BlackRock profit increases 20pc on tech and fees

The world’s largest asset manager reported higher earnings despite wild market swings pushing assets below $US10 trillion.

BlackRock CEO Larry Fink. Picture: Jane Dempster/The Australian.

BlackRock reported higher quarterly profit even as market volatility lowered the investment firm’s assets under management to $US9.6 trillion.

The world’s largest asset manager reported net income of $US1.4bn, or $US9.35 a share, for the first quarter, up 20 per cent from $US1.2bn in the same period a year earlier.

BlackRock exceeded analyst expectations of a per-share profit of $US8.60, according to analysts polled by S&P Global Market Intelligence.

Revenue rose 7 per cent to $US4.7bn, slightly below analysts’ estimates of $US4.76bn.

BlackRock’s shares were down $US2.41, or 0.3 per cent, at $US714.42 by midday after jumping in morning trading Wednesday. The stock has fallen 11 per cent in the past year.

The firm ended 2021 with over $US10.01 trillion in assets – the first time any money manager has reached that number – but market conditions in the past three months have changed drastically, compounded by Russia’s invasion of Ukraine in late February. With inflation climbing to its highest levels in the past four decades, investors’ faith in the markets is lower as evidenced by slowing inflows of $US86bn, down from $US172bn over the same period last year.

BlackRock is a top provider of exchange-traded funds and other low-cost alternatives that track market indexes. But the firm’s actively managed funds, its higher-fee products, made up nearly half of the manager’s fees last quarter, despite making up about one-quarter of BlackRock’s total assets under management.

This quarter, the money manager’s revenue from performance fees decreased $US31m from a year ago – a sign of a tough quarter for actively managed products. BlackRock’s base management fees – fees not tied to performance that the firm receives for administering fund holdings – was a main driver for the revenue growth. Management-fee revenue increased 6.7 per cent, or $US241m. Revenue from its suite of software tools, Aladdin, was a driver as well, which rose 11 per cent, or $US35m.

The day before earnings, the firm announced it was participating in a $US400m funding round for Circle internet Financial, a cryptocurrency firm that issues digital assets pegged to the US. dollar. Fidelity Investments, Marshall Wace and Fin Capital also participated in the funding round. Prior to the investment, BlackRock already managed some of the cash – and cash equivalent – reserves for its USD coin. In his annual letter to shareholders in March, BlackRock Chairman and Chief Executive Larry Fink predicted that the Ukraine war could boost usage of digital currencies.

BlackRock continues to receive criticism for its stance around climate-friendly policies, a core theme in Mr Fink’s annual letters to CEOs in recent years.

Last June, Texas passed a bill requiring state entities like pensions to stop doing business with companies that boycott the fossil-fuel industry. The state has yet to clarify how this bill would be applied. Lawmakers have suggested that BlackRock is a likely candidate for the list – putting the firm at risk of losing millions of dollars of Texas pension business.

On a conference call with analysts, Mr Fink tried to maintain a balance in response to critics. “As you know, I always said – I don’t believe in divestiture,” Mr. Fink said, referring to his firm’s stance on energy transition for the fossil companies it invests in. “BlackRock has over $US180bn in investments in [energy], so we are working with all the companies about how to move forward.” “Let me be clear, BlackRock is the largest investor for pension funds and retirement than anyone. We have a long-term responsibility of making sure that our beneficiaries achieve their long-term aspirations and goals. There is no question that this energy transition is real, but it’s not going to be a straight line.”
The Wall Street Journal