BlackRock’s assets under management increased to $9.1tn in the first quarter but net income fell 19 per cent year on year, as the world’s largest money manager struggled with squeezed margins, subdued markets and lower performance fees.
Revenue was down 10 per cent year on year to $4.2bn, with performance fees on its hedge funds and other alternative investment offerings down more than 40 per cent to $55bn, the money manager said on Friday.
Net income fell 19 per cent year on year to $1.1bn, or $7.93 a share and ahead of the $7.67 expected by analysts polled by Bloomberg.
However, assets under management rose by $500bn in the quarter to $9.1tn, more than analysts had expected, although they are still well short of the peak of $10tn at the end of 2021.
The increase was driven by a partial rebound in markets after last year’s lows, but BlackRock also saw inflows of $110bn, with bond exchange traded funds performing particularly strongly.
Chief executive Larry Fink struck an optimistic note in a quarter where investors are anxiously awaiting the tally of the economic damage from the collapse of three regional banks in March.
“I believe today’s crisis of confidence in the regional banking sector will further accelerate capital markets growth, and BlackRock will be a central player,” he said in a statement
BlackRock is among the first money managers to report in a quarter that is expected to see the sector trying to slash costs to compensate for lower earnings after a tough 2022. Its first-quarter operating margin of 33.9 per cent was down sharply from the same quarter last year, and slightly missed expectations.
The inflows include $103bn to long-term funds and reflect a strong performance in the US where BlackRock has faced persistent attacks from state officials and legislatures in Republican states over its use of environment, social and governance factors in investing.
Republican state treasurers have pulled out more than $4bn of government pension and treasury funds from the company on the grounds that it “boycotts” fossil fuel. BlackRock has hit back, denying those claims and arguing that it invests money the way its clients want.
The company received only limited benefit from the recent huge inflows into money market funds from both institutional and retail investors seeking higher interest rates and fleeing regional banks. It recorded $8bn in net flows to its cash management products in the quarter because of outflows in January and February but $40bn in inflows in March.
BlackRock supplements its money management business with a chunky technology services business centred on its Aladdin risk management platform. Revenues in that division were basically flat year on year at $340bn, a bright spot when most other areas were down.
Kyle Sanders of Edward Jones said the results “exceed low expectations” and highlighted BlackRock’s “ability to sustain solid asset inflows in volatile markets” but warned that profit margins would reman under pressure until markets recovered.
BlackRock shares were flat in pre-market trading.