BlackRock reported strong earnings growth in the first quarter, as rising stock markets lifted assets under management for the world’s largest money manager.
Net income rose 34 per cent on the year before, to $568m, modestly ahead of Wall Street expectations, as first-quarter revenues rose 14 per cent to $2,282m.
Assets under management rose 2 per cent from the end of 2010 to $3,648bn, as inflows offset the loss of assets related to the acquisition of Barclays Global Investors in 2009.
Clients, predominantly pension funds who were invested with both companies pre-merger, have been forced to pull some assets from the combined group to avoid a concentration of risk.
Such outflows slowed considerably, with the $18.4bn lost less than half the merger-related outflow of the previous quarter. Net outflows have totalled $139bn since the merger, and Larry Fink, chief executive, announced that the integration is now complete and the group will no longer report such outflows separately.
Money market funds continued to be the main source of non-merger-related asset outflows, as retail investors withdraw funds in reaction to very low interest rates and return to bank deposits. “That trend is not going to change anytime soon,” said Mr Fink, who argued that such assets contribute very little in fees.
BlackRock reported positive inflows in all three regions: the Americas, Europe and Asia. The exchange-traded fund business, iShares, recorded growth in every product area except for emerging market equities, where the company had problems accurately tracking the underlying index last year.
Mr Fink argued that ETF flows are a good indication of the direction for overall asset allocation, noting that BlackRock saw a shift from fixed income to equity ETFs in the third quarter last year and said that the trend is accelerating. “It’s why we believe equities will continue to rally,” he said.
The group has ruled out any large mergers or acquisitions in the near term, but continues to add individuals and teams providing new strategies in its alternative asset management business, which has $115bn under management.
Mr Fink acknowledged the current regulatory uncertainty, arguing that under the current definition BlackRock should not be defined as a “systemically important institution” and therefore subject to greater regulation and capital requirements.
He saw new financial regulation as an opportunity, instead, as it restricts some of the activities of banks. “This is one of the reasons why we’re a little more aggressive in building out our alternatives business, looking at all types of activity, including private equity,” he said.
BlackRock increased its dividend 38 per cent in the quarter to $1.38 per share. The group has authority for substantial share buy-backs, but is constrained by the need to preserve a large enough free float to maintain membership in the S&P 500.
The group was only admitted to the index this month, so share buy-backs will be used merely to maintain the share count by absorbing share grants to employees and the effect of any convertible bonds converting to equity. In early trading, BlackRock’s shares were up less than 1 per cent from the previous day’s close of $193.72 per share.
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