BlackRock profits jump in volatile quarter despite long-term outflows

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BlackRock beat expectations with profits that rose 13 per cent year on year but volatile markets drove down assets under management and resulted in the group’s first quarterly net long-term outflows since the early days of the Covid-19 pandemic.

The world’s largest asset manager reported adjusted net income of $1.6bn, powered by faster than expected growth of its Aladdin risk management platform and other technology. Revenue was $4.5bn and adjusted earnings were $10.91 a share.

Outflows were driven by a $19bn redemption from its index funds by a single overseas institutional client, while money continued to come into exchange traded funds, bringing net long-term outflows from the end of June to $13bn. Wary investors continued to park more money in cash, so total flows were mildly positive at $2.57bn.

Chief executive Larry Fink said he was “disappointed” by the soft flow numbers, but added that the group was “positioning to capture the money in motion . . . The long-term trend of clients consolidating more of their portfolios with BlackRock is only accelerating, and underlying business momentum remains strong.”

Assets under management fell in the quarter to $9.1tn, although they were up year on year.

BlackRock shares closed 1.3 per cent lower on Friday, leaving them down more than 15 per cent since late July.

Analysts polled by Bloomberg had been expecting net long-term inflows of $50bn in the quarter and net income of $1.2bn.

While BlackRock is doing better than most of its competitors, its quarterly long-term flows fell to the lowest level since the very start of the pandemic, according to calculations by Kyle Saunders at Edward Jones.

But he remained bullish on the stock, saying investors would return in larger numbers soon. “With so much money sitting in money market funds, it’s a matter of when, not if,” said Saunders, who continues to rate the group a “buy”.

Across the broader industry, assets in US money market funds remain near all-time highs of $5.7tn, according to this week’s data from the Investment Company Institute.

Daniel Fannon, analyst at Jefferies, called the results “modestly worse” and said a lower tax rate accounted for much of the unexpectedly high earnings.

Fink reiterated his enthusiasm for doing another “transformational” deal to take advantage of “ecosystem changes”. He cited opportunities in private markets and technology.

“We are engaged in more conversations than we have in many many years,” he told analysts on an earnings call. “We are focusing on where can we be additive . . . in revenues, client technology and reach.”