BOSTON BlackRock Inc (BLK.N), the world's largest money manager by assets, marshaled a rapidly growing list of fund styles and asset classes to post a 43 percent jump in second-quarter profit, topping expectations.
The New York-based company has long been known as a fixed-income institutional manager, but CEO Laurence Fink has pressed into new areas such as exchange traded funds and multi-asset products. Both took in healthy inflows of cash from investors in the three months ended June 30.
Net income rose to $619 million, or $3.21 per share, from $432 million, or $2.21 a share, a year earlier, BlackRock reported on Wednesday. Adjusted earnings were $3.00 a share, topping analysts' average forecast of $2.88, according to Thomson Reuters I/B/E/S.
Assets under management were $3.659 trillion at June 30, up 16 percent from a year earlier and up 0.3 percent from the end of the first quarter.
Fink said the results showed his emphasis on new areas is paying off. On a conference call with analysts, he said BlackRock's broad product mix will lead to a deeper relationship with clients and drive revenue and profits.
"That is our strategy. And our strategy has shown in the second quarter that it is working," Fink said. Many clients are looking for longer-term guidance amid uncertain world markets, and "no other firm in the business is as well positioned for that type of dialogue," he added.
Analysts agreed BlackRock's gains reflected its wide range of products, allowing growth in volatile markets.
"This is a company that I would expect to continue to hit singles and doubles," said Calyon Securities analyst Chris Spahr, using a baseball analogy. "There are not going to be many swings and misses because they're so big."
BlackRock shares finished trading up 0.44 percent, at $184.50. The company is the first large publicly traded asset manager to report second-quarter earnings and continued a good run. In the 12 months that ended Tuesday, BlackRock shares rose 20 percent. That bested several smaller managers with poorer results, or more known for equity funds, that have had trouble attracting assets. For instance, Janus Capital Group (JNS.N) shares are down 11 percent over the same period, while AllianceBernstein Holding LP (AB.N) is off 35 percent.
BlackRock said it had about 9,700 employees as of June 30, up from 8,500 a year earlier.
NO LONGER JUST ABOUT FLOWS
In a note to investors, Ticonderoga Securities analyst Douglas Sipkin wrote that BlackRock's scale means it is not as dependent on inflows of cash as rivals. "BLK is no longer a play on flow momentum, although we do believe organic growth trends will head higher throughout the year," he wrote.
Investors added a net $18.4 billion to BlackRock's long-term funds in the second quarter, excluding outflows in money funds, specialized portfolios and merger-related flows.
As at other fund companies, volatile markets during the quarter meant BlackRock faced both market depreciation and net redemptions from some stock funds. Outflows from its active equity products totaled $8.9 billion.
But investors added money in most other areas. BlackRock's popular iShares exchange traded funds took in $11.6 billion, up 11 percent from the first quarter. Investors added $20.7 billion to multi-asset class products, which BlackRock said reflected demand for fiduciary and asset allocation services.
In an afternoon interview broadcast on CNBC, Fink said there is still a case for stocks. Corporate results over the past week have shown "some very good earnings numbers across the board," and that with higher earnings and the major indices not rising in response, "the market has become relatively cheaper."
Stocks also offer investors a way to diversify against the political risk posed by policy uncertainty in any given country, he added.
Debates like the one in Washington over whether to raise the U.S. debt ceiling are causing many investors to "freeze" in uncertainty and not make new investments, Fink said. "You're seeing across the board a slowdown in decision making," he said.
For Fink, 58, the string of strong results shows the growing influence of the company he helped found in 1988. Initially, the company was the money management arm of the large BlackStone private equity firm; it was spun out in 1995.
Merrill Lynch later came to own almost half of BlackRock, and in 2007 there were reports that Merrill had spoken to Fink about bringing him in as CEO of the investment bank. That never came to pass, and Fink rode out the financial crisis at a company with little subprime exposure.
On Wednesday's conference call, Fink and BlackRock Chief Financial Officer Ann Marie Petach said BlackRock has reported the last of outflows stemming from the company's 2009 purchase of Barclays Global Investors, a milestone analysts had expected.
Separately, Petach said BlackRock has signed a new lease to move employees in London from two buildings into one, and expects to move most employees during the third quarter. The move will lead to a charge of $75 million to $100 million in the second half, she said.
(Reporting by Ross Kerber; additional reporting by Andrew Longstreth; Editing by Lisa Von Ahn and John Wallace)