The firm saw deposits of $5.1 billion from individual clients, driven by sales of unconstrained bond funds and multi- asset income funds, and $7.8 billion from institutions, mainly into index products. Investors pulled $963 million from the firm’s iShares exchange-traded funds, mainly those tracking emerging markets, bonds and commodities.
BlackRock has revamped equity and fixed-income teams to revive deposits into active products. Chris Leavy, chief investment officer of BlackRock’s fundamental equity unit in the Americas, replaced portfolio managers at strategies that represented about 40 percent of the division’s $115 billion.
About 42 percent of BlackRock’s actively managed stock funds have beaten benchmarks over the past five years. Fink said in today’s interview that rebuilding its active equity brand is a two-year to three-year process. Active stock funds lost $4.3 billion to client redemptions during the quarter, while their ETF counterparts attracted $2.7 billion.
Investment Fees
Money managers such as BlackRock, which earn fees based on the assets that they manage for clients, traditionally benefit from rising stock markets and investor deposits into higher-fee active funds. The U.S. benchmark Standard & Poor’s 500 Index increased 2.4 percent in the second quarter while the MSCI All Country World Index of global stocks fell 1.2 percent.
BlackRock’s investment advisory fees, earned for managing client money, rose 9 percent to $2.2 billion from a year earlier. Performance fees, earned by funds for beating certain benchmarks, more than doubled to $89 million.
BlackRock in October created the iShares Core Series, which is made up of six ETFs with lowered fees and four new ones, after the firm lost market share to Vanguard Group Inc., the Valley Forge, Pennsylvania-based money manager that boosted assets in its funds with lower-cost products. BlackRock had earlier combined the sales teams for its iShares unit, the world’s largest provider of ETFs, and BlackRock’s retail funds. In March, BlackRock enhanced its partnership with Boston-based Fidelity Investments to sell more ETFs directly to retail investors.
‘Client Mix’
“We view BlackRock’s institutional-heavy client mix and ETF market leadership as providing downside support against any prolonged retail outflows,” Morgan Stanley analysts led by Matthew Kelley wrote in a July 8 research note.
ETFs have been the fastest-growing segment of the asset- management business, benefiting money managers such as BlackRock, Vanguard and State Street Corp. In the 12 months ended May 30, ETF assets in the U.S. increased 33 percent to $1.48 trillion, according to data from the Washington-based Investment Company Institute.