World’s largest asset manager is one of biggest winners from shift to passive investing
Source: Financial Times
BlackRock attracted a record amount of money from investors last year, as the bull market in stocks and bonds cemented its status as the world’s largest asset manager.
The company’s funds sucked in $429bn last year, more than three times as much as 2018, swelling its overall assets under management to $7.4tn.
Investors’ appetite to ride the extended rally in equities and fixed income helped drive BlackRock’s fourth-quarter profits up 40 per cent to $1.3bn, the company said in a statement on Wednesday. The earnings exceeded Wall Street’s forecasts, sending shares in BlackRock up almost 2 per cent.
Founded in 1988, BlackRock has proved one of the biggest winners from the more than decade-long bull market as well as the shift to passive investing. Its growing clout in global markets has also brought increased scrutiny, with the asset manager facing pressure to use its powerful shareholder votes to influence companies’ approaches to climate change and the diversity of their boards.
Last year’s inflows exceed the total assets of all but a few dozen of the world’s asset managers, reflecting, in part, the historic shift over the past decade to passive investing that simply aims to match performance of major market indices.
iShares, BlackRock’s exchange traded fund business, sucked in $183bn last year while its actively managed funds attracted $110bn. Its ability to hoover up money outpaced its chief rival, Vanguard, the second-largest asset manager, which had $268bn of net inflows in the period.
“BlackRock continues to take market share and gather assets at an impressive pace,” said Kyle Sanders, an analyst at Edward Jones. “Often being the largest player in an industry limits growth. However, in BlackRock’s case, we believe size enables growth.”
Its fourth-quarter revenues climbed 16 per cent to $3.97bn, ahead of analysts’ forecasts. Overall inflows for last year were 16 per cent higher than its previous record in 2017, another year marked by a stunning rally in equities.
Rate cuts from global central banks have sent markets surging over the past 12 months, with the FTSE All-World stock index rising 24 per cent, its best year in a decade. The Bloomberg Multiverse, the broadest measure of the bond market, climbed 7.1 per cent, its second-best year in a decade. When markets rise, the amount fund managers receive in fees, which are charged as a proportion of assets, increases.
Larry Fink, chief executive of BlackRock, said the inflows reflected the breadth of the company’s offering and pointed to the money pouring into its fixed-income ETFs as a marker of rising popularity for passive bond funds.
“Much of the fixed-income flows were from active investors who are now using index products to actively manage fixed income,” he said.
The results come a day after BlackRock outlined new efforts to incorporate climate risk into its investment process, including offloading $500m in shares of companies that generate a quarter or more of revenue from thermal and doubling its number of sustainable ETFs to 150. BlackRock has faced criticism that its actions have failed to match its rhetoric on climate change.