BlackRock Bond Flows Drop From Second Quarter While Stocks Gain

Annie Massa, Bloomberg News

(Bloomberg) -- BlackRock Inc. reported a decline in fixed income inflows from the previous quarter as clients moved some money back into equities.

The world’s largest asset manager posted fixed income flows of $34.99 billion in the third quarter, a drop of 68% from the previous quarter. But it was an improvement from the 2018 period, when those products brought in $22.91 billion. Equity net inflows rose 68% from the second quarter.

Key Insights

BlackRock’s iShares indexed products brought in $41.5 billion in the quarter. ETFs are a consistent driver of flows for the firm, which has about two-thirds of its assets under management in indexed products. BlackRock is the world’s largest issuer of ETFs, with more than $2 trillion in those products.
Adjusted net income of $1.1 billion for the quarter was down 8% versus the same period a year earlier. Adjusted earnings of $7.15 per share beat analysts estimates of $6.97.
BlackRock brought in total net flows of $84.2 billion in the third quarter, below analyst estimates of $93.8 billion.
Revenue of $3.69 billion beat the estimate of $3.6 billion in the quarter and increased 3% increase from the same period a year earlier.

Digging Deeper

Assets under management rose to $6.9 trillion.
Online brokers rattled Wall Street recently, slashing commissions for online stock and ETF trades to zero. These brokers sell investment products like BlackRock’s funds directly to customers. It’s just another frontier showing the intense competition to offer investment products on the cheap. BlackRock earlier had its own broker agreements that allowed their ETFs to be offered commission-free.
BlackRock is expanding into higher-yielding products amid heightened price competition for indexed products.
In one of its plays in alternatives, BlackRock last year announced a private equity-style vehicle called Long Term Private Capital, which takes long-term stakes in private companies. The project is behind schedule: last year it said it was seeking to raise up to $12 billion, compared to $2.75 billion it said it had secured as of April. The fund struck its first deal in August, backing a company that manages brands including Sports Illustrated, Marilyn Monroe and Juicy Couture.

Market Reaction

BlackRock shares were little changed in pre-market trading on Tuesday in New York. The stock has returned 13% this year through Monday versus an 18% gain for the S&P 500 financials index.

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