Oct. 20 (Bloomberg) -- BlackRock Inc., the biggest publicly traded U.S. asset manager, said third-quarter net income rose 46 percent as fund sales and the value of the company’s investments benefited from the rally in financial markets.

Earnings climbed to $317 million, or $2.27 a share, from $217 million, or $1.59, a year earlier, the New York-based company said today in a statement. A change in New York City tax law added 33 cents a share to net income. Excluding that gain and other items, profit of $2.10 a share topped the $1.90 per- share estimate of 10 analysts surveyed by Bloomberg.

BlackRock’s assets rose 4 percent to $1.43 trillion during the quarter as investors deposited $11.9 billion into equity funds and $3.5 billion into bond funds. Chief Executive Officer Laurence Fink, who in June agreed to buy Barclays Global Investors to form the world’s biggest money manager, said BlackRock has $42.5 billion in new business and is “very close” to winning several large assignments.

“It was a pretty good quarter, and I get confidence from the discussion of their pipeline, which was very impressive,” Macrae Sykes, an analyst with Gabelli & Co. in Rye, New York, said in an interview. Sykes, who rates BlackRock’s shares “hold,” expected the company to earn $1.80 per share on an adjusted basis.

BlackRock rose $6.17, or 2.7 percent, to $236.60 at 4:15 p.m. in New York Stock Exchange composite trading. It has gained 76 percent this year, compared with the 28 percent increase by the Standard & Poor’s index of asset managers and custody banks.

More Than Zero

The company benefited as investors, looking to earn more than zero from cash and other liquid products, started shifting money into stocks, bonds and alternative investments, Fink said. BlackRock had $26.4 billion in outflows from cash-management funds during the quarter.

Institutional investors, such as pension funds, are increasingly looking to equities to earn higher returns that will help them meet their funding obligations, Fink said. BlackRock is also seeing increased interest from sovereign wealth funds and endowments that are reassessing their portfolios, he added.

Investors are no longer “frightened of Armageddon,” Fink said.

BlackRock’s non-operating income, which includes investments in its own funds, was $61 million in the quarter, compared with a loss of $120 million a year earlier.

BGI Takeover

BlackRock will add more passive and index funds with its $13.5 billion purchase of London-based Barclays Plc’s investment unit, the first attempt by a top-ranked fund manager to unite two opposing investment philosophies. Expenses to integrate the unit may range from $300 million to $350 million, BlackRock executives said today. Fink said the deal will close as scheduled on Dec. 1.

The firm’s BlackRock Solutions unit provided advice to financial institutions and the U.S. government in the past year on how to value troubled securities, such as debt formerly held by American International Group Inc. and Bear Stearns Cos.

As the global credit crisis abates, growth at that unit may start to slow, said Jeffrey Hopson, an analyst with Stifel Nicolaus & Co. in St. Louis. Hopson expected BlackRock to earn $1.86 a share, excluding one-time items, and rates the shares “buy.”

To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net.

Last Updated: October 20, 2009 16:23 EDT