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 The New York-based asset manager ended the fourth quarter through
December 31 with $4.3 trillion in assets, including new money and
market gains, surpassing the $4 trillion mark for the first time
last year.
That asset growth — a 14 percent rise from the end of 2012 — helped
drive BlackRock's 24-percent jump in quarterly profit to $841
million, or $4.86 per share, up from $690 million, or $3.93 per
share, a year earlier.
BlackRock and its peers make money by charging fees as a percentage
of assets under management.
"They are well positioned to generate solid growth almost regardless
of the market environment, given that they have a very broad product
offering," said Jason Weyeneth, a New York-based analyst with Sterne,
Agee & Leach Inc, focusing on the asset management sector.
BlackRock shares were up 1.7 percent at $317.96 in afternoon trading
on the New York Stock Exchange, after earlier jumping as much as 4.2
percent. The stock surged 53 percent in 2013, riding an equity
market rally that also boosted its peers.
The company said its board had approved a 15 percent increase in its
quarterly cash dividend to $1.93 per common share, payable in March.
Excluding long-term compensation expenses and other items, earnings
were $4.92 a share, above analysts' average forecast of $4.33,
according to Thomson Reuters I/B/E/S.
Analysts said part of that profit gain may have been driven by a
lower tax rate and better than expected performance fees.
Revenue grew 9 percent to $2.8 billion. Revenue generated by fees
based on a portfolio's performance rose 2 percent to $268 million
from a year earlier.
iSHARES, RETAIL
BlackRock has benefited from increased investor appetite for the
less-expensive indexed funds provided by iShares, which the company
acquired from Barclays in 2009 and is now the largest U.S. provider
of ETFs. iShares makes up 21 percent of the company's assets under
management.
Of the $40.5 billion that investors poured into long-term funds
during the quarter, nearly half — $19.1 billion — went into the
company's iShares exchange-traded funds business. Retail investors
accounted for $16.6 billion, or 41 percent of total long-term net
flows.
"You typically observe retail coming in when markets have recovered
and look more stable, and they tend to sell when things get choppy,"
said St. Louis-based Edward Jones analyst Jim Shanahan.
"Institutions are taking profits at these levels and retail is
piling in," Shanahan said, noting that the increased activity on the
retail side was consistent with the broader industry.
BlackRock has been expanding its iShares business within the U.S.
and abroad.
"We think Europe is going to be a place of accelerated growth" for
ETFs, Chief Executive Officer Laurence Fink said in an interview on
Thursday.
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BlackRock last year acquired Credit Suisse's ETF business and hired
Rachel Lord, previously with Citigroup, to head its iShares business
in Europe, the Middle East and Africa.
Fink said he saw the potential for ETF assets to eventually account
for 25 percent of the mutual fund industry. ETFs currently represent
about 15 percent of the industry.
The bulk of investor money during the quarter went into equities,
which accounted for $24.7 billion, or roughly 61 percent, of
BlackRock's long-term net inflows.
Investors also added more money than they withdrew in fixed-income
funds, which had net inflows of $1.5 billion, and multi-asset
products, which had $17.4 billion.
RETIREMENT
BlackRock is increasingly turning its focus to the retirement
market, where it sees a ripe opportunity.
"We believe the defined contribution area is the greatest growth
area," Fink said. "We have to start focusing on things like
longevity" and education around saving for retirement.
BlackRock said it had $30 billion in net inflows into its defined
contribution channel for the year, increasing its total assets in
the unit to $525 billion.
That's up 30 percent from last year when assets in defined
contribution plans totaled roughly $405 billion. BlackRock now has
the fourth-largest franchise in the defined contribution industry in
terms of assets in their plans, Fink said.
BlackRock's LifePath target-date funds, which serve more than eight
million individual investors, now have more than $100 billion in
assets.
Fink said on a call with analysts that BlackRock was forming a new
U.S. retirement group that will focus on product development and
services geared toward individual investors.
The expansion follows BlackRock's introduction of a new series of
indexes and funds called the "CoRI" Retirement Index series, which
BlackRock launched last year and allows pre-retirees to estimate how
much their current savings would produce in terms of annual income
when they turn 65.
The new retirement group will be led by Chip Castille, who heads
BlackRock's U.S. and Canada defined contribution group.
(Reporting by Ashley Lau in New York;
additional reporting by Tanya Agrawal; editing by Lisa Von Ahn,
Linda Stern and Bernadette Baum)
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