BlackRock Shed $1 Trillion AUM in First Quarter, Profit Fell 23%
BlackRock, the world’s biggest asset manager, demonstrated the caustic effects of the coronavirus market crash on Thursday as it reported a 23% fall in first-quarter profit and a decline of $1 trillion in assets under management.
The functionality of Aladdin, which helps managers and advisers model investment assumptions, proved its reliability as advisors pumped up demand for the software amid wildly volatile markets while working from home toward the end of the quarter, according to BlackRock Chief Executive Larry Fink.
“Aladdin processed record trade volumes in recent weeks, even with a remote global workforce,” he told analysts on the company’s earnings call, noting that 95% of BlackRock’s 16,000 employees were working remotely by the end of March. “Not only has Aladdin proved to be a significant differentiator for BlackRock itself, it has enabled nearly 250 Aladdin third-party clients, other asset managers, asset owners, banks and insurance clients to also operate seamlessly during this time.”
BlackRock developed Aladdin for hedge funds, but has been pushing it to retail wealth managers. Morgan Stanley added it to brokers’ workstations last year in an effort to help the advisors gather held-away assets from customers.
Contract renewal rates for Aladdin have increased during the pandemic, the company said.
BlackRock attracted $35 billion in new money during the January-March period, down from $64.7 billion in the year-earlier quarter. Like Merrill Lynch, Morgan Stanley and other big asset gatherers, the company said nervous clients poured into cash and money-market funds as the coronavirus crisis unfolded at the end of the quarter. It collected $53 billion of net inflows into cash products even as institutional clients pulled out $31 billion from equity and other funds and as U.S. retail investors withdrew $1.5 billion.
On another front, Fink said that BlackRock’s January announcement that its funds will stop investing in companies that are polluters or create other big climate risks has proved timely.
Its iShares sustainable ETFs attracted a quarterly record $10 billion during the quarter, out of $13.8 billion of new money that flowed into the ETF business.
The flip side that highlights the parlous state of investing right now is that the ETF business gathered $75 billion of new money in the last quarter of 2019.
BlackRock has imposed a hiring freeze for the rest of the year, along with a pledge to abstain from layoffs.
Shares of BlackRock were up 2.2%, or $9.69 a share, in early afternoon trading.