BlackRock Passes a Milestone, With $7 Trillion in Assets Under Management

By John Coumarianos and Leslie P. Norton
Jan. 15, 2020 2:29 pm ET

BlackRock ’s assets under management jumped past $7 trillion in 2019 as the market surged higher and money poured into the company’s funds.

The firm (ticker: BLK) now manages $7.4 trillion, up nearly $1.5 trillion from last year, according to its latest earnings report, released on Wednesday. More money flowed into BlackRock funds as stocks rose, boosting the value of existing investments. The S&P 500 Index returned more than 30% in 2019, and the MSCI ACWI, an index that represents the world stock market, gained nearly 27%.

Net inflows of money were strong, at about $129 billion for the quarter and $429 billion for the year. BlackRock’s fourth-quarter earnings per share rose 43% to an unadjusted $8.29, much higher than the $7.75 analysts had expected, from revenue of $3.98 billion. For the full year, BlackRock earned net income of $4.5 billion, or $28.43 a share, for a 7% gain in EPS from 2018.

Investment companies such as BlackRock collect a percentage of the money they oversee as fees, so the increase in assets under management led to 2% growth in both full-year revenue and unadjusted operating income.

In midday trading, BlackRock stock was up 1.9% to $528.12. The S&P 500 was up 0.5%.

Much of the money BlackRock handled did well relative to the benchmarks used to track funds’ performance, or other funds of the same type. Performance fees for the latest quarter more than doubled from a year earlier, BlackRock said.

Some 87% of actively managed taxable fixed-income assets outperformed their benchmarks or peer medians in 2019. For tax-exempt assets, it was 61%.

The figure was 71% for fundamental active equity strategies, while it was 54% for systematic equity, which uses quantitative techniques enabled by artificial intelligence.

According to Morningstar, BlackRock’s iShares unit had some of the most successful exchange-traded funds with regard to net flows in 2019. IShares funds brought in more than $117 billion, surpassing Vanguard’s $104 billion in net flows. Vanguard, however, had net flows of $183 billion including its active funds. State Street was a distant third in the ETF asset-gathering derby of 2019, with $24 billion in net flows.

The iShares Edge MSCI Minimum Volatility USA ETF ( USMV), by itself had net flows of $12.5 billion for the year, the fourth-most of any equity ETF. Also, the iShares Core MSCI EAFE ETF (IEFA) had more than $11 billion in net flows for the year. The iShares Core S&P 500 ETF (IVV) had around $8.6 billion in net flows.

Although Vanguard’s fixed-income ETFs had higher net flows than BlackRock’s, the iShares Core U.S. Aggregate Bond ETF (AGG) still had nearly $9 billion in net flows. The iShares MBS ETF (MBB) and the iShares U.S. Treasury Bond ETF (GOVT) had roughly $8.3 billion each in net flows for 2019.

Fixed income “will be one of the largest drivers of BlackRock’s growth in the next decade,” said CEO Larry Fink on a conference call with investors. One reason is that institutional investors sitting on cash have decided to substitute liquid fixed-income ETFs instead. That will continue, driven by institutions, central bankers and other asset managers.

“We believe this is a fundamental shift in how people use fixed income,” Fink said. “I believe this will be an overwhelming trend in the fixed income landscape.”

Sustainable funds, a focus for BlackRock, “reached an inflection point” in 2019, said Fink. The iShares ESG MSCI USA Leaders (SUSL) raised more than $1 billion in its launch and now stands at $1.87 billion.

Growth will also come the company’s Aladdin risk-management tech solutions, which will be have “ESG data at the heart,” said Fink, referring to environmental, social, and governance factors. “We’re putting sustainability at the core of how we manage risk and how we engage with companies.”

https://www.barrons.com/articles/blackrock-earnings-assets-under-management-7-trillion-51579116426