BlackRock is getting closer to the unthinkable, $ 10 trillion in assets

The company’s adjusted earnings exceeded analysts’ estimates.

Its assets under management increased 30% to $ 9.5 trillion from $ 7.3 trillion a year earlier, solidifying its dominance as the world’s largest fund manager. Known for its funds that follow the markets and trade quickly on the exchanges, BlackRock’s returns reflect the huge market rally from the depth of the pandemic and the pressure from CEO Larry Fink to build a business that serves almost all types. investors.

While the company’s returns have been bolstered by a list of assets hitting record highs, its fortunes remain tied to markets and changes in investor sentiment. Mr Fink will now have to navigate an environment where the pandemic and central bank intervention in markets are radically changing the economy.

And, as a major shareholder in many of the country’s biggest companies for investors, Mr Fink believes inflation is likely to stay.

“I don’t think it’s temporary,” he said.

He said government policies focused on protecting domestic jobs and the U.S. supply chain will have inflationary effects. He added that most of the companies he speaks with are behind in their hiring plans for 2021. This will lead to higher wages.

“We are making structural changes that will change the framework for inflation,” he added.

He predicts that inflation will exceed 2% per year for the next five years or so.

The money flowing through the company’s wide array of exchange-traded funds, index products and other funds is a barometer of sentiment on Wall Street and where major investors place bets.

BlackRock added about $ 81 billion in new capital to investors, up from $ 100.2 billion a year earlier. Part of the decline is due to the withdrawal of indexed assets from a large pension fund in the first half of the year.

Amid the surge in equities, bond funds have lost their luster this year. Investors added $ 41.29 billion to BlackRock’s bond funds in the second quarter, up from $ 60 billion in the previous year quarter.

The prices of used petroleum cars have increased with the opening of the US economy. Some investors demand higher returns to offset inflation risks.

“Inflation is more damaging to fixed income because cash flow isn’t as important to investors as it used to be,” said Kyle Sanders, analyst at Edward Jones.

Some $ 23 billion in new flows in the quarter went to money market funds and cash management products.

With interest rates so low, BlackRock has had to shell out money to keep money market fund returns from dropping below zero in recent months. In the second quarter, he gave up some $ 160 million to keep returns from going negative. That’s about double what he gave up in the first trimester.

The company continues to drive down the cost of many funds, crushing industry competitors. This strategy cemented the dominance of its exchange traded funds that trade like stocks on the exchange. This company received $ 75 billion in new flows during the quarter.

BlackRock’s fund business run by bond pickers and other active betting portfolio managers also continues to grow. Although a smaller portion of the company’s assets, this business generated $ 1.8 billion in base fees and securities lending income in the quarter, tied with the top 1 $ 8 billion generated by index tracking strategies and ETFs.

Mr Fink said active flows are helping to support growth. “Our quarterback is really screaming at this,” he said. “It is indicative of the importance of the active side of BlackRock.”

BlackRock sells software, including a suite of tools called Aladdin, to banks and other institutions for measuring risk. Technology services revenue, which includes Aladdin’s fees, rose about 14%.

BlackRock has also tried to become a larger provider of funds that can take advantage of governments’ new focus on climate risk. It generated $ 35 billion in net sustainable brand fund flows in the quarter. BlackRock raised $ 250 million this quarter from governments and other investors to invest in infrastructure designed to reduce disruption to developing economies due to climate change.

As the company grows, it comes under more scrutiny as to how it exercises shareholder votes on behalf of millions of investors. Mr Fink said Wednesday that BlackRock is exploring ways to allow more people the company invests the money for to exercise their own right to vote.

Write to Dawn Lim at [email protected]

Corrections and amplifications
Chief Executive Officer Larry Fink said Wednesday that BlackRock is exploring ways to allow more of the people the company invests the money for to exercise their own right to vote. An earlier version of this article incorrectly stated that he made the statement on Tuesday. (Corrected July 14)