BlackRock’s money gathering machine has started to splutter, as rising concerns over global trade tensions spooked investors and pushed the asset manager’s inflows to a two-year low in the second quarter.
Assets under management at the world’s biggest investment group dipped for the first time since late 2015, as the resurgent US currency eroded the dollar value of its growing overseas business. That crimped BlackRock’s assets from $6.32tn three months ago to $6.3tn at the end of June.
But analysts and investors focused primarily on the sharp slowdown in BlackRock’s overall inflows this year, which fell to $20bn in the second quarter — down from more than $100bn in the same period last year. That sent the asset manager’s shares down 0.9 per cent on Monday.
BlackRock has been one of the fastest growing asset managers globally over the past two decades buoyed by a series of astute acquisitions, such as snapping up Barclays’ exchange-traded fund business iShares in 2009. Its slowing growth in assets highlighted the challenges affecting investment companies worldwide as market volatility has returned this year.
Even BlackRock’s ETF business — comfortably the world’s biggest, with $1.8tn under management — saw its inflows fall sharply to a two-year low of $17.8bn in the second quarter, down from $34.6bn in the first three months of 2018. Indeed, it suffered ETF outflows of more than $5bn in June, according to ETFGI, a data provider.
“We’re seeing huge churn,” Larry Fink, BlackRock’s founder and chief executive, told the FT. But he argued that the slowdown was only a temporary blip in a longer-term, seismic investor shift towards cheaper passive products such as ETFs.
“We believe the longer-term trend is still intact,” he said. “We will continue to see strong ETF flows for the next five years, but quarter on quarter, who knows what will happen . . . Even in a year like this, most active managers have not performed after fees.”
Despite decelerating investor inflows, BlackRock still managed to beat analyst expectations for profits and revenues in the second quarter, thanks to a lower corporate tax rate, still-strong income from investment advisory fees, contained costs and better than forecast earnings from the sale of technology such as its Aladdin risk management platform.
The asset manager reported earnings per share of $6.66 and revenues of $3.61bn in the three months through June, compared with Wall Street expectations of $6.55 and $3.59bn.
Michael Cyprys, an analyst at Morgan Stanley, said that BlackRock’s shares would probably continue to trade softly because of the current bout of uncertainty — the asset manager’s shares are down more than 2 per cent this year — but argued that “we see an attractive buying opportunity for a secular winner”.
The investment group is focusing on trying to increase its dominance outside the US. It recently applied to the French markets regulator for a licence to set up an alternative investments hub in Paris to serve clients across Europe and Asia.
It is also in talks with Intesa Sanpaolo, the Italian bank, over buying a stake in its fund management business, Eurizon. Discussions, which have slowed in recent weeks, involve a distribution arrangement between the two companies as BlackRock tries to get a stronger hold of the lucrative Italian market.
Mr Fink declined to comment on “market rumours” over Eurizon, but said that BlackRock saw “large opportunities in Europe”.
Get alerts on US & Canadian companies when a new story is published