BlackRock second-quarter profit falls 11 percent

Wed Jul 18, 2012 12:25pm EDT
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(Reuters) - BlackRock Inc (BLK.N: Quote), the world's largest money manager, said on Wednesday its second-quarter profit fell 11 percent as tumultuous market conditions cut into fee income.

Net income at New York-based BlackRock dropped to $554 million, or $3.08 per share, from $619 million, or $3.21 per share, a year earlier.

Investors fretting about Europe's debt crisis and overall global economic weakness moved out of higher risk -- and higher fee -- stock funds and into bonds and short-term securities, BlackRock Chief Executive Laurence Fink said. BlackRock benefits more when investors move the opposite direction, from what Fink called a "risk off" position to "risk on."

"For the remainder of 2012, unfortunately, all eyes are still going to be on politics and the economy," Fink said on a call with analysts. U.S. elections and the coming budget showdown "will likely create additional uncertainty and lead to more soft business sentiment and probably a reduction in consumer spending," he added.

Investor interest in BlackRock's iShares unit, the top manager of U.S. exchange-traded funds, saved the firm from an even deeper profit decline. Investors added a net $6.1 billion into iShares funds in the quarter, while withdrawing $2.3 billion combined from BlackRock's other long-term funds.

But the inflows were overwhelmed by the impact of declining worldwide markets, which cut $76.8 billion from BlackRock's long-term assets during the quarter, and currency moves, which trimmed another $16 billion.

The MSCI All Country Index lost .MIWD00000PUS 6.4 percent in the second quarter while the Standard & Poor's 500 .SPX lost 2.8 percent.

All told, BlackRock's assets under management at June 30 totaled $3.56 trillion, down 3 percent during the quarter and down 3 percent from a year earlier.

PLAN FOR ETFS   Continued...

The BlackRock logo is seen outside of its offices in New York January 18, 2012. REUTERS/Shannon Stapleton