It is easy to understand why George Osborne can find a day a week in his busy schedule to work for BlackRock, the world’s largest fund manager. At £650,000 a year, or £13,000 a day, it sounds a more lucrative gig than editing the London Evening Standard on the other four weekdays. The former chancellor may also be given shares in the US firm, so we do not know if the salary is the starter or the main course.

Can he possibly be worth it? They certainly pay themselves well at BlackRock – Larry Fink, its co-founder, chairman and chief executive, got $26m (£21m) in 2015 – but Osborne won’t be managing investments or even lobbying the UK government because the rules forbid it.

BlackRock’s bland official explanation is that it hired the Conservative MP for Tatton for his wise counsel on subjects such as European politics and Chinese economic reform. “George has a unique and invaluable perspective on the issues that are shaping our world today,” said Fink when he announced the appointment in January. “At the centre of our mission is helping people around the world save and invest for retirement, and George’s insights will help our clients achieve their goals.”

Osborne the pensioners’ friend, then? Up to a point. Many financial companies have advisory boards to generate ideas, interpret long-term trends and deliver occasional home truths to the insiders. The conveyor belt of former regulators, central bankers and politicians never stops. BlackRock’s own Investment Institute, the part Osborne will advise, is led by Philipp Hildebrand, a former head of the Swiss central bank. The critical difference in Osborne’s case is that he intends to continue as an MP and also edit a newspaper.

One FTSE 100 chief executive thinks the arrangement is untenable. “Politics is impacting on the business world like never before so I can completely understand why BlackRock would want a politician who knows economics,” he says. “What I cannot understand is why George Osborne thinks he can straddle politics, the media and finance at the same time. How can he separate information and tittle-tattle gained in one role from his duties in another role? It’s just not feasible.”

George Osborne has said he will receive £650,000 a year advising BlackRock for around one day a week. Photograph: Daniel Leal-Olivas/AFP/Getty Images

It’s not as if BlackRock occupies a quiet corner of the financial world. It manages $5.1tn (£4tn) of assets. To put that into perspective, that is more than double the UK’s annual GDP. It spans the market from shares to bonds to private equity.

It is often the biggest single investor in large US and UK companies and is a key player in corporate takeover battles. It has 13,000 staff in 30 countries. And, while Fink preaches a gospel of long-termism and sustainability – a refreshing antidote to old-style Wall Street excess – BlackRock’s size means it is constantly in the midst of political and regulatory debates.

BlackRock’s closeness to politicians has also come under the spotlight in the past, notably during the financial crisis of 2007-09, when the US administration turned to the firm for help in analysing and solving the meltdowns at investment bank Bear Stearns, giant insurer AIG and government-backed mortgage lenders Fannie Mae and Freddie Mac. Back then, the explanation was that BlackRock’s expertise in analysing risk served the interests of the American taxpayer.

The argument was plausible, it should be said. Unlike the Wall Street banks, BlackRock was not entangled in financial junk and its brilliance in analysing risk is unquestioned. But the firm’s standing as the trusted adviser to the Obama administration was also clearly helpful in expanding its global reach and picking up business from sovereign wealth funds.

Larry Fink, CEO at BlackRock. Photograph: Lucas Jackson/Reuters

Fink, a Democrat, co-founded the firm in 1988 after his high-flying career as a bond market trader at US bank First Boston came to a humiliating halt when a bet on interest rates produced a $100m loss. BlackRock was conceived as a less risky way do business. The heartbeat of the firm remains Aladdin, an enormous information processing system which drives the “fact-based, data-driven” approach to investing.

This technology-led approach has transformed the fund management industry. So has the 20-year trend towards “passive” investment, also led by BlackRock.

Its most successful purchase was its acquisition of Barclays Global Investors in 2009, from the then-stricken UK bank. Long-serving Barclays executives now roll their eyes in despair at the thought of how life could have been different for them if BGI had been retained. BlackRock was already big in index-tracking products – those that passively seek to replicate the performance of bond or share index – but the addition of BGI helped to super-charge the expansion.

The current planned £12bn merger between Standard Life and Aberdeen Asset Management can be viewed as a direct response to the power of the passives. The Scottish duo need to cut costs to fund their own technological innovations and lead active management’s fight-back. Yet, even with a combined £660bn under management, the combination will look small next to BlackRock.

For some, BlackRock’s sheer size has become a problem. Active managers in the UK grumble that the firm has taken a free-ride on their time-consuming efforts to rein in boardroom pay. That appeared to change this year when BlackRock wrote to large UK companies setting out a tougher stance – calling for an end to huge executive pay rises unless employees were treated similarly. But UK rivals still complain that BlackRock is years behind the curve and too timid.

BlackRock offices in New York City. Photograph: Brendan Mcdermid/Reuters

More seriously for Fink, regulators wondered after the banking crisis whether giant asset managers could also endanger the global financial system. The Financial Stability Board (FSB), the closest thing to a global financial regulator, asked four years ago whether they should be considered “systemically important”.

That label matters. In a post-crisis world, systemically important banks and insurers are more closely supervised and must hold more capital. ““Too big to fail” is a bank concept. We’re not a bank,” argued Fink and other big US managers such as Vanguard. After an intense lobbying effort, they won. The FSB backed off, opting instead to improve its monitoring of their activities to ensure markets could not suddenly seize up. The victory was crucial: for the likes of BlackRock, it meant there is no extra regulatory penalty for becoming even bigger.

But the episode illustrated where future threats could emerge. “When you are as big in a sector as BlackRock is, the key risks to your sector aren’t really your competitors,” says one lobbyist. “The biggest risk comes from public policy and regulation policy. Who better to have advising you than a former G7 finance minister?”

That is one context in which to place Osborne’s arrival. BlackRock is big, immensely successful and acutely aware of the need to stay in touch with political and regulatory thinking. At £650,000 a year, the services of a former chancellor represent small change for a company that made profits last year of $4.5bn (£3.6bn). So, yes, through BlackRock’s narrow lens, he’s probably worth it.

Yet the potential for conflicts of interest are enormous. Here is just one obvious example: BlackRock owns about 10% of AstraZeneca, the pharmaceutical firm at the centre of a political storm when US rival Pfizer launched an unsuccessful £69bn bid in 2014. If, for example, BlackRock had wished the takeover to go ahead, who better to have on board to assess the potential political reaction – and advise on ways around it – than the former chancellor?

Add in the fact that the same man is now editor of the Evening Standard - the City’s evening newspaper - and his influence is magnified further. When deals that can generate profits measured in hundreds of millions are on the table, Osborne’s £650k is a mere trifle.

George Osborne visits the AstraZeneca site in Cheshire. BlackRock owns 10% of Astrazenca Photograph: Peter Byrne/PA

BlackRock … by numbers

BlackRock has a stake in every FTSE 100 company, worth a total of £145bn.



That means it owns nearly 8% of the UK’s leading share index.



Its investment in the FTSE 100 accounts for around 3.5% of its total assets of £4trn.

Its biggest stake by value is its £9bn investment in HSBC, its smallest a £9.3m shareholding in medical group Convatec.

Other shareholdings worth more than £5bn are AstraZeneca, British American Tobacco, GlaxoSmithKline, and the two classes of Royal Dutch Shell shares.

In percentage terms, its top holdings are Next (nearly 14%), BHP Billiton (13.29%), information group Relx (12.88%), Land Securities (12.46%), building materials group CRH (12.46%), cruise company Carnival (12.19%), gold miner Randgold Resource (nearly 12%), easyJet (11.83%), technology group Johnson Matthey (11.83%), and Severn Trent (11.55%).

It is the biggest shareholder in more than half of the FTSE 100’s companies: Ashtead, Aviva, AstraZeneca, British American Tobacco, British Land, BHP Billiton, BP, Burberry, Centrica, Compass, Croda, CRH, Diageo, Direct Line, Experian, GKN, GlaxoSmithKline, Hammerson, HSBC, 3i, Imperial Brands, Intertek, Johnson Matthey, Kingfisher, Land Securities, Legal & General, Lloyds Banking Group, London Stock Exchange, Marks & Spencer, Mondi, National Grid, Next, Persimmon, Royal Dutch Shell A and B shares, Relx, Royal Mail, Randgold Resources, Sage, Shire, St James’s Place, Standard Life, Smiths Group, Scottish Mortgage Investment Trust, Smith & Nephew, Severn Trent, Tesco, Unilever, Vodafone, Worldpay, and WPP.

(Source: Thomson Reuters)

Its joint venture infrastructure investments include a business park at Heathrow, windfarms bought from Centrica, solar farms in Derbyshire and Essex and a £75m loan to Trafford Housing Trust. Nick Fletcher