BlackRock’s Larry Fink warns of ‘substantial’ impact from markets on earnings

BlackRock’s Larry Fink has admitted that “negative markets had a substantial impact” on the world’s largest fund manager last year, wiping out $1.4tn of its assets and hitting profits.

In an internal memo seen by the Financial Times, the chief executive said the operating environment “is unlike anything we’ve seen in decades”.

His comments come as asset managers across the industry have suffered steep declines in assets under management amid one of the toughest market environments in recent history. Global stocks and bonds fell last year by nearly 20 per cent and 14 per cent respectively.

Reporting fourth-quarter results, BlackRock said its assets under management dropped from a record $10tn a year ago to $8.6tn. Revenues fell by 15 per cent to $4.3bn compared with the same period a year ago.

The New-York based manager, known for its iShares range of index funds and actively managed products, reported adjusted earnings per share for the quarter of $8.93, a 16 per cent decrease year on year.

But compared with the third quarter, assets under management increased to $8.6tn from $8tn, beating analyst expectations after a surge in money flowing in from customers.

Flows into BlackRock’s products, excluding money market funds, climbed to $146bn in the fourth quarter, more than double the previous three months.

Fink said in his memo that inflows were “strong” over the course of the year, with most of this money coming from institutional clients. The group reported net outflows from retail investors as active fund performance suffered across the industry.

BlackRock’s bond exchange traded funds under its iShares brand had a record 12 months, generating $123bn of net inflows. The fund group’s private markets business also raised $35bn from customers last year, led by private credit and infrastructure.

The fund group has come under fire over the past year from Republicans over its attempts to engage with companies on the long-term impact of climate change. This has led some state treasuries to withdraw investments from BlackRock.

BlackRock and other asset managers have also come under pressure over costs as a result of the squeeze on revenues.

Earlier this week, BlackRock said it would cut 500 jobs worldwide, a reduction of about 2.5 per cent of its total workforce. The results also showed that BlackRock took a $91mn restructuring charge in the fourth quarter.

Kyle Sanders, an analyst at Edward Jones, said BlackRock “entered 2022 with ambitious hiring plans; however, ongoing economic uncertainty and margins pressures had forced the company to pause hiring”.

“We expect more aggressive cost-cutting measures will be implemented in 2023, which includes headcount reductions,” he added.

A person close to BlackRock said headcount would be broadly flat this year and there were no further cuts on the cards.