BlackRock earnings rise 9%, aided by passive funds
BlackRock, the world’s largest asset management firm, said Monday that second-quarter earnings had risen 9 percent as investors continued to pour money into the company’s expanding fleet of exchange-traded funds.
The company, which oversees $5.7 trillion in assets, received $94 billion in net investor money during the quarter, with $74 billion of that amount flowing into the company’s iSharesbranded exchange-traded funds.
BlackRock now manages $1.5 trillion in exchange-traded funds, passive investment vehicles that track a wide variety of indexes and investment strategies.
The continuing strong performance by the iShares division highlights why CEO Laurence Fink decided in March to close and repurpose many sluggishly performing mutual funds that rely on individuals to pick stocks.
Indeed, as BlackRock cements its place as the industry leader in terms of ETFs — with Vanguard entrenched in second place — Fink will remain under pressure to ensure that its other activities, from managing bonds to its struggling stock-picking division, keep pace with the surging passive business.
In explaining the rush of money into ETFs, Fink emphasized that now, more than ever, the job for financial firms is to provide solutionsdriven advice instead of merely pushing a client into a certain fund.
“Clients are looking for outcomes — they are not looking for products anymore,” he said.
More than ever, Fink is positioning BlackRock to focus on such systematic investment strategies as basic index funds, ETFs and blended strategies like smart beta and factors that target investment themes like momentum and low volatility.
The common theme: low costs and reliance on machines as opposed to experts making bets on stocks.
As of the end of the second quarter, BlackRock managed $3.7 trillion in passive investment money and $1.6 trillion in active strategies.
Mindful of low-cost competitors like Vanguard and Charles Schwab, which through its booming adviser platform is offering ETFs for free, BlackRock has been aggressively slashing the fees of its ETFs.