BlackRock's quarterly profit jumps as investors pile into funds

Thu Apr 17, 2014 12:48pm EDT
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By Ashley Lau

NEW YORK (Reuters) - BlackRock Inc (BLK.N: Quote), the world's largest money manager, said on Thursday its first-quarter profit rose 20 percent, boosted by strong performance fees and strength in its retail business as investors poured money into long-term funds.

The New York-based asset manager, which now manages $4.4 trillion in assets, said it had positive flows across asset classes during the quarter.

"Even with all of the turmoil in the markets that we saw a few weeks ago, every day during that turmoil, we had net inflows," Chief Executive Officer Laurence Fink said in an interview on Thursday, referring to the company's retail client base. Fink noted most of that turmoil was due to "fast money" exits, with hedge funds moving out of their positions rather than any broad-based selling among long-term investors.

Revenue at BlackRock grew 9 percent to $2.67 billion, with revenue generated by fees based on a portfolio's performance surging 46.3 percent to $158 million from a year earlier.

Of the $26.7 billion that investors poured into long-term funds during the quarter, roughly half came from retail investors, who accounted for $14 billion of long-term net inflows during the quarter. Retail fund assets at the end of March totaled $508.7 billion, representing 12 percent of total assets under management at the end of March.

Still even as investors added more money than they withdrew across asset classes during the quarter, much of those positive flows in addition to retail were concentrated lower-fee institutional index mandates and iShares exchange-traded funds. Active equity and fixed income were a weaker spot, with institutional investors pulling $8 billion out of active equity and $7 billion out of active fixed-income during the quarter.

"It was certainly a fine quarter from an earnings standpoint, but these performance fees and expense items are certainly lumpy and some of them are one time in nature," said Edward Jones analyst Jim Shanahan, who also noted a concern about most of the growth delivered during the quarter being in lower-fee institutional index mandates rather than actively managed funds and other high-fee products.

Shares of BlackRock were down 1.7 percent at $304.96 in morning trading on the New York Stock Exchange.   Continued...