BlackRock’s assets under management hit a record $ 8.68 billion in the fourth quarter and chief executive Larry Fink said he expects momentum to continue in 2021 thanks to a strong recovery of the world economy.
“We are seeing greater participation from clients around the world in stocks,” said Fink, who added that he was not too concerned about high valuations in some areas of the financial system.
“There is a shortage of great assets and why we are seeing foam in some components of the market. Some companies will meet their profit expectations and some won’t, that’s what we see all the time. “
Robust financial markets forecasting a strong economic recovery in 2021 have helped the world’s largest fund manager eclipse fourth quarter income and profit guidance.
Long-term investment flows at BlackRock increased by $ 116.2 billion during the period, with fixed income securities accounting for $ 62.7 billion and equity funds increasing by 48.1 billions of dollars.
BlackRock’s fourth quarter operating margin was 46.6 percent, down from its record 47 percent set in the previous quarter. Gary Shedlin, chief financial officer, said during the company’s earnings call that operating margin for 2021 is expected to remain in line with 2020.
The forecast caused BlackRock shares to fall 3.5% as of noon in New York, after closing at a record low on Wednesday. Over the past year, BlackRock has eclipsed the performance of the stocks of competitors in the S&P 500 Asset Manager Index.
“Investors expected a very good quarter, but in conversations with them after the call, some were disappointed with the margin forecast,” said Craig Siegenthaler, analyst at Credit Suisse. The company indicated more spending in China while increasing recruitments and reviewing tactical deals.
“Their margin is still best in class for the industry and long-term investors want to see a company continue to invest,” said Kyle Sanders, analyst at Edward Jones. He added that BlackRock was taking a tough stance against calls for more regulation of asset managers, which could hit the action hard if they were ever sued.
Mr Fink said that over the past decade, BlackRock’s size relative to global financial markets has remained around 2%, given the strong growth in bonds and stocks outstanding during that time.
“We are regulated at all levels by the SEC, CFTC and Finra [in the US] and what we need is to make sure that regulators focus on well-functioning capital markets. Mr. Fink said, adding that the asset manager serves as a trustee for its clients and does not use leverage to increase investment returns.
BlackRock’s fourth-quarter earnings release showed revenue increased 13% year-on-year to $ 4.48 billion, while net income rose a fifth to $ 1.57 billion. The company reported earnings per share of $ 10.18 on an adjusted and diluted basis, beating analysts’ expectations of $ 9.19 polled by Bloomberg. Revenue also topped analysts’ estimates of $ 4.31 billion.
The company attracted $ 391 billion in total net inflows in 2020, reflecting 5% organic growth and including $ 185 billion in net inflows into iShares, its exchange-traded fund business. Technology services revenues increased 11% from a year ago to a record $ 1.1 billion.
“It’s a tall order to continue to generate 4-5 percent annualized organic growth, but they have a mix of companies that put them ahead of their peers,” said Rob Lee, analyst at KBW.