Blackrock's chief executive Laurence D. Fink on Wednesday suggested investors adjust their portfolio mix and return to equities so as to better adapt to a "new world."
The traditional portfolio mix of 60 percent stocks and 40 percent bonds was inadequate in a "new world" where the population is aging, the growth points are shifting to emerging markets and the developed countries are facing a bout of extended deleveraging, Fink, chairman of the world's largest asset manager, told CEOs of Wall Street.
"I've personally said I would be 100 percent in equities," said Fink, advising institutional investors to revisit outdated, over-restrictive investment guidelines.
In a speech titled "It's a new world: so what should we do?", Fink said though there were more upbeat signs of economic recovery in the United States, investors' risk appetite has yet to come back and CEOs still chose to build cash.
Federal Deposit Insurance Corporation data showed bank deposits hit 10 trillion dollars last year, up from 6 trillion in 2004. According to S&P, non-financial companies in the S&P 500 have held more than 1 trillion dollars in cash as of the fourth quarter of last year.
To boost market confidence, which was "in everyone's interest", Fink urged both individual and institutional investors to get cash off the sidelines and return to capital markets.
"There's a cost of sitting in cash even with low inflation ... for individuals and society," he said.
Fink also showed absolute confidence in the health of the investment environment.
"I don't believe China is slowing down in 2012," he said, adding that China has gradually adopted loose fiscal and monetary policies, which would help re-stimulate the economy.
As for Europe, Fink said the European Central Bank's long-term refinancing operation as well as the ongoing stringent austerity measures do help resolve a flurry of problems facing the continent, but without growth, Europe still remains vulnerable.