rather, we say, if you want to add it to your portfolio, do it cautiously and not if you are a serious long-term major investor.

So, do you see this ETF as more of a product to meet demand?

What is impressive about bitcoin is that it has repeatedly attracted new groups of investors: anarcho-syndicalists, traders, blockchain geeks, and now with the development of futures and infrastructure, others again. Each time a new group arrives, while some previous ones drop out. It is like the currency with seven lives so far, and now we are on life number 5. But this says little about what it will bring in the future. From BlackRock, where I work on the reflective academic research side, we make no comment on recommending a specific percentage of bitcoin for our retirement clients.

What type of students are you looking for at BlackRock?

Well, what is nice is that there are a lot of Dutch students, going directly to London. When I talk about BlackRock Global, and not so much the Netherlands. Because BlackRock Netherlands is a small organisation, we don’t hire that many new people, yes then we have a Summer Analyst Programme. But besides that, we also happen to have someone in our office here, who is normally in New York, and who is doing all different functions, in 3 different locations, spread over 3 years. A kind of traineeship. But there are also all these people who are hired for all kinds of roles and yes then you can make it as crazy as you actually want. Like for me, for instance, I’m in the communications and marketing angle. But besides that, you can think about capital markets and those kinds of functions, the trading-like roles, you’re also in product development, so that’s organised on asset classes, then you’re in a fixed-income team or in a certain kind of equity product.

What positions are there within BlackRock Netherlands?

In the Netherlands, we have two types of functions at BlackRock. On the one hand, we focus on institutional clients, mainly pension funds and insurers. On the other hand, we have iShares and wealth management, serving banks, smaller asset managers and distribution platforms. As a relationship manager, I go to clients, listen to their needs and see which way they want to go, be it existing or new clients. Some sales processes are long, especially if you are trying to sell something new to, say, a pension fund. We apply “glocalisation”, serving the local customer. We also have support functions, including sales relations and order execution, reporting, daily tasks and compliance.

If you are a recent graduate, can you apply for those position on BlackRock?

Yes you can, we have a careers site and through LinkedIn you can also check it out. Of course, the foreign branches are much larger and most of the opportunities may be in places like London and New York, which is also numerically where most of the spots become available. Students who want an international experience can definitely look into that.