BlackRock(US:BLK)2024-10-11 15:31Financial Data and Key Metrics - The company generated $221 billion of net inflows, the highest net flows quarter ever, with 8% annualized organic asset growth [6] - Third quarter revenue of $5.2 billion was 15% higher year-over-year, driven by 5% organic base fee growth and market movements on average AUM [11] - Operating income of $2.1 billion was up 26% year-over-year, with an operating margin of 45.8%, up 350 basis points [12][16] - Earnings per share of $11.46 increased 5%, reflecting a higher tax rate compared to a year ago [12] - The company ended the quarter with AUM near $11.5 trillion, a 26% increase over the last 12 months [11][29] Business Line Performance - iShares led the industry in global flows with approximately $250 billion through the third quarter, with fixed income ETF assets now over $1 trillion, nearly 40% higher than at year-end 2021 [7] - Aladdin logged 15% ACV growth, consistent with the long-term low to mid-teens target, with key wins and momentum [7] - Fixed income delivered over $60 billion of net inflows, with sustained inflows expected across bond funds, ETFs, and institutional accounts [7] - Private markets saw significant growth, with the acquisition of Global Infrastructure Partners (GIP) tripling infrastructure AUM and doubling private markets run rate management fees [8][13] - Technology services revenue was down 1% year-over-year, but would have increased 9% excluding the impact of eFront on-premises license renewals [14] Market Performance - ETF net inflows were $97 billion in the third quarter, with positive flows across all segments and major regions, including double-digit organic growth in Europe [20][44] - Institutional clients raised $56 billion of net inflows, with $27 billion in active strategies and $29 billion in index strategies [22] - Retail net inflows of $7 billion were led by strength in U.S. active fixed income mutual funds, with demand for illiquid alternative strategies continuing [23] - Cash management saw net inflows of $61 billion, driven by U.S. government and international prime funds [24] Strategic Direction and Industry Competition - The company is focusing on higher secular growth areas like private markets, technology, whole portfolio mandates, and model portfolios, aiming for 5% organic base fee growth over the long term [10] - The acquisition of GIP and the planned acquisition of Preqin are expected to enhance private markets capabilities and data analytics, with GIP adding $250 million of management fees in Q4 2024 [8][13][19] - The company is leveraging its technology, scale, and global footprint to deliver profitable growth, with a strong pipeline expected to drive momentum into 2025 [30][31] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory, citing strong client sentiment and a broad global opportunity set for new asset management and technology mandates [6][11] - The company expects the fourth quarter to be historically strong for inflows, with significant opportunities to deepen client relationships and grow market share [24][25] - The integration of GIP and Preqin is expected to unlock growth synergies, with private markets becoming increasingly important in the financing of the economy [34][35] Other Important Information - The company repurchased $375 million worth of common shares in the third quarter and plans to repurchase at least $375 million in the fourth quarter [19] - The planned acquisition of Preqin is expected to close around year-end 2024, subject to regulatory approvals [19] - The company launched an Ethereum ETF, which garnered over $1 billion of net inflows in the first two months of trading [45] Q&A Session Summary Question: Net Flow Trajectory and Money Market Business - The company expects strong net inflows to continue, with a healthy trajectory on asset growth and a focus on re-risking periods [48][49] - Money market fund business is largely institutional and durable, with $61 billion of flows in the quarter and $850 billion in assets, nearly 70% bigger than five years ago [50] Question: Investment Spending and Margin Expansion - The company is focused on driving operating leverage and industry-leading margins through disciplined investments, variablizing expenses, and fixed cost scale [54][55] - Technology, automation, and firm footprint are major levers for margin expansion, with market movements also contributing to margin growth [56] Question: GIP Financials and Private Markets - GIP is expected to add $1 billion of fees with an FRE margin north of 50% in 2025, with strong momentum in fundraising and growth synergies [58][59] Question: M&A Appetite and Integration - The company is focused on integrating GIP and closing Preqin, with inorganic investments being a tool to optimize organic growth but not necessary to meet growth targets [61][62] Question: EPS Growth and Fee Rate Potential - The company expects double-digit EPS growth with 5% organic growth and margin expansion, with the fee rate expected to benefit from growth in private markets [66][71][72] Question: Wealth Management Opportunity - The company aims to revolutionize wealth management by integrating public and private markets into model portfolios, with a focus on digital enablement and partnerships [74][75][76] Question: Digital Assets and Regulatory Changes - The company sees significant opportunities in digital assets, with Bitcoin and Ethereum playing key roles, and expects broader market acceptance as analytics and transparency improve [83][84][85] Question: Fixed Income RFP Activity - The company is seeing large institutional mandates and RFP activity, with money in motion and opportunities for growth in fixed income [87][88] Closing Remarks - Management expressed confidence in the company's position and growth prospects, with a focus on delivering strong performance for clients and shareholders [91]