NEW YORK (Reuters) - BlackRock Inc's BLK.N assets under management dipped sharply in the first quarter amid turmoil in global markets caused by concerns about the economic fallout of the coronavirus outbreak.
BlackRock’s assets fell to $6.47 trillion from $7.43 trillion at the end of the fourth quarter.
“We had vast de-risking from February 21 to the end of the quarter,” Chief Executive Officer Larry Fink said on a conference call with analysts.
Worries about the economic fallout of the coronavirus pandemic hammered global financial markets in the first quarter and soured investor appetite for riskier assets like stocks. The benchmark S&P 500 index fell 20% during the period.
The massive volatility in global markets has left asset managers dealing with the biggest challenge since the financial crisis of 2008.
BlackRock’s net income fell to $806 million, or $5.15 per share, in the first quarter ended March 31, from $1.05 billion, or $6.61 per share, a year earlier.
BlackRock pulled in $35 billion in new money during the quarter but a big part of that was due to risk-averse investors going to cash as markets became volatile.
Its cash-management business reeled in over $52 billion in net inflows as clients sought to de-risk.
“By asset class, index and active bond flows both missed our forecast substantially,” analysts at UBS wrote in a note.
BlackRock’s fixed-income products, typically viewed as safe-havens, experienced outflows of $35 billion, sapping a recent source of strength for the asset manager.
“Eroding investor sentiment was a headwind to asset gathering this quarter,” said Kyle Sanders, an analyst with St. Louis-based financial services firm Edward Jones.
“Results were softer than usual, proving that even BlackRock isn’t immune to a market downturn,” Sanders said.
A 34% growth in technology services revenue, to $274 million, was a bright spot, helping the firm grow revenue to $3.71 billion, up 11% from the comparable quarter last year.
Speaking about a potential economic recovery, BlackRock’s Fink told CNBC that he does not see a rapid rebound.
“Until we have adequate testing, rapid testing, it is very hard for me to see how we are going to reboot in the next 30 days,” Fink said.
Many healthcare experts believe comprehensive testing as essential to the reopening of the economy, and chief executives from some of the nation’s biggest companies recently told President Donald Trump more testing was needed to guarantee safety.
While Fink was confident that eventually new protocols to save lives and minimize the severity of the disease will be developed, leading to a more normalized environment, he said it may not be until August.
BlackRock is a key partner in the U.S. government’s effort to support the U.S. economy.
BlackRock was recently hired by the New York Fed to manage purchases of commercial mortgage-backed securities and to oversee certain liquidity facilities. The firm will also oversee the secondary market corporate credit facility, which will purchase corporate bonds and exchange-traded funds.
The asset manager’s shares, down about 10% for the year, rose 1.9% on Thursday.
Reporting by Saqib Iqbal Ahmed; Additional reporting by Noor Zainab Hussain and Bharath Manjesh in Bengaluru; Editing by Nick Zieminski
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