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Money Management

BlackRock’s AUM down for the quarter, year

BlackRock (BLK) had $5.976 trillion in assets under management as of Dec. 31, down 7.3% from three months earlier and 5% lower than a year earlier, the firm said Wednesday in its earnings statement.

Long-term net inflows were $43.6 billion in the fourth quarter compared to $10.6 billion in the previous quarter and $80.6 billion in the year-earlier quarter. Equity net inflows for the latest quarter were $28.3 billion with net inflows of $3.1 billion into fixed income, $7.3 billion into multiasset strategies and $4.9 billion into alternatives.

However, BlackRock's institutional business experienced a second consecutive quarter of long-term net outflows of $34.6 billion, with $7.6 billion moving out of active strategies and $27 billion from passive strategies. In the third quarter, total net institutional outflows totaled $24.8 billion, while the fourth quarter of 2017 saw net institutional inflows of $14.4 billion.

Institutional net outflows in the latest quarter were driven by significant redemptions from passive strategies driven by institutional investors globally seeking to derisk their portfolios or meet cash needs, said Gary S. Shedlin, BlackRock's chief financial officer, during an earnings call Wednesday with analysts.

Mr. Shedlin attributed a significant portion of the fourth-quarter passive net outflows to a large redemption by an asset owner in the Asia-Pacific region, which he did not name.

AUM in BlackRock (BLK)'s institutional business was down by 8.6% to $3.2 trillion as of Dec. 31 compared to Sept. 30 and down 9.1% from Dec. 31, 2017.

BlackRock's iShares ETF business experienced a peak in quarterly net inflows of $81.4 billion in the fourth quarter, vs. net inflows of $33.7 billion in the previous quarter and $54.8 billion in the year-earlier quarter.

Despite the record-high net inflows to iShares in the quarter, assets managed in iShares were down 6.6% to $1.7 trillion as of Dec. 31 compared to three months earlier and were 1.1% lower than the a year earlier.

The balance of BlackRock's assets is managed in retail, cash and other strategies.

Laurence D. Fink, BlackRock's chairman and CEO, explained to analysts on the conference call that exchange-traded funds are "playing a greater role in client portfolios" and noted that many institutional investors increasingly are using ETFs for risk-on/risk-off portfolio management and as part of tactical asset allocation.

BlackRock's ETF business is off to a strong start in 2019 with $13 billion of net inflows to date in January, Mr. Fink added.

BlackRock's global retail business suffered long-term net outflows of $3.2 billion in the latest quarter, compared to net inflows of $1.7 billion in the third quarter and $11.4 billion in the year-earlier quarter.

The firm's revenue was $3.4 billion, down 4% from the third quarter and down 8.8% from the fourth quarter of 2017. Net income was $927 billion, down 23.8% from the previous quarter and down 59.6% compared to the year-earlier quarter.

In response to an analyst's question about BlackRock's Jan. 10 announcement of a company restructuring involving layoffs of 3% of its workforce, Robert Kapito, president and co-founder, said given tough market conditions, the firm needs to "focus its more limited resources" on areas where the firm's management sees "amazing opportunities for growth."

Mr. Kapito stressed that the firm is global and that the staff realignment is "less about geographic targeting" and more about adding new people and moving existing employees to new areas of growth. He did, however, indicate that BlackRock is increasing its focus on investment management product distribution in China and other Asia-Pacific regions.

Among the investment areas BlackRock is restructuring and strengthening are ETFs, multiasset strategies and illiquid alternatives, Mr. Kapito said, noting that the firm also is leveraging its technology businesses, including Aladdin and a new partnership with Microsoft to build a next-generation investment platform for defined contribution plans.

Mr. Fink added that the firm is very focused on expansion of the firm's client solutions business because "our ecosystem is changing from product selection to whole portfolio construction."