By David Benoit
Larry Fink, the boss of the world's biggest money manager
BlackRock Inc., has spent the past few years labeling Carl Icahn
and his activist ilk a danger for companies. Wednesday, Mr. Icahn
flipped the script.
"BlackRock is an extremely dangerous company," Mr. Icahn
announced at CNBC's Delivering Alpha conference in New York.
The two famed investors sparred on stage at the conference, with
laughs from the audience, though Mr. Fink showed obvious irritation
as the criticism continued. Mr. Icahn steered the bulk of the
conversation away from activism--the billing of the event--to his
growing fears about a bubble in high-yield bonds and what he called
the dangers of exchange-traded funds run by firms like Mr.
Fink's.
Mr. Icahn blamed the growing prices for such relatively risky
debt partly on Mr. Fink's sprawling $4 trillion asset manager and
its exchange-traded funds, which Mr. Icahn said were causing a
liquidity problem because they have snapped up so many assets.
Mr. Icahn is concerned because ETFs now own so many assets and
Wall Street firms are retreating from trading, which he says raises
questions about who will buy if investors sell ETFs during the next
market downturn.
Exchange-traded funds are securities that trade on an exchange
and typically track an index or other basket of assets.
Mr. Icahn argued junk-bond ETFs will be much harder to trade in
the next downturn than most investors expect, leading to big
losses, especially for individuals who have flocked to these
products in recent years.
Mr. Fink had some different ideas.
"ETFs create more transparency in the market, especially
high-yield," Mr. Fink said, chiding that Mr. Icahn had gotten the
picture wrong. "Carl, once again, you are a good investor, but you
are wrong again, you are just dead wrong."
Mr. Fink said the ETFs are a way to buy exposure and aren't
crimping liquidity.
The scene drew laughs from the audience, and Mr. Icahn several
times looked to clarify his views weren't against Mr. Fink
personally, or BlackRock.
"It's his job to make money," he said.
At one point, Mr. Icahn described a cartoon he was imagining to
get across his point. It would involve a party bus of sorts full of
bond investors drinking and having a good time, and unaware they
are heading toward a cliff.
"You know who is pushing it? Larry Fink and Janet Yellen," Mr.
Icahn said with a laugh, referring to the chairwoman of the Federal
Reserve. "You know what's going to destroy it? They are going to
hit a black rock."
Mr. Icahn has recently looked to make a public warning about
what he sees as a bubble in high-yield bonds and Wednesday resisted
letting the conversation wander far from his concerns to the
scheduled topic of activism.
Mr. Fink declined to say whether there was a bubble or not. He
did offer to take Mr. Icahn to lunch, and foot the bill, for a
lesson on ETFs, a plan Mr. Icahn was willing to take him up on.
About activism, the two did find some time to disagree as well,
with Mr. Fink saying some activists are pushing poor short-term
decisions and Mr. Icahn saying BlackRock is enabling poor corporate
executives.
Mr. Fink said his firm supports activists more often than many
think, which some data supports, though Mr. Icahn claimed he had
never won a BlackRock vote.
Gregory Zuckerman contributed to this article
Write to David Benoit at david.benoit@wsj.com
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