BlackRock AUM slips in quarter, but up for year

Updated with correction

BlackRock (BLK) managed $6.3 trillion in assets under management as of June 30, down 0.27% from the previous quarter but 10.7% higher than a year earlier, the firm said Monday in its earnings statement.

Net inflows to the firm's long-term strategies were $14.5 billion in the three months ended June 30, down 73.4% from $54.6 billion the prior quarter and down 84.5% from $93.5 billion in the second quarter of 2017.

During Monday's earnings call, Gary Shedlin, BlackRock chief financial officer, noted that because of global market uncertainty in the second quarter "clients have paused, deferring investments until there is more certainty."

Among BlackRock's long-term strategy asset classes, fixed income led with net inflows for the quarter of $26.4 billion, compared to net inflows of $26.7 billion in the previous quarter and $42.9 billion in net inflows the prior year.

Multiasset class approaches had inflows of $8.4 billion in the second quarter, compared to net outflows of $2 billion the previous quarter and net inflows of $9.5 billion in the quarter ended June 30, 2017.

Alternative strategies attracted net inflows of $2.1 billion in the quarter ended June 30; this compares with $3.4 billion in the prior quarter and $2.7 billion a year earlier.

There was significant net outflow of $22.4 billion from BlackRock's equity strategies in the three months ended June 30, compared to net inflows of $26.5 billion in the prior quarter and net inflows of $38.4 billion in the second quarter of 2017.

Institutional investors were responsible to a large degree for the changes in net flows to BlackRock's broad asset class categories, said Laurence D. Fink, the firm's chairman and CEO, during the earnings call.

He said redemptions by institutional investors were "substantial" and new inflows were "muted" because many were taking profits by reducing equity exposure while others were derisking their portfolios by moving assets out of equities and into bonds through liability-driven investment approaches.

Mr. Shedlin noted much of the net outflow of $8.8 billion by institutional investors was driven by derisking efforts. By contrast, institutional activity in the first quarter of 2018 resulted in positive inflows of long-term assets of $3.3 billion and net positive inflows of $13.3 billion in the quarter ended June 30, 2017.

For long-term active investment strategies, institutional investor net inflows totaled $4.7 billion in the three months ended June 30, compared to net outflows of $7.1 billion in the previous quarter, and net inflows of $4.6 billion a year earlier.

Long-term passive strategies experienced a significant net outflow of $13.5 billion in the quarter ended June 30 vs. net inflows of $10.4 billion in the first quarter of 2018 and net inflows of $13.3 billion the previous year.

BlackRock managed a total of $3.4 trillion in long-term assets for institutional investors as of June 30, down 0.8% from $3.5 trillion as of March 31 but up 8.1% from $3.2 trillion as of June 30, 2017.

BlackRock's iShares exchange-traded fund business saw net inflows of $17.8 billion vs. $34.7 billion in the previous quarter and $73.8 billion in the second quarter 2017.

Assets in iShares ETFs totaled $1.8 trillion as of June 30, up 5.1% from three months earlier and 16.1% higher than BlackRock's assets managed in the business as of June 30, 2017.

Net inflows to long-term strategies within BlackRock's global retail business were $5.5 billion in the quarter ended June 30 compared to $638 billion in the previous quarter and $587 billion in the in second quarter of last year.

Blackrock's retail AUM was $637 billion as of June 30 compared to $638 billion in the quarter ended March 31 and $587 billion in the second quarter 2017.

In response to a question from an analyst on Monday's conference call about where investment flows likely will go in the future, Mr. Fink predicted investors will shift to U.S.-focused strategies because of the strength of the U.S. dollar.

With a caveat — "if there isn't an all-out tariff war" — Mr. Fink said he thinks investors might turn their attention once again to stocks, noting equity markets and price-to-earnings ratios are lower than they were earlier this year.

"I'm pretty calm," Mr. Fink assured analysts on the call, noting the global investment environment is exhibiting "asymmetry. There's a little more upside than downside."

Net income was $1.073 billion in the second quarter 2018, down 1.5% from the prior quarter and up 25.6% from for the same period a year ago.

The firm's revenue in the quarter ended June 30 was $3.605 billion, up 0.6% from the previous quarter and up 11.4% from a year earlier.