BlackRock Inc. (BLK), the world’s biggest money manager, said second-quarter profit rose 11 percent as investors added money to its funds, boosting assets and the fees for managing them.
Net income increased to $808 million, or $4.72 a share, from $729 million, or $4.19 a share, a year earlier, the New York-based company said today in a statement. Excluding certain items, adjusted earnings of $4.89 a share beat the $4.46 average of 20 analysts surveyed by Bloomberg.
BlackRock Chief Executive Officer Laurence D. Fink, 61, has reorganized the firm’s leadership as it seeks to improve performance at its active products, appeal to individual investors, and win more money into its funds globally. The firm attracted about $38 billion in investor money during the quarter, compared with $27 billion in the previous three months.
Client inflows “were above our estimate on strong fixed income inflows, which continue to benefit from improving performance,” Daniel Fannon, a San Francisco-based analyst at Jefferies LLC, said today in a note to clients.
BlackRock shares rose 0.4 percent to close at $325.17 in New York trading. The shares have advanced 4 percent this year, including reinvested dividends, compared with the 2.1 percent increase in the Standard & Poor’s 18-company index of asset managers and custody banks.
BlackRock, which earns fees based on the amount of money it oversees for clients, benefited from rising global markets in the second quarter, which boosted assets 4.4 percent to $4.59 trillion. The Standard & Poor’s 500 Index (SPX) increased 5.2 percent during the second quarter and the MSCI All Country World Index of global stocks rose 5.4 percent.
BlackRock, co-founded by Fink in 1988, acquired Barclays Global Investors in December 2009 to expand into passive investments such as exchange-traded funds. The firm also offers actively managed stock and bond funds, hedge funds and portfolios that use mathematical models.
The firm attracted about $30.4 billion into its iShares ETFs during the quarter, with more than two-thirds of that going into equity products. Investors pulled $5.3 billion from the firm’s active stock funds, while putting $9.6 billion into actively managed bond strategies. About 90 percent of BlackRock’s taxable bond assets are beating benchmarks or peer medians over the past three years, the firm said.
BlackRock’s multi-asset offerings, including the Multi-Asset Income Fund, drew almost $7 billion in investor money during the quarter.
“It’s one of the fastest-growing multi-asset product funds in the world and it’s just an example of the depth of our platform,” Fink said today in an interview.
The firm has sought to increase assets in higher-fee products such as active stock strategies and non-traditional investments such as hedge funds. This month, BlackRock said it hired Chris Jones, formerly at JPMorgan Chase & Co.’s asset-management unit, as co-head of its global fundamental equity business. Last month, the firm hired Harvard Management Co.’s Mark McKenna to start an event-driven hedge fund.
BlackRock’s alternative offerings are growing as institutional clients, such as pension funds and insurance companies, seek to reduce risk, Fink said. The firm is engaged in “very large discussions at this moment” with public pension plans, Fink said.
On the retail side, BlackRock has been collaborating with Fidelity Investments, the Boston-based mutual fund giant. Fidelity clients can trade dozens of BlackRock’s iShares ETFs commission-free. The firms expanded their ties in April with their first actively-managed product built using multiple ETFs.
That partnership has been “more successful” than expected, co-president Rob Kapito said on the call today.
Large money managers such as BlackRock and Fidelity are among nonbank financial companies that the U.S. Financial Stability Oversight Council is evaluating to determine whether they require Federal Reserve oversight. FSOC discussed and agreed to review BlackRock and Fidelity, two people with knowledge of the matter said in November.
Fink said in the interview today that the regulatory process for identifying systemic risks needs to be more transparent and that there’s “honestly no dialog” between regulators and the companies.
“We don’t how how that process is going and unfortunately we learn it through innuendos and leaks,” Fink said.
BlackRock has faced regulatory scrutiny this year, including a Wells notice from the U.S. Securities and Exchange Commission disclosed June 17. The regulator’s staff is recommending action against one of BlackRock’s units over a former money manager, Daniel J. Rice III, who used its funds to invest in a company with which he had financial ties. BlackRock said it doesn’t believe it violated provisions mentioned by the SEC and it doesn’t expect any resolution of the matter to have a material impact on its financial results.
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