BlackRock Amasses $7 Trillion of Assets on Record Net Inflow
BlackRock Chief Executive Larry Fink on Wednesday credited the shift to zero commissions at discount and electronic brokerage firms with super-charging sales of the asset management giant’s funds during the fourth quarter.
As more registered investment advisers and brokerage firms such as Charles Schwab that cater to self-directed investors eliminate transaction costs, BlackRock benefits by collecting more money for its iShares exchange-traded funds and other investment vehicles, Fink told analysts after the New York-based company reported a 40% jump in fourth-quarter profit to $1.3 billion.
“I’ve seen our monthly flows accelerate across these platforms since the move to commission-free trading in October,” he said, labeling the trend a “democratization of access to investing.”
The asset-gathering trend is likely to play out further “in the coming months and years, especially for firms like us that can invest at scale, and can invest for the long term,” said Fink, who had forecast last year that his company would benefit from distributors’ commission-free platforms. Since that time, the list of brokerage giants that have dropped commissions has extended, and now even includes competitor Vanguard’s discount-brokerage arm.
The company’s iShares ETFs attracted $75 billion in new money during the October-December period, up 80% from last year’s third quarter. They are the most popular ETFs in industry sales, and represented 58% of BlackRock’s $129 billion of fourth-quarter net inflows.
For the full year, Black Rock attracted $429 billion of new money, with much of the flow going to fixed income and record purchases of “illiquid alternatives.”
Fink garnered headlines earlier this week by announcing in his annual “letter to CEOs” that BlackRock plans to shed investments in companies that “present a high sustainability-related risk,” including thermal coal producers and others with high percentages of revenue generated from climate-endangering products.
The move is good business, he said on Wednesday’s earnings call, noting that the company plans to double to 150 its menu of environmental, governance and social (ESG) ETFs over the next two years.
“We are entering a new era of finance,” he told analysts. “Investment risks presented by climate change are set to drive a significant reallocation of capital, and companies, investors and governments…all need to be more prepared.”
BlackRock also has “huge opportunities” to leverage its ESG expertise by offersing model portfolios, indices, and other products in addition to ETFs, company president Rob Kapito said on the earnings call.
Net revenue in BlackRock’s fourth-quarter climbed 16% to $3.98 billion from $3.43 billion in the comparable 2018 period. For the full year, revenue was up 2% to $14.5 billion, driven by rising advisory, administration and securities lending, and technology services fees.
Net income for the year grew 4% to $4.5 billion.
Shares of BlackRock were up 1.9%, or $9.80 a share, to $528.12 in afternoon trading Wednesday on the New York Stock Exchange.