results fell short of sharply reduced expectations in what it
described as the worst environment in decades as falling asset prices
and a rising dollar drove assets under management down to $8.5tn.
largest money manager’s adjusted earnings fell 30 per cent to $7.36
per share on $4.4bn in revenue for the quarter ending June 30.
Analysts polled by Refinitiv had been expecting $7.90 a share, on
revenue of $4.65bn.
and other asset managers have been
hit hard by volatile markets that have unsettled investors and pushed
down the value of the portfolios from which they draw management fees.
has delayed hiring for some senior positions until 2023 and total
spending on employee pay and benefits fell by 5 per cent from the
first quarter. Although there is no firm-wide hiring freeze, BlackRock
is trying to hold down costs by “juniorising” their work force: hiring
less experienced people to fill open positions.
under management dropped 11 per cent, marking the second consecutive
quarterly drop after peaking at $10tn at the end of 2021. State
Street’s asset management arm reported on Friday that its AUM had also
fallen 11 per cent to $3.5tn.
As a global
manager, BlackRock has also felt the impact of a rising dollar, which
has reduced the value of fees derived in other currencies. While
revenue was down 6 per cent overall, base fees were flat in constant
half of 2022 brought on a combination of macro financial and economic
challenges that investors have not seen in decades . . . 2022 ranks as
the worst start in 50 years for both stocks and bonds,” founder and
chief executive Larry Fink
said on an earnings call.
the group’s ability to generate $90bn in net inflows despite the grim
news, saying it was “demonstrating our ability to deliver
industry-leading flows even in these most challenging environments . .
. BlackRock’s position has never been stronger.”
shares, which had lost one-third of their value in 2022, were down
slightly in morning trading.
margins compressed to 43.7 per cent, dragged down by higher expenses
for technology as well as travel and entertainment, even as revenues
[BlackRock] isn’t immune to a market downturn. However, we were
impressed with[their] ability to sustain robust asset inflows in
choppy markets,” said Edward Jones analyst Kyle Sanders, adding that
he expected BlackRock’s continued spending on strategic growth areas
“will probably dampen profit margins in the near-term [but] we think
it bolsters their competitive advantage”.
iShares exchange traded funds platform drew the bulk of new investor
money, with$52bn in net inflows, and its cash platform reached record
levels with $21bn in net new money as customers fled to safety and
took advantage of rising interest rates.
market experts have predicted that volatile markets will lead
investors to cut their allocations to ETFs and other passive vehicles,
so far that has not been the case. Black Rock chief financial officer
Gary Shedlin said that institutional investors are increasingly using
ETFs to reposition their portfolios rather than buying and selling
individual stocks and bonds directly.
bond industry ETF assets will nearly triple and reach $5tn at the end
of the decade . . . Rising rates will bring a whole new set of
investors,” Fink said.
fared worse, with net outflows of $10bn, and BlackRock’s performance
fees for its advisory services were down sharply year on year. But
products that use environmental, social and governance criteria
continue to attract new money and now manage $473bn in assets.
company’s technology division proved to be a bright spot. Revenue rose
5 per cent year on year, and Fink said the company had received record
new mandates for its Aladdin system, which helps other financial
services companies manage risk.
has always capitalised on market disruption and emerged stronger,”
said Shedlin said“ We have navigated these choppy waters before.”
figures do not include several very large institutional mandates for
outsourced investment management that BlackRock has recently won from
AIG and General Dynamics, among others. “We are going to see an
acceleration . . we see this as a real opportunity for us,” Fink said.
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