BlackRock Inc. reported assets under management of $3.36 trillion as of March 31, up a marginal 0.5% from the prior quarter but 162% higher than the year before, boosted by the company’s December acquisition of Barclays Global Investors and its $1.8 trillion in client assets.
In a conference call Monday on the giant money manager’s latest financial results, Chairman and CEO Laurence D. Fink said institutional investors, in the wake of the equity market’s hefty rebound in 2009, appeared to be stepping back to reassess their asset allocation strategies during the first quarter, which he termed a period of “huge churn” marked by shifts from active to passive strategies.
While upbeat about market trends and BlackRock’s ability to take full advantage of them, Mr. Fink conceded that concerns about BGI’s integration with BlackRock — what he termed “the consternation of our clients” — was one factor behind institutional outflows of $135 billion outpacing inflows of $122 billion for the quarter.
Rebalancing, with a view to taking risk off the table, was another major factor, said Mr. Fink, noting that investors took profits on active equity and fixed-income strategies and moved money into passive strategies during the quarter.
According to a company news release, BlackRock had $8.9 billion of net long-term inflows for the latest quarter. The money manager’s $22.3 billion of outflows from its actively managed equity and fixed-income portfolios exceeded the $18.2 billion of net new business for indexed equity and fixed-income products, but the shortfall was more than offset by inflows of $13 billion for BlackRock’s multiasset and alternative investments.
On the cash side, however, in line with industry trends, investors continued to move money out of BlackRock money market strategies, which suffered net outflows of just under $40 billion for the quarter. Mr. Fink said a big chunk of those outflows moved into bank deposits — a trend that could continue until the Federal Reserve begins to boost short-term interest rates again, possibly late this year.
Including all categories, the company saw net outflows of $33.6 billion for the three-month period.
Even so, and with an additional $33.6 billion of foreign-exchange-related losses, market gains of $84.8 billion left BlackRock with a $17.6 billion increase in AUM for the quarter — an enormous sum for almost any other manager but practically a rounding error for BlackRock.
Mr. Fink noted that the company’s quantitative, or “scientific” equity strategies, suffered net outflows of $8.8 billion for the quarter, reflecting a tough environment for computer-driven investment strategies industrywide in recent years.
Still, he noted that BlackRock’s new business pipeline remained strong, with $35.2 billion in wins funded or to be funded as of April 20, with a noticeable pickup in recent weeks of client discussions focused on more lucrative active strategies.
Meanwhile, demand for BlackRock’s industry-leading iShares exchange-traded fund franchise, which the company picked up with its BGI acquisition, remains strong, with growing institutional interest in the product. Big clients, such as sovereign wealth funds, are increasingly using “beta strategies for alpha,” as they tactically allocate their portfolios across different geographies and asset classes, Mr. Fink noted.
For the latest quarter, BlackRock reported net income of $423 million, up 65% from the prior quarter and up 404% from the year before.
Revenues, meanwhile, came to $2 billion, up 29% from the prior quarter and up 102% from the year before.
Despite the sharp jump in net profit, BlackRock’s adjusted diluted earnings per share of $2.40 came in below the average forecast of analysts for the quarter of $2.45. In midday trading Monday, BlackRock’s shares were hovering around roughly $195, down more than 7% from Friday’s close.