Oct. 21 (Bloomberg) -- BlackRock Inc., the biggest publicly traded U.S. asset manager, said third-quarter earnings fell 15 percent as investors unnerved by the financial crisis pulled money from its stock, bond and money-market funds.

Net income fell to $217.7 million, or $1.62 a share, from $255.2 million, or $1.94, a year earlier, the New York-based company said today in a statement. BlackRock fell as much as 12 percent in New York trading as profit excluding certain compensation expenses was $1.71 a share, less than the $1.88 average estimate of nine analysts surveyed by Bloomberg.

The bankruptcy last month of Lehman Brothers Holdings Inc. and losses at a money-market fund run by Reserve Management Corp. triggered $53.8 billion in withdrawals from BlackRock's cash and securities-lending funds. Chief Executive Officer Laurence Fink said the U.S. Federal Reserve's decision today to buy assets from money-market funds that are being squeezed by redemptions will restore investor confidence.

``This is a big event,'' Fink said in a conference call today with analysts and investors. ``It is the first thawing.''

BlackRock's assets fell 12 percent to $1.26 trillion from the prior quarter, driven by $69.1 billion of market depreciation in its stock funds. Investors also pulled $6.7 billion from stock and bond funds as the Standard & Poor's Index dropped 8.9 percent and bonds lost 0.5 percent.

``It was mildly worse than what we had anticipated, but it was okay given the difficult markets we've been through,'' Roger Smith, an analyst with Fox-Pitt Kelton Cochran Caronia Waller USA LLC in New York, said in an interview.

Smith, who has an ``underperform'' rating on the stock, had expected BlackRock to earn $1.82.

Stock Drops

BlackRock fell $8.22, or 5.7 percent, to $135 at 10:25 a.m. in New York Stock Exchange composite trading, after dropping to $126.26. Before today, the stock fell 34 percent this year, compared with the 43 percent decline in the Standard & Poor's index of 16 money managers and custody banks.

Revenue rose 1.2 percent to $1.3 billion. Asset-management and advisory fees increased 6 percent to $1.08 billion, while performance fees, earned for beating market benchmarks, declined 63 percent to $54.7 million. Fees from the company's BlackRock Solutions risk-management advisory unit more than doubled to $112.6 million.

Investors had poured $60 billion into the company's funds in the first half of the year, more than they put with any other publicly traded money manager in the U.S.

Lehman, Reserve Primary

Most of BlackRock's third-quarter net outflows occurred in the last two weeks of September, after Lehman Brothers Holdings Inc. filed for bankruptcy and Reserve Primary Fund suffered losses, setting off a run on money-market funds.

BlackRock said it has attracted $13.8 billion to its money funds since Sept. 30. The company had $62.3 billion in new commitments for long-term and cash funds as of Oct. 19.

TrimTabs Investment Research in Sausalito, California, estimated that stock and bond fund outflows reached a record $72 billion in September. The average stock fund fell 11 percent in the third quarter, while the average bond fund fell 3.9 percent, according to data compiled by Chicago-based Morningstar Inc.

BlackRock, started as a fixed-income fund manager in 1988, has tried to capitalize on the credit crunch by raising distressed-debt funds. It's one of the asset-management firms bidding to run a pool of troubled assets under the U.S. government's $700 financial-rescue plan.

BlackRock was picked by the Federal Reserve in March to oversee $30 billion of Bear Stearns Cos.' investments when the fifth-largest U.S. securities firm agreed to be acquired by JPMorgan Chase & Co. BlackRock was called in by UBS AG to help manage a portfolio of mortgage assets.

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

Last Updated: October 21, 2008 10:42 EDT