Financial markets are likely to reach the bottom of the current downturn in the first quarter of next year, according to BlackRock.

"About a year ago, I said we would not see a bottom of the market until we see a capitulation," BlackRock chief executive and chairman Laurence Fink said yesterday, at a Merrill Lynch conference in New York.

"I think we can say fairly now, we are seeing a capitulation," he said.

During a capitulation, investors sell equities on a large scale to get out of the market and into less risky investments. It is often seen as a sign of the bottom of a cycle.

A recovery might set in halfway during the year. Governments worldwide have pledged to inject more than $13 trillion into their economies, and companies will soon be forced to start spending this capital, Fink said.

"Once CEOs start to worry about earnings... we will see the beginnings of a stable environment."

The investment management industry has been changed as a result of the credit crisis, Fink said.

Firms will have to spend more money on risk management and the industry will see increased regulation, which will affect the cost base of investment managers.

Scale will become more important as firms seek to reduce costs. "We are all going to see a huge consolidation," Fink said.

BlackRock is the largest publicly-traded asset management firm in the US and has substantial operations in Australia, with offices in Brisbane, Melbourne, Perth and Sydney.