BlackRock Inc posted a higher quarterly profit, as market gains and new client funding lifted the investment firm’s assets under management above $10 trillion for the first time.
Money Manager reported fourth-quarter net income of $1.64 billion, or $10.63 per share, up 6% from $1.55 billion, or $10.02, in the same period a year ago. Analysts polled by S&P Global Market Intelligence predicted a profit of $10.22 per share.
Revenue rose 14% to $5.11 billion, slightly below analysts’ average estimate of $5.15 billion.
Shares of the company fell 2.2% on Friday. Analysts said some investors were worried about a hike in interest rates and the impact of higher spending could weigh on the results for 2022.
BlackRock ended the year with a net worth of $10.01 trillion, the first time a money manager has crossed the milestone. The firm is a top seller of exchange-traded funds, and demand for ETFs and other low-cost investments that track market indices has fueled BlackRock’s transformation from a bond-investing specialist to the world’s largest wealth manager. Have given.
However, in the fourth quarter, BlackRock benefited from strong inflows into its actively managed investments. Active funds brought in nearly half of the $211.7 billion in net new client money added by the firm over the period.
The boom in active business, which includes stock- and bond-picking funds and alternative investments such as infrastructure, real estate and private loans, has helped BlackRock counter the downward pressure on fees all money managers face. Because many investors have turned to index funds. While active funds account for about a quarter of BlackRock’s assets, they contributed about half of manager’s fees during the fourth quarter.
On a conference call with analysts, BlackRock president and chief executive Larry Fink said the firm’s active business is now benefiting from the build-out it has made for both its investment teams and its sales organization. Large pension, endowment and other institutional clients are turning to a handful of asset managers to oversee a large portion of their assets, Mr. Fink said. This helps BlackRock as well, as it is one of the few firms to have both large active and passive platforms.
“We are probably the best-positioned organization in the world to meet these types of opportunities,” he said. “If anything, I think the momentum is going to go up.”
Some investors worry that BlackRock’s active-investing business could lose steam in the new year, said Brennan Hawken, an analyst at UBS Group AG. A substantial portion of the firm’s fourth quarter inflows were channeled into bond funds.
“As you’ve seen from the rate market year to date, rates are going to be very tough,” Mr. Hawken said. “The idea that the strength of fixed income will continue may not be a domestic race.”
BlackRock’s annual fee rate fell slightly in the fourth quarter compared to the third quarter, indicating that the wealth manager’s revenue growth may be slowing, he said.
On Friday’s call, BlackRock’s finance chief Gary Shedlin said the manager plans to increase its workforce by 10% this year as it builds out its businesses. The continued technology investment will help increase core general and administrative expenses by 15% to 20%, he said.
For the year, BlackRock earned $5.9 billion, or $38.22 per share, on revenue of $19.37 billion.
Shares of BlackRock fell $23.44 to $844.14 on Friday afternoon. The stock is up 14% in the past year.
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