BlackRock AUM falls 3.4% to $9.1 trillion but up 14% YOY

BlackRock reported having $9.1 trillion in assets under management at the end of the third quarter, up 14% year-over-year but down 3.4% from June 30.

Net inflows for the quarter fell sharply to just $3 billion, down from $80 billion in the previous quarter and $17 billion in the year-ago quarter. In BlackRock’s earnings release on Oct. 13, the firm attributed the figure to $49 billion of net outflows from lower-fee institutional index equity strategies, including $19 billion from one unnamed international client. Long-term net outflows totaled $13 billion for the quarter.

By client type, institutional saw $38 billion in outflows while retail clients withdrew $4 billion. Cash management saw $15 billion in net inflows while exchange-traded funds had about $29 billion in net inflows.

On BlackRock’s earnings call, CFO Martin Small ascribed the lower inflows to market conditions that are leading the firm’s clients to reallocate assets within their portfolios and take advantage of safe haven cash. Small added that the international client who withdrew $19 billion remains working with BlackRock to “extend its mandates and active strategies.”

Larry Fink, BlackRock’s founder and CEO, said he was “disappointed” by the softer flow quarter he also attributed to growing uncertainty in the financial markets, which he told investors was leading to slower client activity as they “hunkered down in cash.”

Despite his stated disappointment, Fink told investors that BlackRock’s clients would eventually put their money back to work, redeploying assets once the market becomes less volatile.

“We know moments of uncertainty are often when transformational opportunities emerge,” Fink said.

One of the biggest opportunities could be a massive reallocation to fixed income, said BlackRock’s president Rob Kapito.

“As we approach the peak in interest rates, there are going to be some very, very large allocations to fixed income. I’m sure someone will call it the great reallocation,” said Kapito.. “We are so well positioned to benefit from this reallocation with our comprehensive $2.6 trillion fixed income platform.”

BlackRock’s revenue climbed 5% year-over-year in the third quarter.

Operating expenses for the firm climbed to $2.9 billion.