Due to the strong financial market stimulating capital inflows into active management and exchange-traded fund products, BlackRock’s assets under management surged to a record US$9.5 trillion in the second quarter.
The world’s largest fund management company reported that in the three months to June, revenue increased by 32% year-on-year to US$4.8 billion, exceeding expectations of US$4.6 billion, thanks to strong organic growth and higher Performance fees. The group’s operating profit margin expanded to 40.1% from 38.5% a year ago.
Chief Executive Larry Fink said: “Due to our best-performing active platform and industry-leading iShares ETF franchise, it drove a strong annualized base fee growth of 10% in the second quarter.”
Net income climbed 14% to $1.38 billion, and the group reported adjusted earnings per share of $10.03. Analysts surveyed by Bloomberg expected earnings per share of $9.48.
The net inflow during the three-month period was US$81 billion, ending the continuous inflow of more than US$100 billion in the previous four quarters. According to Bloomberg News, long-term investment flows (an indicator that does not include cash management) are US$60 billion, which is lower than analysts’ expectations of US$94 billion.
“We attribute most of the decline in the last quarter to US pension fund clients’ loss of $58 billion in stock index mandates,” said Edward Jones analyst Kyle Sanders. “Although the loss of pension customers puts pressure on the overall traffic data, the underlying trend is solid.”
BlackRock said it will increase the basic salary of all employees by 8% from September, including director-level employees.
The group’s share price hit a record high of US$920.31 this week, and analysts have raised their earnings per share expectations in recent days. This shift reflects the stock market’s record high. So far this year, the net inflow of global ETFs is about to exceed that of 2020. As of the end of June, global ETF inflows totaled US$659 billion, while net inflows of all ETFs were US$767 billion last year, according to data from consulting firm ETFGI.
Analysts are optimistic about BlackRock’s long-term growth prospects because it is far ahead of its competitors in ETFs and technical services through its Aladdin platform and products that focus on environmental, social and governance investments.
BlackRock assets iShares franchise It exceeded US$3 trillion for the first time in May, and net inflows for the quarter were US$75 billion, up from US$51 billion a year ago. The asset management company told investors in June that by 2025, the current US$9 trillion global ETF market will reach US$15 trillion.
Another important area of long-term growth that BlackRock is targeting is China, because China has opened its doors to foreign fund managers.
In the second quarter, BlackRock was approved as a Wealth managerA joint venture with China Construction Bank and Singapore’s state-owned fund Temasek, and last month became the first foreign asset management company approved to conduct wholly-owned mutual fund business in China.
Credit Suisse analyst Craig Siegenthaler said: “BlackRock has invested in the region and spent time building relationships, which will help them become a major asset management company in China.”
BlackRock’s stock price has risen 26% so far this year, helping its stock outperform the Standard & Poor’s Asset Management Index and most of its competitors since early April, continuing its long-term rise.
BlackRock shares fell 1.5% to $895 in premarket trading.