ETFs prop-up BlackRock’s AUM growth

Added 14th July 2016

BlackRock’s Q2 results revealed a client bias for fixed income ETF products, which outperformed equities and facilitated a 4% expansion of AUM.

ETFs prop-up BlackRock’s AUM growth

The asset manager’s ETF platform, iShares, outperformed its institutional active and retail divisions and was the only segment not to suffer outflows in the quarter. iShares brought in close to $15.7bn (£12bn) in long-term net inflows, which was largely driven by the popularity of its range of fixed income ETFs.

“We are seeing increasing evidence that our recent strategic investments are driving growth,” said BlackRock’s chairman and CEO, Laurence D. Fink. “iShares generated $16 billion of net new business during the quarter, with significant strength in fixed income and ‘smart-beta’ ETFs, as clients utilize these tools to manage risk and minimize volatility.”

In total, BlackRock’s fixed income ETFs produced net inflows of $10bn (£7.5bn) during the period and led to the 4% increase in the firm’s AUM to $4.9 trillion (£3.7 trillion) year-over-year.

In spite of this, BlackRock’s total revenue dropped by 3.5% to $2.8bn (£2.1bn) over the second quarter. Net income was also down by 4% to $789m (£592m) compared with the previous year. 

Equities also proved especially vulnerable over the year-to-date period, generating outflows across BlackRock’s retail, institutional and ETF platforms. In the second quarter alone, total equity outflows reached $2.2bn (£1.7bn).

Fink stated that volatile market conditions had slowed client activity.

“Political and macroeconomic uncertainty, historically low yields and elevated market volatility are leading clients to pause, as evidenced by more than $55 trillion in bank deposits in the US, China and Japan alone,” he said.

However, Fink said the shifting economic and technological landscape was creating greater opportunities to engage with clients, as evidenced by the success of iShares and BlackRock’s risk management operating system, Aladdin. 

“Aladdin revenue grew 13% year-over-year,” he indicated. “The increasing impact of technology on our industry continues to drive demand, as we signed one of our largest ever institutional clients during the quarter, and we remain focused on meeting the growing need for technology solutions in the retail sector.”

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