BlackRock’s fixed-income products helped total net inflows hit a record in the second quarter as investors wary of trade wars sought havens.
The world’s biggest asset manager took in $110.4 billion of fixed-income inflows in the period, a robust showing that included large active bond mandates from two insurers. But the firm was not immune to price competition and market volatility: BlackRock’s revenue and profit both slid.
“Clients are finding management of fixed income more difficult to do in-house,” CEO Larry Fink said. “They’re looking for deeper relationships. They’re employing firms like BlackRock to manage a core part of their portfolios for fixed income.”
BlackRock, which manages $6.8 trillion, benefited from its global reach and broad range of offerings as investors shifted out of equities in the quarter. Investment in the company’s bond products helped lift total net flows to $151 billion, according to a release Friday. The shares rose 1%.
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Investors have grown cautious following October’s rout in global markets.
November 21 -
The firm has parted ways with its CEO Alex Friedman and launched a restructuring plan.
November 26 -
Investors in higher-beta credit funds are shunning longer-duration debt following recent equity turmoil.
February 15
As the biggest players in asset management engage in a price war, BlackRock felt the effects of fee pressure. Revenue fell 2% to $3.5 billion compared with the year-ago quarter, partly from lower performance fees and securities lending results. Net income dropped 7% to $1 billion. Securities lending revenue — generated by loaning assets to borrowers like hedge funds — was down 18%.
“The fee rate continues to tick down and that’s something that they’re going to continue to have to outrun,” said Kyle Sanders, an analyst at Edward Jones. “You just have to grow faster, and for the most part they’re able to do that.”
The products have benefited from the past decade of “economic expansion and bull market for risk assets,” one expert says.
BlackRock’s earnings fell short of analysts’ estimates. The firm reported adjusted earnings of $6.41 per share, compared with analyst estimates of $6.50.
A consistent driver of the firm’s growth is iShares, BlackRock’s ETF division, which saw net flows of $36 billion. The unit, the world’s largest issuer of ETFs, crossed over the milestone of $2 trillion in assets in the quarter.
BlackRock also completed its purchase of eFront, a French software provider that helps private equity firms, real estate investors and other customers analyze fundraising and performance. Technology services revenue grew 20%.
