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BlackRock assets under management swell to record $9.5tn

BlackRock’s assets under management swelled to a record $9.5tn in the second quarter, boosted by robust financial markets that spurred inflows into actively managed and exchange traded fund products.

The world’s biggest fund manager reported a 32 per cent year-on-year rise in revenue in the three months to June to $4.8bn, beating a forecast of $4.6bn, boosted by strong organic growth and higher performance fees. The group’s operating margin expanded to 40.1 per cent from 38.5 per cent a year ago.

“Strong annualised organic base fee growth of 10 per cent in the second quarter was driven by our top-performing active platform and industry-leading iShares ETF franchise,” said chief executive Larry Fink.

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Net income climbed 14 per cent to $1.38bn and the group reported adjusted earnings per share of $10.03. Analysts polled by Bloomberg had forecast EPS of $9.48.

Net inflows were $81bn during the three-month period, ending a streak of running above $100bn during the previous four quarters. Long-term investment flows, a metric that excludes cash management, were $60bn and fell short of analyst expectations of $94bn, according to Bloomberg.

“We attribute the majority of the decline from the prior quarter to the loss of a $58bn equity index mandate from a US pension fund client,” said Kyle Sanders, analyst at Edward Jones. “While the pension client loss weighed on the overall flow figure, underlying trends were solid.”

Shares in BlackRock hit a new all-time high this week at $920.31 and analysts had raised their EPS estimates in recent days. That shift reflected both equity markets setting new highs and net inflows into global ETFs so far this year being on the cusp of outpacing those for all of 2020. By the end of June, global ETF flows totalled $659bn, compared with $767bn for all of last year, according to consultancy ETFGI.

Analysts are bullish about the long-term growth prospects for BlackRock as it holds a substantial lead over rivals in ETFs and technology services through its Aladdin platform, as well as its products focused on environment, social and governance investing.

Assets in BlackRock’s iShares franchise rose beyond $3tn for the first time in May and net inflows for the quarter were $75bn, up from $51bn a year ago. The asset manager told investors in June that it expects the current $9tn global ETF market will reach $15tn by 2025.

Bar chart of S&P Asset Management and Custody Bank index showing BlackRock's share performance has lately outpaced most rivals

Another important area of long-term growth targeted by BlackRock is China, as the country opens the doors to foreign fund managers.

During the second quarter, BlackRock gained approval for operating as a wealth manager, in a joint venture with China Construction Bank and Singapore’s state fund Temasek, while last month it became the first foreign asset manager to win approval to launch a wholly owned mutual fund business in China. 

“BlackRock has invested in the region and spent time building relationships that will help them become a major asset manager in China,” said Craig Siegenthaler, analyst at Credit Suisse.

Shares in BlackRock have gained 26 per cent so far this year, helping its stock outperform the S&P Asset Management index and most of its rivals since the start of April, extending a lengthy period of gains.

Shares in BlackRock were down 1.5 per cent at $895 in pre-market trading. 

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