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Roaring equity markets and the popularity of a new spot bitcoin exchange traded fund powered BlackRock to record assets under management of $10.5tn and net income that rose by more than one-third.
The world’s largest money manager reported a 36 per cent year-on-year jump in net income to $1.57bn in its fiscal first quarter, on an 11 per increase in revenue to $4.7bn. Those figures, as well as adjusted net income of $1.47bn, all beat the expectations of analysts polled by Bloomberg.
However, net inflows of $57bn disappointed, as investors remain cautious about leaving cash to go back into equity and debt markets while the US Federal Reserve keeps interest rates at a 23-year high.
“There is still a record amount of cash on the sidelines, and money market fund balances are now approaching $9tn. I think this stems from fear and uncertainty,” BlackRock chief executive Larry Fink told analysts on Friday.
Fink said big pension funds that have large allocations to private equity have been particularly reluctant to invest because those funds have been slow to return money to investors amid a slowdown in takeovers and initial public offerings.
“More and more clients are keeping a higher balance of cash [to] meet their liability discharges,” he said. “If there was an unlock in private equity, I do believe you would see a faster allocation in fixed income and other income-producing products.”
BlackRock was one of a dozen providers to launch a spot bitcoin exchange traded fund in the first quarter but its product has been the runaway success story: it reached $10bn in assets in record time and now has $18.7bn. That helped power total flows into ETFs in the quarter to $67bn.
Fink highlighted BlackRock’s enthusiasm for private markets and infrastructure, where the firm aims to capitalise on global investment in decarbonisation and digitisation. BlackRock said the $12.5bn purchase of Global Infrastructure Partners, announced in January, is on track to close in the third quarter, subject to regulatory approvals and funded by $3bn in newly issued debt.
Fink also said BlackRock was seeing “accelerating momentum” because it was winning new business from “marquee” clients for its technology, retirement and portfolio management services. “All of this is going to lead to much bigger opportunities,” he said.
Technology revenues were up $37mn year on year to $377mn, and Fink told analysts that its Aladdin platform had notched up several “large mandates” with more to come.
“We view Aladdin as a differentiated source of growth . . . delivering a recurring source of dependable revenue during market downturns,” Kyle Saunders, analyst at Edward Jones, wrote in a client note.
Most of the nearly $500bn increase in assets under management in the first quarter was due to rising equity markets. In the US, the S&P 500 had its best first quarter since 2019. Fixed income funds reported inflows of $42bn and equity funds received $18bn, for total long-term flows of $76bn.
BlackRock’s operating margin improved to 35.8 per cent, slightly better than analysts expected. Chief financial officer Martin Small said on a call with analysts that he expected headcount to be “broadly flat” in 2024, as it has been over the past two years. Fink added that he believed artificial intelligence would allow the firm to do more with fewer people.
BlackRock shares were down 2 per cent in afternoon trading on Friday. The company’s stock price is down more than 5 per cent in 2024, after a strong fourth quarter during which time it rose more than 25 per cent.
