UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934.

For the quarterly period ended SeptemberJune 30, 20172021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934.

For the transition period from to .

Commission file number 001-33099

BlackRock, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

32-0174431

(State or Other Jurisdiction of

Incorporation or Organization)

 

    (I.R.S.(I.R.S. Employer Identification No.)

55 East 52nd Street, New York, NY 10055

(Address of Principal Executive Offices)

(Zip Code)

(212) 810-5300

(Registrant’s Telephone Number, Including Area Code)

 

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value

BLK

New York Stock Exchange

1.250% Notes due 2025

BLK25

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

 

X

 

No

 

 

Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes

 

X

 

No

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer                Accelerated filer

       Non-accelerated filer (Do not check if a smaller reporting company)

            Smaller reporting company

            Emerging growth company

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

 

 

 

No

 

X

As of OctoberJuly 31, 2017,2021, there were 160,332,161152,195,794 shares of the registrant’s common stock outstanding.

 

 


 


BlackRock, Inc.

Index to Form 10-Q

PART I

FINANCIAL INFORMATION

 

 

 

Page

 

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Financial Condition

1

 

 

 

 

Condensed Consolidated Statements of Income

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income

3

 

 

 

 

Condensed Consolidated Statements of Changes in Equity

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

3439

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

6573

 

 

 

Item 4.

Controls and Procedures

6674

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

6775

Item 1A.

Risk Factors

76

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

6977

 

 

 

Item 6.

Exhibits

7078

 

 

 

i


PART I – FINANCIAL INFORMATION

Item 1.     Financial Statements

BlackRock, Inc.

Condensed Consolidated Statements of Financial Condition

(unaudited)

 

 

September 30,

 

 

December 31,

 

 

June 30,

 

 

December 31,

 

(in millions, except shares and per share data)

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents(1)

 

$

6,165

 

 

$

6,091

 

 

$

6,416

 

 

$

8,664

 

Accounts receivable

 

 

3,183

 

 

 

2,350

 

 

 

3,790

 

 

 

3,535

 

Investments(1)

 

 

1,928

 

 

 

1,595

 

 

 

7,595

 

 

 

6,919

 

Assets of consolidated variable interest entities:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

82

 

 

 

84

 

Investments

 

 

1,286

 

 

 

1,008

 

Other assets

 

 

46

 

 

 

63

 

Separate account assets

 

 

147,938

 

 

 

149,089

 

 

 

103,872

 

 

 

104,663

 

Separate account collateral held under securities lending agreements

 

 

27,431

 

 

 

27,792

 

 

 

16,170

 

 

 

16,507

 

Property and equipment (net of accumulated depreciation of $708 and $601 at September 30,

2017 and December 31, 2016, respectively)

 

 

571

 

 

 

559

 

Intangible assets (net of accumulated amortization of $909 and $832 at September 30, 2017

and December 31, 2016, respectively)

 

 

17,400

 

 

 

17,363

 

Property and equipment (net of accumulated depreciation and amortization of $1,211 and

$1,098 at June 30, 2021 and December 31, 2020, respectively)

 

 

741

 

 

 

681

 

Intangible assets (net of accumulated amortization of $351 and $291 at

June 30, 2021 and December 31, 2020, respectively)

 

 

18,514

 

 

 

18,263

 

Goodwill

 

 

13,226

 

 

 

13,118

 

 

 

15,362

 

 

 

14,551

 

Other assets

 

 

1,311

 

 

 

1,065

 

Other assets(1)

 

 

4,502

 

 

 

3,199

 

Total assets

 

$

220,567

 

 

$

220,177

 

 

$

176,962

 

 

$

176,982

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued compensation and benefits

 

$

1,614

 

 

$

1,880

 

 

$

1,704

 

 

$

2,499

 

Accounts payable and accrued liabilities

 

 

1,652

 

 

 

1,094

 

 

 

1,238

 

 

 

1,028

 

Liabilities of consolidated variable interest entities

 

 

319

 

 

 

216

 

Borrowings

 

 

5,000

 

 

 

4,915

 

 

 

6,491

 

 

 

7,264

 

Separate account liabilities

 

 

147,938

 

 

 

149,089

 

 

 

103,872

 

 

 

104,663

 

Separate account collateral liabilities under securities lending agreements

 

 

27,431

 

 

 

27,792

 

 

 

16,170

 

 

 

16,507

 

Deferred income tax liabilities

 

 

4,966

 

 

 

4,840

 

 

 

3,907

 

 

 

3,673

 

Other liabilities

 

 

1,230

 

 

 

1,007

 

Other liabilities(1)

 

 

5,190

 

 

 

3,692

 

Total liabilities

 

 

190,150

 

 

 

190,833

 

 

 

138,572

 

 

 

139,326

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

Temporary equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

320

 

 

 

194

 

 

 

2,242

 

 

 

2,322

 

Permanent Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock, Inc. stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.01 par value;

 

 

2

 

 

 

2

 

 

 

2

 

 

 

2

 

Shares authorized: 500,000,000 at September 30, 2017 and December 31, 2016;

Shares issued: 171,252,185 at September 30, 2017 and December 31, 2016;

Shares outstanding: 160,528,060 and 161,534,443 at September 30, 2017 and

December 31, 2016, respectively

 

 

 

 

 

 

 

 

Preferred stock (Note 15)

 

 

 

 

 

 

Shares authorized: 500,000,000 at June 30, 2021 and December 31, 2020;

Shares issued: 172,075,373 at both June 30, 2021 and December 31, 2020;

Shares outstanding: 152,298,784 and 152,532,885 at June 30, 2021 and

December 31, 2020, respectively

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

19,145

 

 

 

19,337

 

 

 

19,297

 

 

 

19,293

 

Retained earnings

 

 

15,065

 

 

 

13,660

 

 

 

25,620

 

 

 

24,334

 

Accumulated other comprehensive loss

 

 

(473

)

 

 

(716

)

 

 

(388

)

 

 

(337

)

Treasury stock, common, at cost (10,724,125 and 9,717,742 shares held at September 30, 2017 and

December 31, 2016, respectively)

 

 

(3,697

)

 

 

(3,185

)

Treasury stock, common, at cost (19,776,589 and 19,542,488 shares held at June 30, 2021

and December 31, 2020, respectively)

 

 

(8,498

)

 

 

(8,009

)

Total BlackRock, Inc. stockholders’ equity

 

 

30,042

 

 

 

29,098

 

 

 

36,033

 

 

 

35,283

 

Nonredeemable noncontrolling interests

 

 

55

 

 

 

52

 

 

 

115

 

 

 

51

 

Total permanent equity

 

 

30,097

 

 

 

29,150

 

 

 

36,148

 

 

 

35,334

 

Total liabilities, temporary equity and permanent equity

 

$

220,567

 

 

$

220,177

 

 

$

176,962

 

 

$

176,982

 

(1)

At June 30, 2021, cash and cash equivalents, investments, other assets and other liabilities include $217 million, $4,920 million, $136 million, and $1,601 million, respectively, related to consolidated variable interest entities (“VIEs”). At December 31, 2020, cash and cash equivalents, investments, other assets and other liabilities include $155 million, $4,253 million, $90 million, and $952 million, respectively, related to consolidated VIEs.

 

See accompanying notes to condensed consolidated financial statements.

 

 


1


BlackRock,BlackRock, Inc.

Condensed Consolidated Statements of Income

(unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions, except shares and per share data)

 

September 30,

 

 

September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and

securities lending revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and

securities lending revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related parties

 

$

1,995

 

 

$

1,768

 

 

$

5,662

 

 

$

5,098

 

 

$

2,829

 

 

$

2,052

 

 

$

5,514

 

 

$

4,227

 

Other third parties

 

 

797

 

 

 

778

 

 

 

2,335

 

 

 

2,296

 

 

 

928

 

 

 

914

 

 

 

1,835

 

 

 

1,794

 

Total investment advisory, administration fees and

securities lending revenue

 

 

2,792

 

 

 

2,546

 

 

 

7,997

 

 

 

7,394

 

 

 

3,757

 

 

 

2,966

 

 

 

7,349

 

 

 

6,021

 

Investment advisory performance fees

 

 

191

 

 

 

58

 

 

 

309

 

 

 

166

 

 

 

340

 

 

 

112

 

 

 

469

 

 

 

153

 

Technology and risk management revenue

 

 

175

 

 

 

152

 

 

 

497

 

 

 

439

 

Technology services revenue

 

 

316

 

 

 

278

 

 

 

622

 

 

 

552

 

Distribution fees

 

 

5

 

 

 

10

 

 

 

17

 

 

 

32

 

 

 

369

 

 

 

253

 

 

 

709

 

 

 

529

 

Advisory and other revenue

 

 

70

 

 

 

71

 

 

 

202

 

 

 

234

 

 

 

38

 

 

 

39

 

 

 

69

 

 

 

103

 

Total revenue

 

 

3,233

 

 

 

2,837

 

 

 

9,022

 

 

 

8,265

 

 

 

4,820

 

 

 

3,648

 

 

 

9,218

 

 

 

7,358

 

Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

 

1,088

 

 

 

969

 

 

 

3,108

 

 

 

2,893

 

 

 

1,548

 

 

 

1,152

 

 

 

2,957

 

 

 

2,289

 

Distribution and servicing costs

 

 

123

 

 

 

114

 

 

 

361

 

 

 

320

 

 

 

523

 

 

 

429

 

 

 

1,028

 

 

 

874

 

Amortization of deferred sales commissions

 

 

4

 

 

 

8

 

 

 

13

 

 

 

27

 

Direct fund expense

 

 

234

 

 

 

200

 

 

 

666

 

 

 

583

 

 

 

320

 

 

 

246

 

 

 

640

 

 

 

523

 

General and administration

 

 

363

 

 

 

312

 

 

 

1,014

 

 

 

946

 

Restructuring charge

 

 

 

 

 

 

 

 

 

 

 

76

 

General and administration expense

 

 

461

 

 

 

388

 

 

 

1,046

 

 

 

1,530

 

Amortization of intangible assets

 

 

27

 

 

 

25

 

 

 

77

 

 

 

75

 

 

 

37

 

 

 

27

 

 

 

71

 

 

 

52

 

Total expense

 

 

1,839

 

 

 

1,628

 

 

 

5,239

 

 

 

4,920

 

 

 

2,889

 

 

 

2,242

 

 

 

5,742

 

 

 

5,268

 

Operating income

 

 

1,394

 

 

 

1,209

 

 

 

3,783

 

 

 

3,345

 

 

 

1,931

 

 

 

1,406

 

 

 

3,476

 

 

 

2,090

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on investments

 

 

41

 

 

 

31

 

 

 

128

 

 

 

49

 

 

 

314

 

 

 

398

 

 

 

396

 

 

 

358

 

Interest and dividend income

 

 

15

 

 

 

22

 

 

 

35

 

 

 

33

 

 

 

8

 

 

 

10

 

 

 

27

 

 

 

25

 

Interest expense

 

 

(46

)

 

 

(52

)

 

 

(159

)

 

 

(154

)

 

 

(52

)

 

 

(51

)

 

 

(107

)

 

 

(97

)

Total nonoperating income (expense)

 

 

10

 

 

 

1

 

 

 

4

 

 

 

(72

)

 

 

270

 

 

 

357

 

 

 

316

 

 

 

286

 

Income before income taxes

 

 

1,404

 

 

 

1,210

 

 

 

3,787

 

 

 

3,273

 

 

 

2,201

 

 

 

1,763

 

 

 

3,792

 

 

 

2,376

 

Income tax expense

 

 

445

 

 

 

333

 

 

 

1,090

 

 

 

954

 

 

 

654

 

 

 

361

 

 

 

972

 

 

 

347

 

Net income

 

 

959

 

 

 

877

 

 

 

2,697

 

 

 

2,319

 

 

 

1,547

 

 

 

1,402

 

 

 

2,820

 

 

 

2,029

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling

interests

 

 

12

 

 

 

2

 

 

 

31

 

 

 

(2

)

 

 

169

 

 

 

188

 

 

 

243

 

 

 

9

 

Net income attributable to BlackRock, Inc.

 

$

947

 

 

$

875

 

 

$

2,666

 

 

$

2,321

 

 

$

1,378

 

 

$

1,214

 

 

$

2,577

 

 

$

2,020

 

Earnings per share attributable to BlackRock, Inc.

common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

5.85

 

 

$

5.33

 

 

$

16.41

 

 

$

14.09

 

 

$

9.04

 

 

$

7.90

 

 

$

16.90

 

 

$

13.08

 

Diluted

 

$

5.78

 

 

$

5.26

 

 

$

16.23

 

 

$

13.92

 

 

$

8.92

 

 

$

7.85

 

 

$

16.69

 

 

$

12.99

 

Cash dividends declared and paid per share

 

$

2.50

 

 

$

2.29

 

 

$

7.50

 

 

$

6.87

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

161,872,716

 

 

 

164,129,214

 

 

 

162,459,737

 

 

 

164,756,355

 

 

 

152,443,039

 

 

 

153,732,878

 

 

 

152,504,902

 

 

 

154,488,079

 

Diluted

 

 

163,773,546

 

 

 

166,256,598

 

 

 

164,289,042

 

 

 

166,760,912

 

 

 

154,417,581

 

 

 

154,712,032

 

 

 

154,359,353

 

 

 

155,556,187

 

See accompanying notes to condensed consolidated financial statements.

 

 


2


BlackRock,BlackRock, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

 

September 30,

 

 

September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income

 

$

959

 

 

$

877

 

 

$

2,697

 

 

$

2,319

 

 

$

1,547

 

 

$

1,402

 

 

$

2,820

 

 

$

2,029

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments(1)

 

 

102

 

 

 

(38

)

 

 

244

 

 

 

(151

)

 

 

23

 

 

 

29

 

 

 

(51

)

 

 

(210

)

Other

 

 

 

 

 

 

 

 

(1

)

 

 

1

 

Other comprehensive income (loss)

 

 

102

 

 

 

(38

)

 

 

243

 

 

 

(150

)

Comprehensive income

 

 

1,061

 

 

 

839

 

 

 

2,940

 

 

 

2,169

 

Comprehensive income (loss)

 

 

1,570

 

 

 

1,431

 

 

 

2,769

 

 

 

1,819

 

Less: Comprehensive income (loss) attributable to

noncontrolling interests

 

 

12

 

 

 

2

 

 

 

31

 

 

 

(2

)

 

 

169

 

 

 

188

 

 

 

243

 

 

 

9

 

Comprehensive income attributable to BlackRock, Inc.

 

$

1,049

 

 

$

837

 

 

$

2,909

 

 

$

2,171

 

 

$

1,401

 

 

$

1,243

 

 

$

2,526

 

 

$

1,810

 

 

(1)

Amounts for the three months ended SeptemberJune 30, 20172021 and 20162020 include a loss from a net investment hedge of $18$6 million (net of a tax benefit of $11$2 million) and $5$14 million (net of a tax benefit of $4 million), respectively. AmountsAmount for the ninesix months ended SeptemberJune 30, 2017 and 2016 include2021 includes a lossgain from a net investment hedge of $56$20 million (net of tax expense of $6 million). Gain (loss) from a tax benefit of $33 million) and $16 million (net of a tax benefit of $10 million), respectively.  net investment hedge was immaterial for the six months ended June 30, 2020.

See accompanying notes to condensed consolidated financial statements.

 

 

 


3


BlackRock,BlackRock, Inc.

Condensed Consolidated Statements of Changes in Equity

(unaudited)

 

For the Six Months Ended June 30, 2021

(in millions)

 

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity

 

December 31, 2016

 

$

19,339

 

 

$

13,660

 

 

$

(716

)

 

$

(3,185

)

 

$

29,098

 

 

$

52

 

 

$

29,150

 

 

$

194

 

Net income

 

 

 

 

 

2,666

 

 

 

 

 

 

 

 

 

2,666

 

 

 

3

 

 

 

2,669

 

 

 

28

 

Dividends paid

 

 

 

 

 

(1,259

)

 

 

 

 

 

 

 

 

(1,259

)

 

 

 

 

 

(1,259

)

 

 

 

Stock-based compensation

 

 

417

 

 

 

 

 

 

 

 

 

 

 

 

417

 

 

 

 

 

 

417

 

 

 

 

PNC preferred stock capital

    contribution

 

 

193

 

 

 

 

 

 

 

 

 

 

 

 

193

 

 

 

 

 

 

193

 

 

 

 

Retirement of preferred stock

 

 

(193

)

 

 

 

 

 

 

 

 

 

 

 

(193

)

 

 

 

 

 

(193

)

 

 

 

Issuance of common shares

   related to employee stock

   transactions

 

 

(612

)

 

 

 

 

 

 

 

 

621

 

 

 

9

 

 

 

 

 

 

9

 

 

 

 

Employee tax withholdings

   related to employee stock

   transactions

 

 

 

 

 

 

 

 

 

 

 

(308

)

 

 

(308

)

 

 

 

 

 

(308

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

 

(825

)

 

 

(825

)

 

 

 

 

 

(825

)

 

 

 

Subscriptions (redemptions/

   distributions) —

   noncontrolling interest

   holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

(14

)

 

 

338

 

Net consolidations

  (deconsolidations) of

   sponsored

   investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

14

 

 

 

(240

)

Other comprehensive

   income (loss)

 

 

 

 

 

 

 

 

243

 

 

 

 

 

 

243

 

 

 

 

 

 

243

 

 

 

 

Adoption of new accounting

   pronouncement

 

 

3

 

 

 

(2

)

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

 

 

 

September 30, 2017

 

$

19,147

 

 

$

15,065

 

 

$

(473

)

 

$

(3,697

)

 

$

30,042

 

 

$

55

 

 

$

30,097

 

 

$

320

 

(in millions)

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests(2)

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity(2)

 

December 31, 2020

$

19,295

 

 

$

24,334

 

 

$

(337

)

 

$

(8,009

)

 

$

35,283

 

 

$

51

 

 

$

35,334

 

 

$

2,322

 

Net income

 

 

 

 

2,577

 

 

 

 

 

 

 

 

 

2,577

 

 

 

2

 

 

 

2,579

 

 

 

241

 

Dividends declared ($8.26 per share)

 

 

 

 

(1,291

)

 

 

 

 

 

 

 

 

(1,291

)

 

 

 

 

 

(1,291

)

 

 

 

Stock-based compensation

 

378

 

 

 

 

 

 

 

 

 

 

 

 

378

 

 

 

 

 

 

378

 

 

 

 

Issuance of common shares related to

   employee stock transactions

 

(374

)

 

 

 

 

 

 

 

 

384

 

 

 

10

 

 

 

 

 

 

10

 

 

 

 

Employee tax withholdings related to

   employee stock transactions

 

 

 

 

 

 

 

 

 

 

(273

)

 

 

(273

)

 

 

 

 

 

(273

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

(600

)

 

 

(600

)

 

 

 

 

 

(600

)

 

 

 

Contributions (redemptions/distributions)

    — noncontrolling interest holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61

 

 

 

61

 

 

 

776

 

Net consolidations (deconsolidations)

   of sponsored investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

 

 

(1,097

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

(51

)

 

 

 

 

 

(51

)

 

 

 

 

 

(51

)

 

 

 

June 30, 2021

$

19,299

 

 

$

25,620

 

 

$

(388

)

 

$

(8,498

)

 

$

36,033

 

 

$

115

 

 

$

36,148

 

 

$

2,242

 

 

(1)(1)

Amounts include $2 million of common stock at both SeptemberJune 30, 20172021 and December 31, 2016.2020.

(2)

At June 30, 2021, amounts include noncontrolling interests related to consolidated sponsored investment products (“CIPs”) and a consolidated affiliate.

For the Three Months Ended June 30, 2021

(in millions)

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests(2)

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity(2)

 

March 31, 2021

$

19,123

 

 

$

24,872

 

 

$

(411

)

 

$

(8,204

)

 

$

35,380

 

 

$

49

 

 

$

35,429

 

 

$

2,411

 

Net income

 

 

 

 

1,378

 

 

 

 

 

 

 

 

 

1,378

 

 

 

2

 

 

 

1,380

 

 

 

167

 

Dividends declared ($4.13 per share)

 

 

 

 

(630

)

 

 

 

 

 

 

 

 

(630

)

 

 

 

 

 

(630

)

 

 

 

Stock-based compensation

 

182

 

 

 

 

 

 

 

 

 

 

 

 

182

 

 

 

 

 

 

182

 

 

 

 

Issuance of common shares related to

   employee stock transactions

 

(6

)

 

 

 

 

 

 

 

 

11

 

 

 

5

 

 

 

 

 

 

5

 

 

 

 

Employee tax withholdings related to

   employee stock transactions

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(5

)

 

 

 

 

 

(5

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

(300

)

 

 

(300

)

 

 

 

 

 

(300

)

 

 

 

Contributions (redemptions/distributions)

    — noncontrolling interest holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63

 

 

 

63

 

 

 

154

 

Net consolidations (deconsolidations)

   of sponsored investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

 

 

(490

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

23

 

 

 

 

 

 

23

 

 

 

 

 

 

23

 

 

 

 

June 30, 2021

$

19,299

 

 

$

25,620

 

 

$

(388

)

 

$

(8,498

)

 

$

36,033

 

 

$

115

 

 

$

36,148

 

 

$

2,242

 

(1)

Amounts include $2 million of common stock at both June 30, 2021 and March 31, 2021.

(2)

At June 30, 2021, amounts include noncontrolling interests related to CIPs and a consolidated affiliate.  

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

4



BlackRock, Inc.

Condensed Consolidated Statements of Changes in Equity

(unaudited)

 

For the Six Months Ended June 30, 2020

(in millions)

 

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity

 

December 31, 2015

 

$

19,407

 

 

$

12,033

 

 

$

(448

)

 

$

(2,489

)

 

$

28,503

 

 

$

77

 

 

$

28,580

 

 

$

464

 

Net income

 

 

 

 

 

2,321

 

 

 

 

 

 

 

 

 

2,321

 

 

 

(2

)

 

 

2,319

 

 

 

 

Dividends paid

 

 

 

 

 

(1,171

)

 

 

 

 

 

 

 

 

(1,171

)

 

 

 

 

 

(1,171

)

 

 

 

Stock-based compensation

 

 

408

 

 

 

 

 

 

 

 

 

 

 

 

408

 

 

 

 

 

 

408

 

 

 

 

PNC preferred stock capital

    contribution

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

172

 

 

 

 

 

 

172

 

 

 

 

Retirement of preferred stock

 

 

(172

)

 

 

 

 

 

 

 

 

 

 

 

(172

)

 

 

 

 

 

(172

)

 

 

 

Issuance of common shares

    related to employee stock

    transactions

 

 

(654

)

 

 

 

 

 

 

 

 

688

 

 

 

34

 

 

 

 

 

 

34

 

 

 

 

Employee tax withholdings

    related to employee stock

    transactions

 

 

 

 

 

 

 

 

 

 

 

(268

)

 

 

(268

)

 

 

 

 

 

(268

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

 

(850

)

 

 

(850

)

 

 

 

 

 

(850

)

 

 

 

Net tax benefit (shortfall) from

   stock-based compensation

 

 

77

 

 

 

 

 

 

 

 

 

 

 

 

77

 

 

 

 

 

 

77

 

 

 

 

Subscriptions (redemptions/

    distributions) —

    noncontrolling interest

    holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

(18

)

 

 

1,017

 

Net consolidations

    (deconsolidations) of

     sponsored

     investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(881

)

Other comprehensive

    income (loss)

 

 

 

 

 

 

 

 

(150

)

 

 

 

 

 

(150

)

 

 

 

 

 

(150

)

 

 

 

September 30, 2016

 

$

19,238

 

 

$

13,183

 

 

$

(598

)

 

$

(2,919

)

 

$

28,904

 

 

$

57

 

 

$

28,961

 

 

$

600

 

(in millions)

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity

 

December 31, 2019

$

19,188

 

 

$

21,662

 

 

$

(571

)

 

$

(6,732

)

 

$

33,547

 

 

$

66

 

 

$

33,613

 

 

$

1,316

 

Net income

 

 

 

 

2,020

 

 

 

 

 

 

 

 

 

2,020

 

 

 

 

 

 

2,020

 

 

 

9

 

Dividends declared ($7.26 per share)

 

 

 

 

(1,150

)

 

 

 

 

 

 

 

 

(1,150

)

 

 

 

 

 

(1,150

)

 

 

 

Stock-based compensation

 

298

 

 

 

 

 

 

 

 

 

 

 

 

298

 

 

 

 

 

 

298

 

 

 

 

Issuance of common shares related to

   employee stock transactions

 

(477

)

 

 

 

 

 

 

 

 

484

 

 

 

7

 

 

 

 

 

 

7

 

 

 

 

Employee tax withholdings related to

   employee stock transactions

 

 

 

 

 

 

 

 

 

 

(270

)

 

 

(270

)

 

 

 

 

 

(270

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

(1,512

)

 

 

(1,512

)

 

 

 

 

 

(1,512

)

 

 

 

Contributions (redemptions/distributions)

    — noncontrolling interest holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

(10

)

 

 

815

 

Net consolidations (deconsolidations) of

  sponsored investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(892

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

(210

)

 

 

 

 

 

(210

)

 

 

 

 

 

(210

)

 

 

 

June 30, 2020

$

19,009

 

 

$

22,532

 

 

$

(781

)

 

$

(8,030

)

 

$

32,730

 

 

$

56

 

 

$

32,786

 

 

$

1,248

 

 

(1)

Amounts include $2 million of common stock at both SeptemberJune 30, 20162020 and December 31, 2015.2019.

For the Three Months Ended June 30, 2020

(in millions)

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity

 

March 31, 2020

$

18,887

 

 

$

21,872

 

 

$

(810

)

 

$

(6,936

)

 

$

33,013

 

 

$

57

 

 

$

33,070

 

 

$

1,440

 

Net income

 

 

 

 

1,214

 

 

 

 

 

 

 

 

 

1,214

 

 

 

 

 

 

1,214

 

 

 

188

 

Dividends declared ($3.63 per share)

 

 

 

 

(554

)

 

 

 

 

 

 

 

 

(554

)

 

 

 

 

 

(554

)

 

 

 

Stock-based compensation

 

149

 

 

 

 

 

 

 

 

 

 

 

 

149

 

 

 

 

 

 

149

 

 

 

 

Issuance of common shares related to

   employee stock transactions

 

(27

)

 

 

 

 

 

 

 

 

31

 

 

 

4

 

 

 

 

 

 

4

 

 

 

 

Employee tax withholdings related to

   employee stock transactions

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(13

)

 

 

 

 

 

(13

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

(1,112

)

 

 

(1,112

)

 

 

 

 

 

(1,112

)

 

 

 

Contributions (redemptions/distributions)

    — noncontrolling interest holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

 

 

(56

)

Net consolidations (deconsolidations) of

  sponsored investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(324

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

29

 

 

 

 

 

 

29

 

 

 

 

 

 

29

 

 

 

 

June 30, 2020

$

19,009

 

 

$

22,532

 

 

$

(781

)

 

$

(8,030

)

 

$

32,730

 

 

$

56

 

 

$

32,786

 

 

$

1,248

 

(1)

Amounts include $2 million of common stock at both June 30, 2020 and March 31, 2020.

See accompanying notes to condensed consolidated financial statements.

 

 

 

5



BlackRock,

BlackRock, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

Nine Months Ended

 

 

Six Months Ended

 

(in millions)

 

September 30,

 

 

June 30,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

 

Net income

 

$

2,697

 

 

$

2,319

 

 

$

2,820

 

 

$

2,029

 

Adjustments to reconcile net income to cash flows from operating activities:

 

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by/(used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

190

 

 

 

198

 

 

 

198

 

 

 

168

 

Noncash lease expense

 

 

63

 

 

 

57

 

Stock-based compensation

 

 

417

 

 

 

408

 

 

 

378

 

 

 

298

 

Deferred income tax expense (benefit)

 

 

175

 

 

 

(6

)

 

 

233

 

 

 

(67

)

Assets and liabilities of consolidated VIEs:

 

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

 

(19

)

 

 

(127

)

Net (gains) losses within consolidated VIEs

 

 

(95

)

 

 

(34

)

Net (purchases) proceeds within consolidated VIEs

 

 

(148

)

 

 

(855

)

Charitable Contribution

 

 

 

 

 

589

 

Gain related to the Charitable Contribution

 

 

 

 

 

(122

)

Other investment gains

 

 

 

 

 

(244

)

Net (gains) losses within CIPs

 

 

(310

)

 

 

69

 

Net (purchases) proceeds within CIPs

 

 

(759

)

 

 

(828

)

(Earnings) losses from equity method investees

 

 

(92

)

 

 

(71

)

 

 

(107

)

 

 

(24

)

Distributions of earnings from equity method investees

 

 

24

 

 

 

16

 

 

 

25

 

 

 

23

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(776

)

 

 

(336

)

 

 

(264

)

 

 

120

 

Investments, trading

 

 

(145

)

 

 

(278

)

 

 

62

 

 

 

114

 

Other assets

 

 

(190

)

 

 

(114

)

 

 

(1,330

)

 

 

(817

)

Accrued compensation and benefits

 

 

(267

)

 

 

(484

)

 

 

(801

)

 

 

(885

)

Accounts payable and accrued liabilities

 

 

595

 

 

 

309

 

 

 

205

 

 

 

(273

)

Other liabilities

 

 

120

 

 

 

17

 

 

 

840

 

 

 

562

 

Cash flows from operating activities

 

 

2,486

 

 

 

962

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Net cash provided by/(used in) operating activities

 

 

1,253

 

 

 

769

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of investments

 

 

(400

)

 

 

(292

)

 

 

(360

)

 

 

(180

)

Proceeds from sales and maturities of investments

 

 

121

 

 

 

215

 

 

 

184

 

 

 

69

 

Distributions of capital from equity method investees

 

 

26

 

 

 

26

 

 

 

55

 

 

 

93

 

Net consolidations (deconsolidations) of sponsored investment funds

 

 

(35

)

 

 

(74

)

 

 

(39

)

 

 

(40

)

Acquisitions

 

 

(102

)

 

 

(30

)

Acquisitions, net of cash acquired

 

 

(1,097

)

 

 

 

Purchases of property and equipment

 

 

(100

)

 

 

(88

)

 

 

(178

)

 

 

(100

)

Cash flows from investing activities

 

 

(490

)

 

 

(243

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net cash provided by/(used in) investing activities

 

 

(1,435

)

 

 

(158

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from long-term borrowings

 

 

697

 

 

 

 

 

 

 

 

 

2,245

 

Repayments of long-term borrowings

 

 

(700

)

 

 

 

 

 

(750

)

 

 

 

Cash dividends paid

 

 

(1,259

)

 

 

(1,171

)

 

 

(1,291

)

 

 

(1,150

)

Proceeds from stock options exercised

 

 

 

 

 

26

 

Repurchases of common stock

 

 

(1,133

)

 

 

(1,118

)

 

 

(873

)

 

 

(1,782

)

Net (redemptions/distributions paid)/subscriptions received from noncontrolling

interest holders

 

 

324

 

 

 

999

 

Excess tax benefit from stock-based compensation

 

 

 

 

 

81

 

Net proceeds from (repayments of) borrowings by CIPs

 

 

18

 

 

 

30

 

Net contributions (redemptions/distributions) - noncontrolling interest holders

 

 

837

 

 

 

805

 

Other financing activities

 

 

(12

)

 

 

3

 

 

 

(7

)

 

 

(42

)

Cash flows from financing activities

 

 

(2,083

)

 

 

(1,180

)

Effect of exchange rate changes on cash and cash equivalents

 

 

161

 

 

 

(168

)

Net increase (decrease) in cash and cash equivalents

 

 

74

 

 

 

(629

)

Cash and cash equivalents, beginning of period

 

 

6,091

 

 

 

6,083

 

Cash and cash equivalents, end of period

 

$

6,165

 

 

$

5,454

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$

150

 

 

$

144

 

Income taxes (net of refunds)

 

$

916

 

 

$

910

 

Net cash provided by/(used in) financing activities

 

 

(2,066

)

 

 

106

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

 

 

 

(80

)

Net increase/(decrease) in cash, cash equivalents and restricted cash

 

 

(2,248

)

 

 

637

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

8,681

 

 

 

4,846

 

Cash, cash equivalents and restricted cash, end of period

 

$

6,433

 

 

$

5,483

 

Supplemental schedule of noncash investing and financing transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 

$

612

 

 

$

654

 

 

$

374

 

 

$

477

 

PNC preferred stock capital contribution

 

$

193

 

 

$

172

 

Charitable Contribution of an investment

 

$

 

 

$

(589

)

Increase (decrease) in noncontrolling interests due to net consolidation (deconsolidation) of

sponsored investment funds

 

$

(226

)

 

$

(881

)

 

$

(1,096

)

 

$

(892

)

 

See accompanying notes to condensed consolidated financial statements.

 


6


BlackRock,BlackRock, Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

 

1. Business Overview

BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, “BlackRock” or the “Company”) is a leading publicly traded investment management firm providing a broad range of investment management and risk managementtechnology services to institutional and retail clients worldwide.

BlackRock’s diverse platform of alpha-seeking active, (alpha)index and index (beta)cash management investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares®exchange-traded funds (“ETFs”), separate accounts, collective investmenttrust funds (“CTFs”) and other pooled investment vehicles. BlackRock also offers antechnology services, including the investment and risk management technology platform, Aladdin®, risk analytics,Aladdin Wealth, eFront, Cachematrix and FutureAdvisor, as well as advisory and technology services and solutions to a broad base of institutional and wealth management investors.

At September 30, 2017, The PNC Financial Services Group, Inc. (“PNC”) held 21.4% of the Company’s voting common stock and 21.9% of the Company’s capital stock, which includes outstanding common and nonvoting preferred stock.

clients.

 

2. Significant Accounting Policies

Basis of Presentation.

These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its controlled subsidiaries. Noncontrolling interests (“NCI”) on the condensed consolidated statements of financial condition representsrepresent the portion of CIPs and a consolidated sponsored investment fundsaffiliate  (collectively, “consolidated entities”) in which the Company does not have direct equity ownership. AccountsIntercompany balances and transactions between consolidated entities have been eliminated.eliminated upon consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.

Certain financial information that normally is included in annual financial statements, including certain financial statement footnotes, is not required for interim reporting purposes and has been condensed or omitted herein. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2020, which was filed with the Securities and Exchange Commission (“SEC”) on February 28, 201725, 2021 (“20162020 Form 10-K”).

The interim financial information at SeptemberJune 30, 20172021 and for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 is unaudited. However, in the opinion of management, the interim information includes all normal recurring adjustments necessary for the fair presentation of the Company’s results for the periods presented. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year.

Certain items previously reported have beenprior period presentations and disclosures, while not required to be recast, were reclassified to conform toensure comparability with current period classifications.

Consolidated Affiliate. During the current year presentation. Beginning with the firstsecond quarter of 2017, Aladdin revenue previously reported within “2021, the Company formed a majority-controlled asset management company in China - BlackRock Solutions®CCB Wealth Management Company Ltd. (“WMC”). WMC is 50.1% owned by the Company. The Company consolidates WMC, which it deems to be a voting rights entity (“VRE”), because it can exert control over the financial and advisory” has been presented within “Technologyoperating policies of the entity, based on the Company’s 50.1% ownership and risk management revenue”voting rights.  


Noncontrolling Interests. NCI consist of third-party investments in the Company’s sponsored investment products and minority interests in WMC, the Company’s consolidated affiliate. The Company reports NCI as equity, separate from the parent’s equity, on the condensed consolidated statements of income.  The remaining previously reported “BlackRock Solutionsfinancial condition. NCI that are redeemable at the option of the holders are classified as temporary equity and advisory” revenue is currently reportednonredeemable NCI are classified as parta component of “Advisory and other revenue.” The prior period amounts reported for BlackRock Solutions and advisory for the three and nine months ended September 30, 2016 have been reclassified to conform to the current presentation.

Accounting Pronouncements Adoptedpermanent equity in the Nine Months Ended September 30, 2017.

Accounting for Share-Based Payments. In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the condensed consolidated

7


statements of cash flows. The Company adopted ASU 2016-09 as of January 1, 2017. ASU 2016-09 requires all excess tax benefits and deficiencies to be recognized in income tax expense on the condensed consolidated statements of income. Accordingly, the Company recorded a discrete income tax benefit of $81 million during the three months ended March 31, 2017 for vested restricted stock units where the grant date stock price was lower than the vesting date stock price. The new guidance will increase the volatility of income tax expense as a result of fluctuations in the Company’s stock price. Upon adoption, the Company elected to account for forfeitures as they occur, which did not have a material impact on the condensed consolidated financial statements.condition. In addition, the Company electedreports net income (loss) attributable to present excess tax benefitsredeemable and deficiencies prospectivelynonredeemable NCI holders in operating activities onnet income (loss) attributable to NCI in the condensed consolidated statements of cash flows.income.

Noncontrolling Interests – CIPs.   NCI of CIPs represent third-party investments in the Company’s sponsored investment products.  

Noncontrolling Interests – Consolidated Affiliate.   NCI of consolidated affiliate represent minority interests held in WMC, a consolidated affiliate. NCI of a consolidated affiliate that are classified as nonredeemable are included as a component of permanent equity in the condensed consolidated statements of financial condition. NCI of a consolidated affiliate that are classified as redeemable are included in temporary equity at estimated redemption value in the condensed consolidated statements of financial condition.  

Fair Value Measurements.Measurements

Hierarchy of Fair Value Inputs.    Inputs.   The Company uses a fair value hierarchy that prioritizes inputs to valuation approaches used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 Inputs:

Quoted prices (unadjusted) in active markets for identical assets or liabilities at the reporting date.

Level 1 assets may include listed mutual funds, ETFs, listed equities and certain exchange-traded derivatives.

Level 1 assets may include listed mutual funds, ETFs, listed equities and certain exchange-traded derivatives.

Level 2 Inputs:

Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; quotes from pricing services or brokers for which the Company can determine that orderly transactions took place at the quoted price or that the inputs used to arrive at the price are observable; and inputs other than quoted prices that are observable, such as models or other valuation methodologies.

Level 2 assets may include debt securities, investments in CLOs, short-term floating-rate notes, asset-backed securities, securities held within consolidated hedge funds, restricted public securities valued at a discount, as well as over-the-counter derivatives, including interest and inflation rate swaps and foreign currency exchange contracts that have inputs to the valuations that generally can be corroborated by observable market data.

Level 2 assets may include debt securities, investments in collateralized loan obligations (“CLOs”), bank loans, short-term floating-rate notes, asset-backed securities, securities held within consolidated hedge funds, restricted public securities valued at a discount, as well as over-the-counter derivatives, including interest and inflation rate swaps and foreign currency exchange contracts that have inputs to the valuations that generally can be corroborated by observable market data.

Level 3 Inputs:

Unobservable inputs for the valuation of the asset or liability, which may include nonbinding broker quotes. Level 3 assets include investments for which there is little, if any, market activity. These inputs require significant management judgment or estimation.

Level 3 assets may include direct private equity investments held within consolidated funds and investments in CLOs.

Level 3 assets may include direct private equity investments held within consolidated funds, investments in CLOs and bank loans held within consolidated CLOs.

Level 3 liabilities include contingent liabilities related to acquisitions valued based upon discounted cash flow analyses using unobservable market data.

Level 3 liabilities may include borrowings of consolidated CLOs and contingent liabilities related to acquisitions valued based upon discounted cash flow analyses using unobservable market data.

Significance of Inputs.The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

Valuation Approaches.The fair values of certain Level 3 assets and liabilities were determined using various valuation approaches as appropriate, including third-party pricing vendors, broker quotes and market and income approaches. Such quotes and modeled prices are evaluated for reasonableness through various procedures, including due diligence reviews of third-party pricing vendors, variance analyses, consideration of the current market environment and other analytical procedures.

A significant number of inputs used to value equity, debt securities, and investments in CLOs and bank loans is sourced from third-party pricing vendors. Generally, prices obtained from pricing vendors are categorized as Level 1 inputs for identical securities traded in active markets and as Level 2 for other similar securities if the vendor uses observable inputs in determining the price. Annually, BlackRock’s internal valuation committee or other designated groups review both the valuation approaches, including the general assumptions and methods used to value various asset classes, and


8


operational processes with these vendors. On a quarterly basis, meetings are held with key vendors to identify any significant changes to the vendors’ processes.

In addition, quotes obtained from brokers generally are nonbinding and categorized as Level 3 inputs. However, if the Company is able to determine that market participants have transacted for the asset in an orderly manner near the quoted price or if the Company can determine that the inputs used by the broker are observable, the quote is classified as a Level 2 input.

Investments Measured at Net Asset Values.   As a practical expedient, the Company uses net asset value (“NAV”) as the fair value for certain investments. The inputs to value these investments may include BlackRockthe Company’s capital accounts for its partnership interests in various alternative investments, including hedge funds, real assets and private equity funds, which may be adjusted by using the returns of certain market indices. The various partnerships generally are investment companies, which record their underlying investments at fair value based on fair value policies established by management of the underlying fund. Fair value policies at the underlying fund generally require the fund to utilize pricing/valuation information from third-party sources, including independent appraisals. However, in some instances, current valuation information for illiquid securities or securities in markets that are not active may not be available from any third-party source or fund management may conclude that the valuations that are available from third-party sources are not reliable. In these instances, fund management may perform model-based analytical valuations that could be used as an input to value these investments.

Derivative InstrumentsFair Value Assets and Liabilities of Consolidated CLO.  The Company applies the fair value option provisions for eligible assets, including bank loans, held by a consolidated CLO. As the fair value of the financial assets of the consolidated CLO is more observable than the fair value of the borrowings of the consolidated CLO, the Company measures the fair value of the borrowings of the consolidated CLO equal to the fair value of the assets of the consolidated CLO less the fair value of the Company’s economic interest in the CLO.

Derivatives and Hedging Activities.  The Company does not use derivative financial instruments for trading or speculative purposes. The Company uses derivative financial instruments primarily for purposes of hedging exposures to fluctuations in foreign currency exchange rates of certain assets and liabilities, and market exposures for certain seed investments. However, certain consolidated sponsored investment funds may also utilize derivatives as a part of their investment strategy.

The Company records all derivative financial instruments as either assets or liabilities at fair value on a gross basis in the condensed consolidated statements of financial condition. Credit risks are managed through master netting and collateral support agreements. The amounts related to the right to reclaim or the obligation to return cash collateral may not be used to offset amounts due under the derivative instruments in the normal course of settlement. Therefore, such amounts are not offset against fair value amounts recognized for derivative instruments with the same counterparty and are included in other assets and other liabilities. Changes in the fair value of the Company’s derivative financial instruments are recognized in earnings and, where applicable, are offset by the corresponding gain or loss on the related foreign-denominated assets or liabilities or hedged investments, on the condensed consolidated statements of income.

The Company may also use financial instruments designated as net investment hedges for accounting purposes to hedge net investments in international subsidiaries whose functional currency is not U.S.US dollars. The gain or loss from revaluing accountingnet investment hedges of net investments in foreign operations at the spot rate is deferred and reported within accumulated other comprehensive income (loss) (“AOCI”) on the condensed consolidated statements of financial condition. Amounts excluded from the effectiveness assessment are reported in the condensed consolidated statements of income using a systematic and rational method. The Company reassesses the effectiveness of its net investment hedge on a quarterly basis.

Money Market Fee Waivers.    The Company is currently voluntarily waiving a portion of its management fees on certain money market funds to ensure that they maintain a targeted level of daily net investment income (the “Yield Support waivers”). During the three and nine months ended September 30, 2017, these waivers resulted in a reduction of management fees of approximately $0million and $6 million, respectively.  During the three and nine months ended September 30, 2016, these waivers resulted in a reduction of management fees of approximately $17million and $42 million, respectively.  Approximately 0% and 45% of Yield Support waivers for the nine months ended September 30, 2017 and 2016, respectively, were offset by a reduction of BlackRock’s distribution and servicing costs paid to a financial intermediary.  BlackRock may increase or decrease the level of Yield Support waivers in future periods.at least quarterly.

Separate Account Assets and Liabilities.  Separate account assets are maintained by BlackRock Life Limited, a wholly owned subsidiary of the Company, which is a registered life insurance company in the United Kingdom (“UK”), and represent segregated assets held for purposes of funding individual and group pension contracts. The life insurance company does not underwrite any insurance contracts that involve any insurance risk transfer from the insured to the life insurance company. The separate account assets primarily include equity securities, debt securities, money market funds and derivatives. The separate account assets are not subject to general claims of the creditors of BlackRock. These separate account assets and the related equal and offsetting liabilities are recorded as separate account assets and separate account liabilities on the condensed consolidated statements of financial condition.


The net investment income attributable to separate account assets supporting individual and group pension contracts accrues directly to the contract owner and is not reported on the condensed consolidated statements of income. While BlackRock has no economic interest in these separate account assets and liabilities, BlackRock earns policy administration and management fees associated with these products, which are included in investment advisory, administration fees and securities lending revenue on the condensed consolidated statements of income.

9


Separate Account Collateral Assets Held and Liabilities Under Securities Lending Agreements.  The Company facilitates securities lending arrangements whereby securities held by separate accounts maintained by BlackRock Life Limited are lent to third parties under global master securities lending agreements. In exchange, the Company receives legal title to the collateral with minimum values generally ranging from approximately 102% to 112% of the value of the securities lent in order to reduce counterparty risk. The required collateral value is calculated on a daily basis. The global master securities lending agreements provide the Company the right to request additional collateral or, in the event of borrower default, the right to liquidate collateral. The securities lending transactions entered into by the Company are accompanied by an agreement that entitles the Company to request the borrower to return the securities at any time; therefore, these transactions are not reported as sales.

The Company records on the condensed consolidated statements of financial condition the cash and noncash collateral received under these BlackRock Life Limited securities lending arrangements as its own asset in addition to an equal and offsetting collateral liability for the obligation to return the collateral. The securities lending revenue earned from lending securities held by the separate accounts is included in investment advisory, administration fees and securities lending revenue on the condensed consolidated statements of income. During the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, the Company had not0t resold or repledged any of the collateral received under these arrangements. At SeptemberJune 30, 20172021 and December 31, 2016,2020, the fair value of loaned securities held by separate accounts was approximately $24.7$14.8 billion and $25.7$15.2 billion, respectively, and the fair value of the collateral held under these securities lending agreements was approximately $27.4$16.2 billion and $27.8$16.5 billion, respectively.

Recent Accounting Pronouncements Not Yet Adopted.

Revenue from Contracts with Customers.    In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance also changes the accounting for certain contract costs and revises the criteria for determining if an entity is acting as a principal or agent in certain arrangements.Money Market Fee Waivers.  The Company continues to evaluate the impact of ASU 2014-09 on the presentation and recognitionmay voluntarily waive a portion of its revenue contractsmanagement fees on certain money market funds to ensure that they maintain a targeted level of daily net investment income (the “Yield Support waivers”). During the three and certain contract costs.six months ended June 30, 2021, these waivers resulted in a reduction of management fees of approximately $160 million and $230 million, respectively, which was partially offset by a reduction of BlackRock’s distribution and servicing costs paid to financial intermediaries. There were no Yield Support waivers for the three and six months ended June 30, 2020. The most significant change identified to date relatesCompany may increase or decrease the level of Yield Support waivers in future periods.


3. Acquisitions

Aperio Group, LLC

On February 1, 2021, the Company acquired 100% of the equity interests of Aperio Group, LLC (the “Aperio Transaction” or “Aperio”), a pioneer in customizing tax-optimized index equity separately managed accounts (“SMAs”) for approximately $1.1 billion in cash, using existing cash resources. The acquisition of Aperio increased BlackRock’s SMA assets under management and expanded the breadth of the Company’s capabilities via tax-managed strategies across factors, broad market indexing, and investor Environmental, Social, and Governance preferences across all asset classes.

The purchase price for the Aperio Transaction was allocated to the presentationassets acquired and liabilities assumed based upon their estimated fair values at the date of certain distribution costs, which are currently presented net against revenues (contra-revenue) and will likely be presented as an expense on a gross basis. the transaction. The Company currently expects such net gross upgoodwill recognized in connection with the acquisition is primarily attributable to annual revenueanticipated synergies from the transaction. The amount of goodwill expected to be deductible for tax purposes is approximately $1 billion with a corresponding gross up$0.6 billion. A summary of the fair values of the assets acquired and liabilities assumed in this acquisition is as follows(1):

 

 

Estimate of

 

(in millions)

 

Fair Value

 

Accounts receivable

 

$

16

 

Finite-lived intangible assets:

 

 

 

 

Customer relationships(2)

 

 

270

 

Other

 

 

17

 

Goodwill

 

 

787

 

Deferred income tax liabilities

 

 

(16

)

Other liabilities assumed

 

 

(12

)

Total consideration, net of cash acquired

 

$

1,062

 

 

 

 

 

 

Summary of consideration, net of cash acquired:

 

 

 

 

Cash paid

 

$

1,066

 

Cash acquired

 

 

(4

)

Total consideration, net of cash acquired

 

$

1,062

 

(1)

At this time, the Company does not expect material changes to the value of the assets acquired or liabilities assumed in conjunction with the transaction.

(2)

The fair value was determined based on the excess earnings method (a Level 3 input), has a weighted-average estimated useful life of approximately 10 years and is amortized using the accelerated amortization method.

Finite-lived intangible assets are amortized over their estimated useful lives, which range from three to annual expense. The Company is currently evaluating which transition method it will apply when it adopts the new revenue recognition guidance in the first quarter of 2018.

Recognition and Measurement of Financial Instruments.In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”).  ASU 2016-01 amends guidance on the classification and measurement of financial instruments, including significant revisions in accounting10 years.  Amortization expense related to the classificationfinite-lived intangible assets was $10 million and measurement$17 million, respectively, for the three and six months ended June 30, 2021. The finite-lived intangible assets had a weighted-average remaining useful life of investmentsapproximately nine years with remaining amortization expense as follows:

(in millions)

 

 

 

 

Year

 

Amount

 

2021 (excluding the six months ended June 30, 2021)

 

$

20

 

2022

 

 

40

 

2023

 

 

38

 

2024

 

 

32

 

2025

 

 

29

 

Thereafter

 

 

111

 

Total

 

$

270

 


The financial results of Aperio have been included in equity securitiesBlackRock’s condensed consolidated financial statements from the closing of the Aperio Transaction. For the three and presentationsix months ended June 30, 2021, Aperio contributed $21 million and $34 million, respectively, of certain fair value changesrevenue and did 0t have a material impact to net income attributable to BlackRock, Inc. Consequently, the Company has not presented pro forma combined results of operations for this acquisition.

Baringa’s Climate Change Scenario Model

In June 2021, the Company completed the acquisition of Baringa Partners’ Climate Change Scenario Model, which will be integrated into BlackRock’s Aladdin Climate technology, and will enhance Aladdin Climate’s capabilities and analytics.Total consideration, including contingent consideration, is not material to the Company’s condensed consolidated financial liabilities when the fair value option is elected.  ASU 2016-01 also amends certain disclosure requirements associated with the fair valuestatements.

4. Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of financial instruments. The Company does not currently expect the reclassification of unrealized gains(losses) on equity securitiescash and cash equivalents reported within accumulated other comprehensive income to retained earnings to be material upon adoption effective January 1, 2018.  

Leases. In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize assets and liabilities arising from most operating leases on the condensed consolidated statements of financial condition. The Company expectscondition to record assetsthe cash, cash equivalents, and liabilities for its current operating leases upon adoption of ASU 2016-02 and does not expect the adoption to have a material impact on its results of operations orrestricted cash flows. ASU 2016-02 is effective for the Company on January 1, 2019, and the Company intends to apply the practical expedients allowed by the standard upon transition.  See Note 13 of the 2016 Form 10-K for information on the Company’s operating lease commitments.

Cash Flow Classification.  In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which amends and clarifies the current guidance to reduce diversity in practice of the classification of certain cash receipts and payments inreported within the condensed consolidated statements of cash flows. The Company is currently evaluating the impact of adopting ASU 2016-15, which is effective for the Company on January 1, 2018 with early adoption permitted. The Company must apply the guidance retrospectively to all periods presented.

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

(in millions)

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,416

 

 

$

8,664

 

Restricted cash included in other assets

 

 

17

 

 

 

17

 

Total cash, cash equivalents and restricted cash

 

$

6,433

 

 

$

8,681

 

10


3.


5. Investments

A summary of the carrying value of total investments is as follows:

 

 

 

September 30,

 

 

December 31,

 

(in millions)

 

2017

 

 

2016

 

Available-for-sale investments

 

$

104

 

 

$

80

 

Held-to-maturity investments

 

 

76

 

 

 

51

 

Trading investments:

 

 

 

 

 

 

 

 

Consolidated sponsored investment funds

 

 

507

 

 

 

465

 

Other equity and debt securities

 

 

131

 

 

 

101

 

Deferred compensation plan mutual funds

 

 

54

 

 

 

59

 

Total trading investments

 

 

692

 

 

 

625

 

Other investments:

 

 

 

 

 

 

 

 

Equity method investments(1)

 

 

944

 

 

 

730

 

Cost method investments(2)

 

 

92

 

 

 

91

 

Carried interest(3)

 

 

20

 

 

 

18

 

Total other investments

 

 

1,056

 

 

 

839

 

Total investments

 

$

1,928

 

 

$

1,595

 

 

June 30,

 

 

December 31,

 

(in millions)

2021

 

 

2020

 

Debt securities:

 

 

 

 

 

 

 

Held-to-maturity investments

$

326

 

 

$

310

 

Trading securities

 

1,616

 

 

 

1,964

 

Total debt securities

 

1,942

 

 

 

2,274

 

Equity securities at FVTNI(1)

 

2,369

 

 

 

2,317

 

Equity method investments(2)

 

1,404

 

 

 

1,081

 

Bank loans

 

271

 

 

 

248

 

Federal Reserve Bank stock(3)

 

95

 

 

 

94

 

Carried interest(4)

 

1,213

 

 

 

627

 

Other investments(5)

 

301

 

 

 

278

 

Total investments

$

7,595

 

 

$

6,919

 

 

(1)(1)

Fair value recorded through net income (“FVTNI”).

(2)

Equity method investments primarily include BlackRock’s direct investments in certain BlackRock sponsored investment funds.

(2)(3)

Amounts include nonmarketable securities, primarilyAt both June 30, 2021 and December 31, 2020, there were no indicators of impairment of Federal Reserve Bank stock, which is held for regulatory purposes and is restricted from sale. At September 30, 2017 and December 31, 2016, there were no indicators of impairment on these investments.

(3)(4)

Carried interest of consolidated sponsor investment funds accounted for as voting rights entities (“VREs”) represents allocations to BlackRock’s general partner capital accounts from certain sponsored investment funds. These balances are subject to change upon cash distributions, additional allocations or reallocations back to limited partners within the respective funds.

(5)

Other investments include BlackRock’s investments in nonmarketable equity securities, which are measured at cost, adjusted for observable price changes and private equity and real asset investments of CIPs measured at fair value.

 

Available-for-Sale Investments

At both September 30, 2017 and December 31, 2016, available-for-sale investments primarily included certain investments in CLOs and seed investments in BlackRock sponsored mutual funds.  The cost of these investments approximated carrying value. 

Held-to-Maturity Investments

The carrying value of held-to-maturity investments was $76$326 million and $51$310 million at SeptemberJune 30, 20172021 and December 31, 2016,2020, respectively. Held-to-maturity investments included certain investments in CLOs and foreign government debt held primarily for regulatory purposes and certain investments in CLOs.purposes. The amortized cost (carrying value) of these investments approximated fair value.value (primarily a Level 2 input). At SeptemberJune 30, 2017, $112021, $14 million of these investments mature between one to five years, $103 million of these investments mature between five to ten10 years and $65$209 million of these investments mature after ten10 years.

Trading InvestmentsDebt Securities and Equity Securities at FVTNI

A summary of the cost and carrying value of trading investmentsdebt securities and equity securities at FVTNI is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2021

 

 

December 31, 2020

 

(in millions)

Cost

 

 

Carrying

Value

 

 

Cost

 

 

Carrying

Value

 

Trading debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt

$

1,131

 

 

$

1,159

 

 

$

1,591

 

 

$

1,641

 

Government debt

 

314

 

 

 

314

 

 

 

203

 

 

 

210

 

Asset/mortgage-backed debt

 

154

 

 

 

143

 

 

 

132

 

 

 

113

 

Total trading debt securities

$

1,599

 

 

$

1,616

 

 

$

1,926

 

 

$

1,964

 

Equity securities at FVTNI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities/mutual funds

$

2,033

 

 

$

2,369

 

 

$

2,055

 

 

$

2,317

 

Total equity securities at FVTNI

$

2,033

 

 

$

2,369

 

 

$

2,055

 

 

$

2,317

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

(in millions)

 

2017

 

 

2016

 

 

 

Cost

 

 

Carrying

Value

 

 

Cost

 

 

Carrying

Value

 

Trading investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan mutual funds

 

$

34

 

 

$

54

 

 

$

41

 

 

$

59

 

Equity securities/multi-asset mutual funds

 

 

323

 

 

 

353

 

 

 

290

 

 

 

308

 

Debt securities/fixed income mutual funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt

 

 

160

 

 

 

162

 

 

 

128

 

 

 

128

 

Government debt

 

 

59

 

 

 

60

 

 

 

60

 

 

 

60

 

Asset/mortgage backed debt

 

 

62

 

 

 

63

 

 

 

70

 

 

 

70

 

Total trading investments

 

$

638

 

 

$

692

 

 

$

589

 

 

$

625

 


 

At September 30, 2017, trading investments included $268 million of debt securities and $239 million of equity securities held by consolidated sponsored investment funds accounted for as VREs, $54 million of certain deferred compensation plan mutual fund investments and $131 million of other equity and debt securities.

11


At December 31, 2016, trading investments included $246 million of debt securities and $219 million of equity securities held by consolidated sponsored investment funds accounted for as VREs, $59 million of certain deferred compensation plan mutual fund investments and $101 million of other equity and debt securities.

Other

In addition, the Company accounts for its interest in PennyMac Financial Services, Inc. (“PennyMac”) as an equity method investment. At September 30, 2017 and December 31, 2016 the Company’s investment in PennyMac was excluded from investments in the table above and included in other assets on the condensed consolidated statements of financial condition. The carrying value and fair value of the Company’s interest (approximately 20% or 16 million shares and units) was approximately $333 million and $277 million, respectively, at September 30, 2017 and approximately $301 million and $259 million, respectively, at December 31, 2016. The fair value of the Company’s interest reflected the PennyMac stock price at September 30, 2017 and December 31, 2016, respectively (a Level 1 input).  The Company performed an other-than-temporary impairment analysis as of September 30, 2017 and determined the difference in fair value below the carrying value to be temporary.

4.6. Consolidated Voting Rights EntitiesSponsored Investment Products

The Company consolidates certain sponsored investment funds accounted for as VREs because it is deemed to control such funds. The investments owned by these consolidated VREs are classified as trading investments. The following table presents the balances related to these consolidated VREs that were recorded on the condensed consolidated statements of financial condition, including BlackRock’s net interest in these funds:

 

 

September 30,

 

 

December 31,

 

(in millions)

 

2017

 

 

2016

 

Cash and cash equivalents

 

$

73

 

 

$

53

 

Trading investments

 

 

507

 

 

 

465

 

Other assets

 

 

28

 

 

 

15

 

Other liabilities

 

 

(61

)

 

 

(50

)

Noncontrolling interests ("NCI")

 

 

(68

)

 

 

(39

)

BlackRock’s net interests in consolidated VREs

 

$

479

 

 

$

444

 

BlackRock’s total exposure to consolidated VREs represents the value of its economic ownership interest in these sponsored investment funds. Valuation changes associated with investments held at fair value by these consolidated VREs are reflected in nonoperating income (expense) and partially offset in net income (loss) attributable to noncontrolling interests for the portion not attributable to BlackRock.

The Company cannot readily access cash and cash equivalents held by consolidated VREs to use in its operating activities.

12


5.   Variable Interest Entities

In the normal course of business, the Company is the manager of various types of sponsored investment vehicles, which may be considered variable interest entities (“VIEs”).VIEs. The Company may from time to time own equity or debt securities or enter into derivatives with the vehicles, each of which are considered variable interests. The Company’s involvement in financing the operations of the VIEs is generally limited to its investments in the entity. The Company consolidates entities when it is determined to be the primary beneficiary (“PB”).  

Consolidated VIEs.    The Company’s consolidated VIEs include certain sponsored investment fundsproducts in which BlackRock has an investment and as the investment manager, is deemed to have both the power to direct the most significant activities of the fundsproducts and the right to receive benefits (or the obligation to absorb losses) that could potentially be significant to these sponsored investment funds.products. The assets of these VIEs are not available to creditors of the Company. In addition, the investors in these VIEs have no recourse to the credit of the Company.

Consolidated VIE assetsThe following table presents the balances related to these CIPs accounted for as VIEs and liabilities are presented after intercompany eliminationsVREs that were recorded on the condensed consolidated statements of financial condition, including BlackRock’s net interest in the following table:these products:

 

 

June 30, 2021

 

 

December 31, 2020

 

(in millions)

 

VIEs

 

 

VREs

 

 

Total

 

 

VIEs

 

 

VREs

 

 

Total

 

Cash and cash equivalents

 

$

217

 

 

$

63

 

 

$

280

 

 

$

155

 

 

$

51

 

 

$

206

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading debt securities

 

 

1,497

 

 

 

73

 

 

 

1,570

 

 

 

1,618

 

 

 

310

 

 

 

1,928

 

Equity securities at FVTNI

 

 

1,758

 

 

 

289

 

 

 

2,047

 

 

 

1,592

 

 

 

413

 

 

 

2,005

 

Bank loans

 

 

271

 

 

 

 

 

 

271

 

 

 

248

 

 

 

 

 

 

248

 

Other investments

 

 

210

 

 

 

 

 

 

210

 

 

 

191

 

 

 

 

 

 

191

 

Carried interest

 

 

1,184

 

 

 

 

 

 

1,184

 

 

 

604

 

 

 

 

 

 

604

 

Total investments

 

 

4,920

 

 

 

362

 

 

 

5,282

 

 

 

4,253

 

 

 

723

 

 

 

4,976

 

Other assets

 

 

136

 

 

 

6

 

 

 

142

 

 

 

90

 

 

 

9

 

 

 

99

 

Other liabilities(1)

 

 

(1,601

)

 

 

(33

)

 

 

(1,634

)

 

 

(952

)

 

 

(70

)

 

 

(1,022

)

Noncontrolling interests - CIPs

 

 

(2,250

)

 

 

(30

)

 

 

(2,280

)

 

 

(2,193

)

 

 

(180

)

 

 

(2,373

)

BlackRock's net interests in CIPs

 

$

1,422

 

 

$

368

 

 

$

1,790

 

 

$

1,353

 

 

$

533

 

 

$

1,886

 

 

 

 

September 30,

 

 

December 31,

 

(in millions)

 

2017

 

 

2016

 

Assets of consolidated VIEs:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

82

 

 

$

84

 

Investments

 

 

1,286

 

 

 

1,008

 

Other assets

 

 

46

 

 

 

63

 

Total investments and other assets

 

 

1,332

 

 

 

1,071

 

Liabilities of consolidated VIEs

 

 

(319

)

 

 

(216

)

Noncontrolling interests

 

 

(307

)

 

 

(207

)

BlackRock's net interests in consolidated VIEs

 

$

788

 

 

$

732

 

(1)

At both June 30, 2021 and December 31, 2020, other liabilities of VIEs primarily include deferred carried interest liabilities and borrowings of a consolidated CLO.

BlackRock’s total exposure to CIPs represents the value of its economic ownership interest in these CIPs. Valuation changes associated with investments held at fair value by these CIPS are reflected in nonoperating income (expense) and partially offset in net income (loss) attributable to NCI for the portion not attributable to BlackRock.

The Company cannot readily access cash and cash equivalents held by CIPs to use in its operating activities.

Net gain (loss) related to consolidated VIEs is presented in the following table:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

(in millions)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating net gain (loss) on consolidated VIEs

 

$

190

 

 

$

282

 

 

$

273

 

 

$

(27

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to NCI on consolidated VIEs

 

$

168

 

 

$

178

 

 

$

223

 

 

$

20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in millions)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating net gain (loss) on consolidated VIEs

 

$

29

 

 

$

19

 

 

$

95

 

 

$

34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) attributable to NCI on consolidated VIEs

 

$

10

 

 

$

1

 

 

$

28

 

 

$

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Non-Consolidated

7. Variable Interest Entities

Nonconsolidated VIEs.    At SeptemberJune 30, 20172021 and December 31, 2016,2020, the Company’s carrying value of assets and liabilities included on the condensed consolidated statements of financial condition pertaining to nonconsolidated VIEs and its maximum risk of loss related to VIEs for which it held a variable interest, but for which it was not the PB,primary beneficiary, was as follows:

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory Fee

 

 

Other Net Assets

 

 

Maximum

 

At September 30, 2017

 

Investments

 

 

Advisory Fee Receivables

 

 

Other Net Assets (Liabilities)

 

 

Maximum Risk of Loss(1)

 

At June 30, 2021

Investments

 

 

Receivables

 

 

(Liabilities)

 

 

Risk of Loss(1)

 

Sponsored investment products

 

$

227

 

 

$

15

 

 

$

(7

)

 

$

259

 

$

779

 

 

$

95

 

 

$

(12

)

 

$

891

 

At December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sponsored investment products

 

$

171

 

 

$

9

 

 

$

(8

)

 

$

197

 

$

662

 

 

$

71

 

 

$

(13

)

 

$

750

 

 

 

(1)

At both SeptemberJune 30, 20172021 and December 31, 2016,2020, BlackRock’s maximum risk of loss associated with these VIEs primarily related to BlackRock’s investments and the collection of advisory fee receivables.

The net assets of sponsored investment products that are nonconsolidated VIEs approximated $5$19 billion and $4$16 billion at SeptemberJune 30, 20172021 and December 31, 2016,2020, respectively.

 


 

13


6.8. Fair Value Disclosures

Fair Value Hierarchy

Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value

 

September 30, 2017

 

Quoted

Prices in

Active

Markets for

Identical

Assets

 

 

Significant

Other

Observable

Inputs

 

 

Significant

Unobservable

Inputs

 

 

Investments

Measured at

 

 

Other Assets

Not Held at

 

 

September 30,

 

(in millions)

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

NAV(1)

 

 

Fair Value(2)

 

 

2017

 

June 30, 2021

(in millions)

Quoted Prices in

Active

Markets for

Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

 

Investments

Measured at

NAV(1)

 

 

Other(2)

 

 

June 30,

2021

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

$

8

 

 

$

73

 

 

$

23

 

 

$

 

 

$

 

 

$

104

 

Held-to-maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76

 

 

 

76

 

Trading:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan mutual funds

 

 

54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54

 

Equity securities/Multi-asset mutual funds

 

 

353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

353

 

Debt securities / fixed income mutual funds

 

 

1

 

 

 

282

 

 

 

2

 

 

 

 

 

 

 

 

 

285

 

Total trading

 

 

408

 

 

 

282

 

 

 

2

 

 

 

 

 

 

 

 

 

692

 

Other investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity investments

$

 

 

$

 

 

$

 

 

$

 

 

$

326

 

 

$

326

 

Trading securities

 

 

 

 

1,595

 

 

 

21

 

 

 

 

 

 

 

 

 

1,616

 

Total debt securities

 

 

 

 

1,595

 

 

 

21

 

 

 

 

 

 

326

 

 

 

1,942

 

Equity securities at FVTNI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities/mutual funds

 

2,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,369

 

Equity method:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity and fixed income mutual funds

 

 

314

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

324

 

 

356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

356

 

Other

 

 

 

 

 

 

 

 

 

 

 

608

 

 

 

12

 

 

 

620

 

Hedge funds/funds of hedge funds

 

 

 

 

 

 

 

 

 

 

351

 

 

 

 

 

 

351

 

Private equity funds

 

 

 

 

 

 

 

 

 

 

483

 

 

 

 

 

 

483

 

Real assets funds

 

 

 

 

 

 

 

 

 

 

214

 

 

 

 

 

 

214

 

Total equity method

 

 

314

 

 

 

 

 

 

 

 

 

618

 

 

 

12

 

 

 

944

 

 

356

 

 

 

 

 

 

 

 

 

1,048

 

 

 

 

 

 

1,404

 

Cost method investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

92

 

 

 

92

 

Bank loans

 

 

 

 

10

 

 

 

261

 

 

 

 

 

 

 

 

 

271

 

Federal Reserve Bank Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

95

 

 

 

95

 

Carried interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20

 

 

 

20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,213

 

 

 

1,213

 

Other investments(3)

 

9

 

 

 

5

 

 

 

5

 

 

 

90

 

 

 

192

 

 

 

301

 

Total investments

 

 

730

 

 

 

355

 

 

 

25

 

 

 

618

 

 

 

200

 

 

 

1,928

 

 

2,734

 

 

 

1,610

 

 

 

287

 

 

 

1,138

 

 

 

1,826

 

 

 

7,595

 

Other assets(4)

 

186

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

186

 

Separate account assets

 

 

112,957

 

 

 

34,268

 

 

 

 

 

 

 

 

 

713

 

 

 

147,938

 

 

69,820

 

 

 

33,036

 

 

 

 

 

 

 

 

 

1,016

 

 

 

103,872

 

Separate account collateral held under securities lending

agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

 

19,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,093

 

 

12,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,599

 

Debt securities

 

 

 

 

 

8,338

 

 

 

 

 

 

 

 

 

 

 

 

8,338

 

 

 

 

 

3,501

 

 

 

 

 

 

 

 

 

 

 

 

3,501

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

70

 

 

 

70

 

Total separate account collateral held under securities

lending agreements

 

 

19,093

 

 

 

8,338

 

 

 

 

 

 

 

 

 

 

 

 

27,431

 

 

12,599

 

 

 

3,501

 

 

 

 

 

 

 

 

 

70

 

 

 

16,170

 

Investments of consolidated VIEs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private / public equity(3)

 

 

5

 

 

 

3

 

 

 

114

 

 

 

69

 

 

 

83

 

 

 

274

 

Equity securities

 

 

338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

338

 

Debt securities

 

 

 

 

 

350

 

 

 

 

 

 

 

 

 

 

 

 

350

 

Other

 

 

 

 

 

 

 

 

 

 

 

64

 

 

 

 

 

 

64

 

Carried interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

260

 

 

 

260

 

Total investments of consolidated VIEs

 

 

343

 

 

 

353

 

 

 

114

 

 

 

133

 

 

 

343

 

 

 

1,286

 

Total

 

$

133,123

 

 

$

43,314

 

 

$

139

 

 

$

751

 

 

$

1,256

 

 

$

178,583

 

$

85,339

 

 

$

38,147

 

 

$

287

 

 

$

1,138

 

 

$

2,912

 

 

$

127,823

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Separate account collateral liabilities under securities

lending agreements

 

$

19,093

 

 

$

8,338

 

 

$

 

 

$

 

 

$

 

 

$

27,431

 

$

12,599

 

 

$

3,501

 

 

$

 

 

$

 

 

$

70

 

 

$

16,170

 

Other liabilities(4)

 

 

 

 

 

7

 

 

 

228

 

 

 

 

 

 

 

 

 

235

 

Other liabilities(5)

 

 

 

 

45

 

 

 

298

 

 

 

 

 

 

 

 

 

343

 

Total

 

$

19,093

 

 

$

8,345

 

 

$

228

 

 

$

 

 

$

 

 

$

27,666

 

$

12,599

 

 

$

3,546

 

 

$

298

 

 

$

 

 

$

70

 

 

$

16,513

 

 

(1)

Amounts are comprised of certain investments measured at fair value using NAV (or its equivalent), as a practical expedient.

(2)

Amounts are comprised of investments held at cost or amortized cost and cost, adjusted for observable price changes, carried interest and certain equity method investments, which include sponsored investment funds and other assets, which are not accounted for under a fair value measure. In accordance with GAAP, certain equity method investees do not account for both their financial assets and liabilities under fair value measures; therefore, the Company’s investment in such equity method investees may not represent fair value.

(3)

Level 3 amountsamount primarily includeincludes direct investments in private equity companies held by consolidated private equity funds.

(4)

AmountsLevel 1 amount includes a minority investment in a publicly traded company.

(5)

Level 2 amount primarily includes fair value of derivatives (See Note 9, Derivatives and Hedging, for more information). Level 3 amounts primarily include borrowings of a consolidated CLO classified based on the significance of unobservable inputs used for calculating the fair value of consolidated CLO assets, and contingent liabilities related to certain acquisitions (see Note 11, 15, Commitments and Contingencies, for more information).

 

14



Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value

 

December 31, 2016

(in millions)

 

Quoted Prices in

Active

Markets for

Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

 

Investments Measured at NAV(1)

 

 

Other Assets

Not Held at Fair

Value(2)

 

 

December 31,

2016

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

$

7

 

 

$

49

 

 

$

24

 

 

$

 

 

$

 

 

$

80

 

Held-to-maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51

 

 

 

51

 

Trading:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan mutual funds

 

 

59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

59

 

Equity/Multi-asset mutual funds

 

 

308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

308

 

Debt securities / fixed income mutual funds

 

 

1

 

 

 

250

 

 

 

7

 

 

 

 

 

 

 

 

 

258

 

Total trading

 

 

368

 

 

 

250

 

 

 

7

 

 

 

 

 

 

 

 

 

625

 

Other investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity method:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity and fixed income mutual funds

 

 

323

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

328

 

Other

 

 

 

 

 

 

 

 

 

 

 

394

 

 

 

8

 

 

 

402

 

Total equity method

 

 

323

 

 

 

 

 

 

 

 

 

399

 

 

 

8

 

 

 

730

 

Cost method investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

91

 

 

 

91

 

Carried interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

 

 

18

 

Total investments

 

 

698

 

 

 

299

 

 

 

31

 

 

 

399

 

 

 

168

 

 

 

1,595

 

Separate account assets

 

 

109,663

 

 

 

38,542

 

 

 

 

 

 

 

 

 

884

 

 

 

149,089

 

Separate account collateral held under securities lending agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

 

22,173

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,173

 

Debt securities

 

 

 

 

 

5,619

 

 

 

 

 

 

 

 

 

 

 

 

5,619

 

Total separate account collateral held under securities lending agreements

 

 

22,173

 

 

 

5,619

 

 

 

 

 

 

 

 

 

 

 

 

27,792

 

Investments of consolidated VIEs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private / public equity(3)

 

 

3

 

 

 

2

 

 

 

112

 

 

 

89

 

 

 

79

 

 

 

285

 

Equity securities

 

 

278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

278

 

Debt securities

 

 

 

 

 

274

 

 

 

 

 

 

 

 

 

 

 

 

274

 

Other

 

 

 

 

 

 

 

 

 

 

 

63

 

 

 

 

 

 

63

 

Carried interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108

 

 

 

108

 

Total investments of consolidated VIEs

 

 

281

 

 

 

276

 

 

 

112

 

 

 

152

 

 

 

187

 

 

 

1,008

 

Total

 

$

132,815

 

 

$

44,736

 

 

$

143

 

 

$

551

 

 

$

1,239

 

 

$

179,484

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Separate account collateral liabilities under securities lending agreements

 

$

22,173

 

 

$

5,619

 

 

$

 

 

$

 

 

$

 

 

$

27,792

 

Other liabilities(4)

 

 

 

 

 

7

 

 

 

115

 

 

 

 

 

 

 

 

 

122

 

Total

 

$

22,173

 

 

$

5,626

 

 

$

115

 

 

$

 

 

$

 

 

$

27,914

 

December 31, 2020

(in millions)

Quoted Prices in

Active

Markets for

Identical Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

 

Investments

Measured at

NAV(1)

 

 

Other(2)

 

 

December 31,

2020

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity investments

$

 

 

$

 

 

$

 

 

$

 

 

$

310

 

 

$

310

 

Trading securities

 

 

 

 

1,953

 

 

 

11

 

 

 

 

 

 

 

 

 

1,964

 

Total debt securities

 

 

 

 

1,953

 

 

 

11

 

 

 

 

 

 

310

 

 

 

2,274

 

Equity securities at FVTNI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities/mutual funds

 

2,317

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,317

 

Equity method:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity and fixed income mutual funds

 

235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

235

 

Hedge funds/funds of hedge funds

 

 

 

 

 

 

 

 

 

 

313

 

 

 

 

 

 

313

 

Private equity funds

 

 

 

 

 

 

 

 

 

 

315

 

 

 

 

 

 

315

 

Real assets funds

 

 

 

 

 

 

 

 

 

 

218

 

 

 

 

 

 

218

 

Total equity method

 

235

 

 

 

 

 

 

 

 

 

846

 

 

 

 

 

 

1,081

 

Bank loans

 

 

 

 

16

 

 

 

232

 

 

 

 

 

 

 

 

 

248

 

Federal Reserve Bank Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

94

 

 

 

94

 

Carried interest

 

 

 

 

 

 

 

 

 

 

 

 

 

627

 

 

 

627

 

Other investments(3)

 

 

 

 

 

 

 

9

 

 

 

94

 

 

 

175

 

 

 

278

 

Total investments

 

2,552

 

 

 

1,969

 

 

 

252

 

 

 

940

 

 

 

1,206

 

 

 

6,919

 

Other assets(4)

 

205

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

218

 

Separate account assets

 

71,392

 

 

 

32,404

 

 

 

 

 

 

 

 

 

867

 

 

 

104,663

 

Separate account collateral held under

   securities lending agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

13,126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,126

 

Debt securities

 

 

 

 

3,381

 

 

 

 

 

 

 

 

 

 

 

 

3,381

 

Total separate account collateral held under

   securities lending agreements

 

13,126

 

 

 

3,381

 

 

 

 

 

 

 

 

 

 

 

 

16,507

 

Total

$

87,275

 

 

$

37,767

 

 

$

252

 

 

$

940

 

 

$

2,073

 

 

$

128,307

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Separate account collateral liabilities under

   securities lending agreements

$

13,126

 

 

$

3,381

 

 

$

 

 

$

 

 

$

 

 

$

16,507

 

Other liabilities(5)

 

 

 

 

68

 

 

 

272

 

 

 

 

 

 

 

 

 

340

 

Total

$

13,126

 

 

$

3,449

 

 

$

272

 

 

$

 

 

$

 

 

$

16,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amounts are comprised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient.

(2)

Amounts are comprised of investments held at cost or amortized cost and cost, adjusted for observable price changes, carried interest and certain equity method investments, which include sponsored investment funds and other assets, which are not accounted for under a fair value measure. In accordance with GAAP, certain equity method investees do not account for both their financial assets and liabilities under fair value measures; therefore, the Company’s investment in such equity method investees may not represent fair value.

(3)

Level 3 amounts includeamount primarily includes direct investments in private equity companies held by consolidated private equity funds.

(4)

AmountsLevel 1 amount includes a minority investment in a publicly traded company.

(5)

Level 2 amount primarily includes fair value of derivatives (See Note 9, Derivatives and Hedging, for more information). Level 3 amounts primarily include borrowings of a consolidated CLO classified based on the significance of unobservable inputs used for calculating the fair value of consolidated CLO assets, and contingent liabilities related to certain acquisitions (see Note 11, 15, Commitments and Contingencies, for more information).

 



15


Level 3 Assets.    Level 3 investments of consolidated VIEs of $114 million and $112 million at September 30, 2017 and December 31, 2016, respectively, related to direct investments in private equity companies held by consolidated private equity funds.

Direct investments in private equity companies may be valued using the market approach or the income approach, or a combination thereof, and were valued based on an assessment of each underlying investment, incorporating evaluation of additional significant third-party financing, changes in valuations of comparable peer companies, the business environment of the companies, market indices, assumptions relating to appropriate risk adjustments for nonperformance and legal restrictions on disposition, among other factors. The fair value derived from the methods used is evaluated and weighted, as appropriate, considering the reasonableness of the range of values indicated. Under the market approach, fair value may be determined by reference to multiples of market-comparable companies or transactions, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. Under the income approach, fair value may be determined by discounting the expected cash flows to a single present value amount using current expectations about those future amounts. Unobservable inputs used in a discounted cash flow model may include projections of operating performance generally covering a five-year period and a terminal value of the private equity direct investment. For investments utilizing the discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, risk premium or discount for lack of marketability in isolation could result in a significantly lower (higher) fair value measurement. For investments utilizing the market-comparable valuation technique, a significant increase (decrease) in the EBITDA multiple in isolation could result in a significantly higher (lower) fair value measurement.

Level 3 assets may include investments in CLOs and bank loans of consolidated CLOs, which were valued based on single-broker nonbinding quotes and direct private equity investments, which were valued using the market approach or the income approach as described above.approach.

Level 3 investments of $287 million and $252 million at June 30, 2021 and December 31, 2020, respectively, primarily included bank loans of a consolidated CLO.

Level 3 Liabilities. Level 3 other liabilities primarily include recordedborrowings of a consolidated CLO, which were valued based on the fair value of the assets of the consolidated CLO less the fair value of the Company’s economic interest in the CLO, and contingent liabilities related to certain acquisitions, which were valued based upon discounted cash flow analyses using unobservable market data inputs.

 

16



Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended SeptemberJune 30, 20172021

 

(in millions)

 

June 30, 2017

 

 

Realized

and

Unrealized

Gains

(Losses) in

Earnings

and OCI

 

 

Purchases

 

 

Sales and

Maturities

 

 

Issuances and

other

Settlements(1)

 

 

Transfers

into

Level 3

 

 

Transfers

out of

Level 3

 

 

September 30, 2017

 

 

Total Net

Unrealized

Gains (Losses)

Included in

Earnings(2)

 

 

March 31,

2021

 

 

Realized

and

Unrealized

Gains

(Losses)

 

 

Purchases

 

 

Sales and

Maturities

 

 

Issuances and

other

Settlements(1)

 

 

Transfers

into

Level 3

 

 

Transfers

out of

Level 3

 

 

June 30,

2021

 

 

Total Net

Unrealized

Gains (Losses)

Included in

Earnings(2)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities(3)

 

$

23

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

23

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

2

 

 

 

 

 

 

$

14

 

 

$

 

 

$

7

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

21

 

 

$

 

Total debt securities

 

 

14

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21

 

 

 

 

Private equity

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

5

 

 

 

 

Bank loans

 

 

235

 

 

 

 

 

 

20

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

261

 

 

 

 

Total investments

 

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

25

 

 

 

 

 

 

$

258

 

 

$

 

 

$

27

 

 

$

 

 

$

 

 

$

6

 

 

$

(4

)

 

$

287

 

 

$

 

Assets of consolidated VIEs - Private equity

 

 

113

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

114

 

 

$

1

 

Total Level 3 assets

 

$

140

 

 

$

1

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

(2

)

 

$

139

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities(4)

 

$

218

 

 

$

(7

)

 

$

 

 

$

 

 

$

3

 

 

$

 

 

$

 

 

$

228

 

 

$

(7

)

Other liabilities

 

$

280

 

 

$

(1

)

 

$

 

 

$

 

 

$

17

 

 

$

 

 

$

 

 

$

298

 

 

$

(1

)

Total Level 3 liabilities

 

$

280

 

 

$

(1

)

 

$

 

 

$

 

 

$

17

 

 

$

 

 

$

 

 

$

298

 

 

$

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)       Issuance and other settlements amount includes a contingent liability of $9 million in connection with the acquisition of Cachematrix in July 2017 (“Cachematrix Transaction”) and a contingent liability payment in connection with a prior acquisition.

(1)

Amounts include proceeds from borrowings of a consolidated CLO and a contingent liability, partially offset by contingent liability payment related to a prior acquisition.

(2)

Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.

(3)

Amounts include investments in CLOs.

(4) 

Other liabilities amount includes contingent liabilities in connection with certain acquisitions.


 

 

17


Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the NineSix Months Ended SeptemberJune 30, 2017

2021

 

(in millions)

 

December 31, 2016

 

 

Realized

and

Unrealized

Gains

(Losses) in

Earnings

and OCI

 

 

Purchases

 

 

Sales and

Maturities

 

 

Issuances and

other

Settlements(1)

 

 

Transfers

into

Level 3

 

 

Transfers

out of

Level 3(2)

 

 

September 30, 2017

 

 

Total Net

Unrealized

Gains (Losses)

Included in

Earnings(3)

 

 

December 31,

2020

 

 

Realized

and

Unrealized

Gains

(Losses)

 

 

Purchases

 

 

Sales and

Maturities

 

 

Issuances and

other

Settlements(1)

 

 

Transfers

into

Level 3

 

 

Transfers

out of

Level 3

 

 

June 30,

2021

 

 

Total Net

Unrealized

Gains (Losses)

Included in

Earnings(2)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities(4)

 

$

24

 

 

$

 

 

$

23

 

 

$

 

 

$

 

 

$

 

 

$

(24

)

 

$

23

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading

 

 

7

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

2

 

 

 

 

 

 

$

11

 

 

$

 

 

$

12

 

 

$

 

 

$

 

 

$

 

 

$

(2

)

 

$

21

 

 

$

 

Total debt securities

 

 

11

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

21

 

 

 

 

Private equity

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

5

 

 

 

 

Bank loans

 

 

232

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

10

 

 

 

(10

)

 

 

261

 

 

 

 

Total investments

 

 

31

 

 

 

 

 

 

27

 

 

 

 

 

 

 

 

 

 

 

 

(33

)

 

 

25

 

 

 

 

 

 

$

252

 

 

$

 

 

$

41

 

 

$

 

 

$

 

 

$

10

 

 

$

(16

)

 

$

287

 

 

$

 

Assets of consolidated VIEs - Private equity

 

 

112

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

114

 

 

$

2

 

Total Level 3 assets

 

$

143

 

 

$

2

 

 

$

27

 

 

$

 

 

$

 

 

$

 

 

$

(33

)

 

$

139

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities(5)

 

$

115

 

 

$

(2

)

 

$

 

 

$

 

 

$

111

 

 

$

 

 

$

 

 

$

228

 

 

$

(2

)

Other liabilities

 

$

272

 

 

$

(4

)

 

$

 

 

$

 

 

$

22

 

 

$

 

 

$

 

 

$

298

 

 

$

(4

)

Total Level 3 liabilities

 

$

272

 

 

$

(4

)

 

$

 

 

$

 

 

$

22

 

 

$

 

 

$

 

 

$

298

 

 

$

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)       Issuance and other settlements amount includes $120 million and $9 million of contingent liabilities in connection with the acquisition of the equity infrastructure franchise of First Reserve in June 2017 (“First Reserve Transaction”) and the Cachematrix Transaction, respectively, and contingent liability payments in connection with certain prior acquisitions.

(2)      Amounts include transfers out of Level 3 due to availability of observable market inputs from pricing vendors.

(3)      Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.

(4)(1)

Amounts include investments in CLOs.proceeds from borrowings of a consolidated CLO and a contingent liability, partially offset by contingent liability payments related to prior acquisitions.

(5) (2)

OtherEarnings attributable to the change in unrealized gains (losses) relating to assets and liabilities amount includes contingent liabilities in connection with certain acquisitions.still held at the reporting date.

 


 

18


Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended SeptemberJune 30, 20162020

 

(in millions)

 

June 30,

2016

 

 

Realized

and

Unrealized

Gains

(Losses) in

Earnings

and OCI

 

 

Purchases

 

 

Sales and

Maturities

 

 

Issuances and

other

Settlements

 

 

Transfers

into

Level 3

 

 

Transfers

out of

Level 3

 

 

September 30, 2016

 

 

Total Net

Unrealized

Gains (Losses)

Included in

Earnings(1)

 

 

March 31,

2020

 

 

Realized

and

Unrealized

Gains

(Losses)

 

 

Purchases

 

 

Sales and

Maturities

 

 

Issuances

and

other

Settlements(1)

 

 

Transfers

into

Level 3

 

 

Transfers

out of

Level 3

 

 

June 30,

2020

 

 

Total Net

Unrealized

Gains (Losses)

Included in

Earnings(2)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities(2)

 

$

 

 

$

 

 

$

24

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

24

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading

 

 

3

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

$

9

 

 

$

 

 

$

1

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

10

 

 

$

 

Total debt securities

 

 

9

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

Private equity

 

 

16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 

 

 

 

Bank loans

 

 

181

 

 

 

14

 

 

 

18

 

 

 

 

 

 

 

 

 

16

 

 

 

 

 

 

229

 

 

 

14

 

Total investments

 

 

3

 

 

 

 

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

$

206

 

 

$

14

 

 

$

19

 

 

$

 

 

$

 

 

$

16

 

 

$

 

 

$

255

 

 

$

14

 

Assets of consolidated VIEs - Private equity

 

 

189

 

 

 

11

 

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

 

 

194

 

 

$

11

 

Total Level 3 assets

 

$

192

 

 

$

11

 

 

$

26

 

 

$

(6

)

 

$

 

 

$

 

 

$

 

 

$

223

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities(3)

 

$

121

 

 

$

(2

)

 

$

 

 

$

 

 

$

(5

)

 

$

 

 

$

 

 

$

118

 

 

$

(2

)

Other liabilities

 

$

421

 

 

$

(12

)

 

$

 

 

$

 

 

$

(171

)

 

$

 

 

$

 

 

$

262

 

 

$

(19

)

Total Level 3 liabilities

 

$

421

 

 

$

(12

)

 

$

 

 

$

 

 

$

(171

)

 

$

 

 

$

 

 

$

262

 

 

$

(19

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amount includes proceeds from borrowings of a consolidated CLO and contingent payments related to certain acquisitions.

(2)

Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.

(2)

Amounts include investments in CLOs.

(3) 

Other liabilities amount includes contingent liabilities in connection with certain acquisitions.


 

19


Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the NineSix Months Ended SeptemberJune 30, 2016

 

 

December 31,

 

 

Realized

and

Unrealized

Gains

(Losses) in

Earnings

 

 

 

 

 

 

Sales and

 

 

Issuances and

other

 

 

Transfers

into

 

 

Transfers

out of

 

 

September 30,

 

 

Total Net

Unrealized

Gains (Losses)

Included in

 

(in millions)

 

2015

 

 

and OCI

 

 

Purchases

 

 

Maturities

 

 

Settlements(1)

 

 

Level 3

 

 

Level 3

 

 

2016

 

 

Earnings(2)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities(3)

 

$

23

 

 

$

 

 

$

47

 

 

$

 

 

$

 

 

$

 

 

$

(46

)

 

$

24

 

 

 

 

 

Trading

 

 

2

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

5

 

 

 

 

 

Total investments

 

 

25

 

 

 

 

 

 

53

 

 

 

 

 

 

 

 

 

 

 

 

(49

)

 

 

29

 

 

 

 

 

Assets of consolidated VIEs - Private equity

 

 

196

 

 

 

13

 

 

 

 

 

 

(15

)

 

 

 

 

 

 

 

 

 

 

 

194

 

 

$

13

 

Total Level 3 assets

 

$

221

 

 

$

13

 

 

$

53

 

 

$

(15

)

 

$

 

 

$

 

 

$

(49

)

 

$

223

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities(4)

 

$

48

 

 

$

 

 

$

 

 

$

 

 

$

70

 

 

$

 

 

$

 

 

$

118

 

 

$

 

2020

 

(1)       Issuances and other settlements amount includes a contingent liability related to the BofA® Global Capital Management transaction in April 2016.

(in millions)

 

December 31,

2019

 

 

Realized

and

Unrealized

Gains

(Losses)

 

 

Purchases

 

 

Sales and

Maturities

 

 

Issuances

and

other

Settlements(1)

 

 

Transfers

into

Level 3

 

 

Transfers

out of

Level 3

 

 

June 30,

2020

 

 

Total Net

Unrealized

Gains (Losses)

Included in

Earnings(3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading

 

$

8

 

 

$

 

 

$

2

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

10

 

 

$

 

Total debt securities

 

 

8

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

Private equity

 

 

9

 

 

 

 

 

 

8

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

16

 

 

 

 

Bank loans

 

 

177

 

 

 

 

 

 

36

 

 

 

 

 

 

 

 

 

16

 

 

 

 

 

 

229

 

 

 

 

Total investments

 

$

194

 

 

$

 

 

$

46

 

 

$

(1

)

 

$

 

 

$

16

 

 

$

 

 

$

255

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

$

388

 

 

$

(23

)

 

$

 

 

$

 

 

$

(149

)

 

$

 

 

$

 

 

$

262

 

 

$

(30

)

Total Level 3 liabilities

 

$

388

 

 

$

(23

)

 

$

 

 

$

 

 

$

(149

)

 

$

 

 

$

 

 

$

262

 

 

$

(30

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) (1)

Amount includes proceeds from borrowings of a consolidated CLO and contingent payments related to certain acquisitions.

(2)

Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.

(3)

Amounts include investments in CLOs.

(4) 

Other liabilities amount includes contingent liabilities in connection with certain acquisitions.

 



Realized and Unrealized Gains (Losses) for Level 3 Assets and Liabilities.    Realized and unrealized gains (losses) recorded for Level 3 assets and liabilities are reported in nonoperating income (expense) on the condensed consolidated statements of income. A portion of net income (loss) for consolidated sponsored investment funds areis allocated to noncontrolling interestsNCI to reflect net income (loss) not attributable to the Company.

Transfers in and/or out of Levels.    Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable/unobservable, or when the carrying value of certain equity method investments no longer represents fair value as determined under valuation methodologies.

Disclosures of Fair Value for Financial Instruments Not Held at Fair Value. At SeptemberJune 30, 20172021 and December 31, 2016,2020, the fair value of the Company’s financial instruments not held at fair value are categorized in the table below:

 

 

September 30, 2017

 

 

December 31, 2016

 

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

 

(in millions)

 

Carrying

Amount

 

 

Estimated

Fair Value

 

 

Carrying

Amount

 

 

Estimated

Fair Value

 

 

Fair Value

Hierarchy

 

Carrying

Amount

 

 

Estimated

Fair Value

 

 

Carrying

Amount

 

 

Estimated

Fair Value

 

 

Fair Value

Hierarchy

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Assets(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,165

 

 

$

6,165

 

 

$

6,091

 

 

$

6,091

 

 

Level 1

(1) (2)

$

6,416

 

 

$

6,416

 

 

$

8,664

 

 

$

8,664

 

 

Level 1

(2) (3)

Accounts receivable

 

 

3,183

 

 

 

3,183

 

 

 

2,350

 

 

 

2,350

 

 

Level 1

(3)

Cash and cash equivalents of consolidated VIEs

 

 

82

 

 

 

82

 

 

 

84

 

 

 

84

 

 

Level 1

(1) (2)

Other assets

 

 

62

 

 

 

62

 

 

 

25

 

 

 

25

 

 

Level 1

(1) (4)

$

47

 

 

$

47

 

 

$

69

 

 

$

69

 

 

Level 1

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

1,652

 

 

 

1,652

 

 

 

1,094

 

 

 

1,094

 

 

Level 1

(3)

Long-term borrowings

 

 

5,000

 

 

 

5,248

 

 

 

4,915

 

 

 

5,165

 

 

Level 2

(5)

$

6,491

 

 

$

6,909

 

 

$

7,264

 

 

$

7,883

 

 

Level 2

(5)

 

(1)

See Note 5, Investments, for further information on investments not held at fair value.

(2)

Cash and cash equivalents are carried at either cost or amortized cost, which approximates fair value due to their short-term maturities.

(2)(3)

At SeptemberJune 30, 20172021 and December 31, 2016,2020, approximately $137$729 million and $132$1,249 million, respectively, of money market funds were recorded within cash and cash equivalents on the condensed consolidated statements of financial condition. In addition, at September 30, 2017 and December 31, 2016, approximately $14 million and $13 million, respectively, of money market funds were recorded within cash and cash equivalents of consolidated VIEs. Money market funds are valued based on quoted market prices, or $1.00 per share, which generally is the NAV of the fund.

(3)(4)

Other assets include restricted cash and cash collateral deposited with certain derivative counterparties. The carrying amountsvalues of accounts receivable, accounts payable and accrued liabilitiesthese assets approximate fair value due to their short-term nature.maturities.

(4)

Other assets primarily include restricted cash.  

(5)

Long-term borrowings are recorded at amortized cost, net of debt issuance costs. The fair value of the long-term borrowings, including the current portion of long-term borrowings, is estimateddetermined using market prices at the end of September 2017June 2021 and December 2016,2020, respectively. See Note 10, 14, Borrowings, for the fair value of each of the Company’s long-term borrowings.

 


21


Investments in Certain Entities that Calculate Net Asset Value Per Share.Share

As a practical expedient to value certain investments that do not have a readily determinable fair value and have attributes of an investment company, the Company uses NAV as the fair value. The following tables list information regarding all investments in entities that use a fair value measurement to account for both their financial assets and financial liabilities in their calculation of a NAV per share (or equivalent).

 

September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

Ref

 

Fair Value

 

 

Total

Unfunded

Commitments

 

 

Redemption

Frequency

 

Redemption

Notice Period

 

Ref

 

Fair Value

 

 

Total

Unfunded

Commitments

 

 

Redemption

Frequency

 

Redemption

Notice Period

Equity method:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedge funds/funds of hedge funds

 

(a)

 

$

249

 

 

$

42

 

 

Daily/Monthly (19%)

Quarterly (55%)

N/R (26%)

 

1 – 90 days

 

(a)

 

$

351

 

 

$

142

 

 

Daily/Monthly (21%)

Quarterly (21%)

N/R (58%)

 

1 – 90 days

Private equity funds

 

(b)

 

 

89

 

 

 

92

 

 

N/R

 

N/R

 

(b)

 

 

483

 

 

 

302

 

 

N/R

 

N/R

Real assets funds

 

(c)

 

 

265

 

 

 

111

 

 

Quarterly (85%)

N/R (15%)

 

60 days

 

(c)

 

 

214

 

 

 

236

 

 

Quarterly (19%)

N/R (81%)

 

60 days

Other

 

 

 

 

15

 

 

 

13

 

 

Daily/Monthly (66%)

N/R (34%)

 

3 – 5 days

Consolidated VIEs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated sponsored investment

products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private equity funds of funds

 

(d)

 

 

69

 

 

 

20

 

 

N/R

 

N/R

 

(d)

 

 

9

 

 

 

4

 

 

N/R

 

N/R

Hedge fund

 

(a)

 

 

23

 

 

 

 

 

Quarterly

 

90 days

Real assets funds

 

(c)

 

 

41

 

 

 

54

 

 

N/R

 

N/R

 

(c)

 

 

81

 

 

 

86

 

 

N/R

 

N/R

Total

 

 

 

$

751

 

 

$

332

 

 

 

 

 

 

 

 

$

1,138

 

 

$

770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

Ref

 

Fair Value

 

 

Total

Unfunded

Commitments

 

 

Redemption

Frequency

 

Redemption

Notice Period

 

Ref

 

Fair Value

 

 

Total

Unfunded

Commitments

 

 

Redemption

Frequency

 

Redemption

Notice Period

Equity method:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedge funds/funds of hedge funds

 

(a)

 

$

237

 

 

$

14

 

 

Daily/Monthly (21%)

Quarterly (51%)

N/R (28%)

 

1 – 90 days

 

(a)

 

$

313

 

 

$

101

 

 

Daily/Monthly (21%)

Quarterly (21%)

N/R (58%)

 

1 – 90 days

Private equity funds

 

(b)

 

 

90

 

 

 

62

 

 

N/R

 

N/R

 

(b)

 

 

315

 

 

 

372

 

 

N/R

 

N/R

Real assets funds

 

(c)

 

 

60

 

 

 

35

 

 

Quarterly (41%)

N/R (59%)

 

60 days

 

(c)

 

 

218

 

 

 

205

 

 

Quarterly (31%)

N/R (69%)

 

60 days

Other

 

 

 

 

12

 

 

 

9

 

 

Daily/Monthly (42%)

N/R (58%)

 

3 – 5 days

Consolidated VIEs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated sponsored investment

products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private equity funds of funds

 

(d)

 

 

89

 

 

 

16

 

 

N/R

 

N/R

 

(d)

 

 

19

 

 

 

7

 

 

N/R

 

N/R

Hedge fund

 

(a)

 

 

36

 

 

 

 

 

Quarterly

 

90 days

Real assets funds

 

(c)

 

 

27

 

 

 

21

 

 

N/R

 

N/R

 

(c)

 

 

75

 

 

 

94

 

 

N/R

 

N/R

Total

 

 

 

$

551

 

 

$

157

 

 

 

 

 

 

 

 

$

940

 

 

$

779

 

 

 

 

 

 

N/R – not redeemable

 

(1)

Comprised of equity method investments, which include investments in investment companies, which account for their financial assets and most financial liabilities under fair value measures; therefore, the Company’s investment in such equity method investees approximates fair value.

(a)

This category includes hedge funds and funds of hedge funds that invest primarily in equities, fixed income securities, distressed credit, opportunistic and mortgage instruments and other third-party hedge funds. The fair values of the investments have been estimated using the NAV of the Company’s ownership interest in partners’ capital. It was estimated thatThe liquidation period for the investments in the funds that are not subject to redemption will be liquidated over a weighted-average period of seven yearsis unknown at Septemberboth June 30, 20172021 and approximately one year at December 31, 2016.2020.

(b)

This category includes several private equity funds that initially invest in nonmarketable securities of private companies, which ultimately may become public in the future. The fair values of these investments have been estimated using capital accounts representing the Company’s ownership interest in the funds as well as other performance inputs. The Company’s investment in each fund is not subject to redemption and is normally returned through distributions as a result of the liquidation of the underlying assets of the private equity funds. It was estimated thatfunds. The liquidation period for the investments in these funds will be liquidated over a weighted-average period of approximately five yearsis unknown at both SeptemberJune 30, 20172021 and December 31, 2016.  2020.


(c)

This category includes several real assets funds that invest directly and indirectly in real estate real estate related assets andor infrastructure. The fair values of the investments have been estimated using capital accounts representing the Company’s ownership interest in the funds. The Company’s investments that are not subject to redemption or are not currently redeemable are normally returned through distributions as a result of the liquidationand realizations of the underlying assets of the funds. It is estimated thatfunds. The liquidation period for the investments in thesethe funds that are not subject to redemptions will be liquidated over a weighted-average period of approximately eight yearsis unknown at Septemberboth June 30, 20172021 and six years at December 31, 2016. 2020. The total remaining unfunded commitments to real assets funds were $322 million and $299 million at June 30, 2021 and December 31, 2020, respectively. The Company’s portion of the total remaining unfunded commitments was $294 million and $267 million at June 30, 2021 and December 31, 2020, respectively.

(d)

This category includes the underlying third-party private equity funds within consolidated BlackRock sponsored private equity funds of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company’s ownership interest in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption or are not currently redeemable; however, for certain funds, the Company may sell or transfer its interest, which may need approval by the general partner of the underlying funds. Due to the nature of the investments in this category, the Company reduces its investment by distributions that are received through the realization of the underlying assets of the funds. The liquidation period for the underlying assets of these funds is unknown at both June 30, 2021 and December 31, 2020. The total remaining unfunded commitments to other third-party funds were $165$4 million and $56$7 million at SeptemberJune 30, 20172021 and December 31, 2016,2020, respectively. The Company had contractual obligations to the consolidated funds of $136$17 million at Septemberboth June 30, 20172021 and $56 million at December 31, 2016.2020. 

 

Fair Value Option.

(d)  This category includes the underlying third-party private equity funds within consolidated BlackRock sponsored private equity funds of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company’s ownership interest in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption; however, for certain funds, the Company may sell or transfer its interest, which may need approval by the general partner of the underlying funds. Due to the nature of the investments in this category, the Company reduces its investment by distributions that are received through the realization of the underlying assets of the funds. It is estimated that the underlying assets of these funds will be liquidated over a weighted-average period of approximately five years at both September

At June 30, 20172021 and December 31, 2016. The total remaining unfunded commitments to other third-party funds were $202020, the Company elected the fair value option for certain investments in CLOs of approximately $46 million and $16$35 million, respectively, reported within investments.

In addition, the Company elected the fair value option for bank loans and borrowings of a consolidated CLO, recorded within investments and other liabilities, respectively. The following table summarizes the information related to these bank loans and borrowings at SeptemberJune 30, 20172021 and December 31, 2016, respectively. The Company had contractual obligations to2020:

 

 

June 30,

 

 

December 31,

 

(in millions)

 

2021

 

 

2020

 

CLO Bank loans:

 

 

 

 

 

 

 

 

Aggregate principal amounts outstanding

 

$

268

 

 

$

250

 

Fair value

 

 

271

 

 

 

248

 

Aggregate unpaid principal balance in excess of (less than) fair value

 

$

(3

)

 

$

2

 

 

 

 

 

 

 

 

 

 

CLO Borrowings:

 

 

 

 

 

 

 

 

Aggregate principal amounts outstanding

 

$

261

 

 

$

244

 

Fair value

 

$

264

 

 

$

246

 

At June 30, 2021, the principal amounts outstanding of the borrowings issued by the CLOs mature in 2030.

During the three and six months ended June 30, 2021 and 2020, the net gains (losses) from the change in fair value of the bank loans and borrowings held by the consolidated fundsCLO were not material and were recorded in nonoperating (expense) on the condensed consolidated statements of $24 million at both September 30, 2017income. The change in fair value of the assets and December 31, 2016.liabilities included interest income and expense, respectively.

 

7.9. Derivatives and Hedging

The Company maintains a program to enter into swaps to hedge against market price and interest rate exposures with respect to certain seed investments in sponsored investment products. At SeptemberJune 30, 2017,2021 and December 31, 2020, the Company had outstanding total return swaps with aggregate notional values of approximately $538 million.$863 million and $833 million, respectively.

The Company executes forward foreign currency exchange contracts to mitigate the risk of certain foreign exchange movements. At June 30, 2021 and December 31, 2016,2020, the Company had outstanding total return swaps and interest rate swapsforward foreign currency exchange contracts with aggregate notional values of approximately $572 million$2 billion and $42 million,$2.8 billion, respectively, and with expiration dates in July 2021 and January 2021, respectively.

Gains (losses) onAt both June 30, 2021 and December 31, 2020, the total return swaps are recorded in nonoperating income (expense) and were $(26) million and $(90) million for the three and nine months ended September 30, 2017, respectively, and $(25) million and $(33) million for the three and nine months ended September 30, 2016, respectively.

Gains (losses) on the interest rate swaps are recorded in nonoperating income (expense) and were not material for the three and nine months ended September 30, 2017 and 2016.  

The Company has entered intohad a derivative providing credit protection towith a counterpartynotional amount of approximately $17 million to a counterparty, representing the Company’s maximum risk of loss with respect to the provision of credit protection.derivative. The Company carries the derivative at fair value based on the expected discounted future cash outflows under the arrangement.


The Company executes forward foreign currency exchange contracts to mitigatefollowing table presents the riskfair values of certain foreign exchange movements. At Septemberderivative instruments recognized in the condensed consolidated statements of financial condition at June 30, 20172021 and December 31, 2016,2020:

(in millions)

Assets

 

 

Liabilities

 

 

Statement of

Financial Condition

 

June 30,

 

 

December 31,

 

 

Statement of

Financial Condition

 

June 30,

 

 

December 31,

 

Derivative instruments

Classification

 

2021

 

 

2020

 

 

Classification

 

2021

 

 

2020

 

Total return swaps

Other assets

 

$

3

 

 

$

 

 

Other liabilities

 

$

14

 

 

$

50

 

Forward foreign currency

  exchange contracts

Other assets

 

 

2

 

 

 

13

 

 

Other liabilities

 

 

19

 

 

 

5

 

Total

 

 

$

5

 

 

$

13

 

 

 

 

$

33

 

 

$

55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents realized and unrealized gains (losses) recognized in the Company had outstanding forward foreign currency exchange contracts with aggregate notional valuescondensed consolidated statements of approximately $1.3 billion and $107 million, respectively.   

Gains (losses)income on the forward foreign currency exchange contracts are recorded in other general and administration expense and were $29 million and $58 million for the three and nine months ended September 30, 2017, respectively. Gains (losses) on the forward foreign currency exchange contracts were not material for the three and nine months ended September 30, 2016.derivative instruments:

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

 

June 30,

 

 

June 30,

 

(in millions)

 

Statement of Income

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Derivative Instruments

 

Classification

 

Gains (Losses)

 

 

Gains (Losses)

 

Total return swaps

 

Nonoperating income (expense)

 

$

(50

)

 

$

(91

)

 

$

(84

)

 

$

51

 

Forward foreign currency

   exchange contracts

 

General and administration

expense

 

 

3

 

 

 

(10

)

 

 

10

 

 

 

(98

)

Total gain (loss) from derivative instruments

 

$

(47

)

 

$

(101

)

 

$

(74

)

 

$

(47

)

The Company consolidates certain sponsored investment funds, which may utilize derivative instruments as a part of the funds’ investment strategies. The changechanges in fair value of such derivatives, which isare recorded in nonoperating income (expense), waswere not material for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016.

The fair value of the outstanding derivatives mentioned above were not material at September 30, 2017 and December 31, 2016.2020.

See Note 12, 15, Borrowings, in the 20162020 Form 10-K for more information on the Company’s net investment hedge.

 

 

23


8.10. Goodwill

Goodwill activity during the ninesix months ended SeptemberJune 30, 20172021 was as follows:

 

(in millions)

 

 

 

 

December 31, 2016

 

$

13,118

 

Acquisitions (1)

 

 

123

 

Goodwill adjustments related to Quellos (2)

 

 

(15

)

September 30, 2017

 

$

13,226

 

(in millions)

 

 

 

December 31, 2020

$

14,551

 

Acquisitions(1)

 

816

 

Other(2)

 

(5

)

June 30, 2021

$

15,362

 

 

(1)

Amount includes $91 million ofThe increase in goodwill relatedduring the six months ended June 30, 2021 primarily relates to the First ReserveAperio Transaction, which expanded the Company’s energy and power infrastructure platform and $32 million of goodwill related to the Cachematrix Transaction, which enhanced the Company’s technology and cash management capabilities.  The total consideration paidclosed on February 1, 2021. See Note 3, Acquisitions, for these acquisitions was approximately $231 million, including $129 million of contingent consideration at fair value at time of close.more information.

(2)

The decrease in goodwill during the nine months ended September 30, 2017 primarilyAmount resulted from a decline related to tax benefits realized from tax-deductible goodwill in excess of book goodwill from the acquisition of the fund-of-funds business of Quellos Group, LLC in October 2007 (the “Quellos Transaction” or “Quellos”). Goodwill related to the Quellos Transaction will continue to be reduced in future periods by the amount of tax benefits realized from tax-deductible goodwill in excess of book goodwill from the Quellos Transaction. The balance of the Quellos tax-deductible goodwill in excess of book goodwill was approximately $176$59 million and $200$74 million at SeptemberJune 30, 20172021 and December 31, 2016,2020, respectively.

 

9.


11. Intangible Assets

The carrying amounts of identifiable intangible assets are summarized as follows:

 

(in millions)

 

Indefinite-lived

 

 

Finite-lived

 

 

Total

 

December 31, 2016

 

$

17,178

 

 

$

185

 

 

$

17,363

 

Amortization expense

 

 

 

 

 

(77

)

 

 

(77

)

Acquisitions (1)

 

 

 

 

 

114

 

 

 

114

 

September 30, 2017

 

$

17,178

 

 

$

222

 

 

$

17,400

 

(in millions)

Indefinite-lived

 

 

Finite-lived

 

 

Total

 

December 31, 2020

$

17,578

 

 

$

685

 

 

$

18,263

 

Acquisitions(1)

 

 

 

 

322

 

 

 

322

 

Amortization expense

 

 

 

 

(71

)

 

 

(71

)

June 30, 2021

$

17,578

 

 

$

936

 

 

$

18,514

 

(1)

In connection with the Aperio Transaction, which closed on February 1, 2021, the Company acquired $270 million of finite-lived customer relationships, $9 million of a finite-lived trade name and $8 million of finite-lived technology-related intangible assets, with weighted-average estimated lives of approximately 10 years, five years and three years, respectively. See Note 3, Acquisitions, for more information.

 

(1)12. Leases

The amount represents $110 millionfollowing table presents components of finite-livedlease cost included in general and administration expense on the condensed consolidated statement of income:

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Lease cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost(1)

$

39

 

 

$

36

 

 

$

78

 

 

$

73

 

Variable lease cost(2)

 

10

 

 

 

10

 

 

 

20

 

 

 

19

 

Total lease cost

$

49

 

 

$

46

 

 

$

98

 

 

$

92

 

(1)

Amounts include short-term leases, which are immaterial for the three and six months ended June 30, 2021 and 2020.

(2)

Amounts include operating lease payments, which may be adjusted based on usage, changes in an index or market rate, as well as common area maintenance charges and other variable costs not included in the measurement of right-of-use (“ROU”) assets and operating lease liabilities.

The following table presents operating leases included on the condensed consolidated statements of financial condition:

 

Statement of

 

 

 

 

 

 

 

 

 

Financial Condition

 

June 30,

 

 

December 31,

 

(in millions)

Classification

 

2021

 

 

2020

 

Statement of Financial Condition information:

 

 

 

 

 

 

 

 

 

Operating lease ROU assets

Other assets

 

$

613

 

 

$

649

 

Operating lease liabilities

Other liabilities

 

$

713

 

 

$

755

 

Supplemental information related to the First Reserve Transaction and $4 million of finite-lived assets related to the Cachematrix Transactionoperating leases is summarized below:

 

 

Six Months Ended

 

 

 

June 30,

 

(in millions)

 

2021

 

 

2020

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of operating lease liabilities

 

$

81

 

 

$

76

 

 

 

 

 

 

 

 

 

 

Supplemental noncash information:

 

 

 

 

 

 

 

 

ROU assets in exchange for operating lease liabilities

 

$

28

 

 

$

77

 


 

June 30,

 

December 31,

 

2021

 

2020

Lease term and discount rate:

 

 

 

 

 

 

 

 

 

Weighted-average remaining lease term

 

8

 

years

 

 

8

 

years

Weighted-average discount rate

 

3

 

%

 

 

3

 

%

13. Other Assets

iCapital

On March 10, 2020, in connection with a weighted average estimated liferecapitalization of iCapital Network, Inc. (“iCapital”), BlackRock received additional stock in exchange for certain securities it held, which resulted in a nonoperating pre-tax gain of approximately nine$240 million in the condensed consolidated statement of income for the six months ended June 30, 2020. Following this transaction, the Company accounts for its interest in iCapital as an equity method investment, which is included in other assets on the condensed consolidated statements of financial condition. At June 30, 2021 and 10 years,December 31, 2020, the carrying value of the Company’s interest in iCapital was approximately $294 million and $296 million, respectively.

 

10.14. Borrowings

Short-Term Borrowings

2017

2021 Revolving Credit Facility.    The  In March 2021, the Company’s credit facility has anwas amended to increase the aggregate commitment amount of $4.0to $4.4 billion and was amended in April 2017 to extend the maturity date to April 2022(the “2017March 2026 (the “2021 credit facility”). In addition, the amendment incorporated certain sustainability-linked pricing metrics into the agreement. Specifically, the Company’s applicable interest rate and commitment fee are subject to upward or downward adjustments on an annual basis if the Company achieves, or fails to achieve, certain specified targets. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate, or an applicable replacement benchmark, plus a spread. The 20172021 credit facility permits the Company to request up to an additional $1.0 billion of borrowing capacity, subject to lender credit approval, increasing the overall size of the 20172021 credit facility to an aggregate principal amount not to exceed $5.0$5.4 billion. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate plus a spread. The 20172021 credit facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of less than 1 to 1 at SeptemberJune 30, 2017.2021. The 20172021 credit facility provides back-up liquidity to fund ongoing working capital for general corporate purposes and various investment opportunities. At SeptemberJune 30, 2017,2021, the Company had no0 amount outstanding under the 20172021 credit facility.

Commercial Paper Program.  The Company can issue unsecured commercial paper notes (the “CP Notes”) on a private-placement basis up to a maximum aggregate amount outstanding at any time of $4.0$4 billion. The commercial paper program is currently supported by the 20172021 credit facility. At SeptemberJune 30, 2017,2021, BlackRock had no0 CP Notes outstanding.

24



Long-Term Borrowings

The carrying value and fair value of long-term borrowings estimateddetermined using market prices and EUR/USD foreign exchange ratesrate at SeptemberJune 30, 20172021 included the following:

 

(in millions)

 

Maturity Amount

 

 

Unamortized

Discount

and Debt

Issuance Costs

 

 

Carrying Value

 

 

Fair Value

 

Maturity Amount

 

 

Unamortized

Discount

and Debt

Issuance Costs

 

 

Carrying Value

 

 

Fair Value

 

5.00% Notes due 2019

 

$

1,000

 

 

$

(1

)

 

$

999

 

 

$

1,067

 

4.25% Notes due 2021

 

 

750

 

 

 

(4

)

 

 

746

 

 

 

802

 

3.375% Notes due 2022

 

 

750

 

 

 

(4

)

 

 

746

 

 

 

781

 

$

750

 

 

$

 

 

$

750

 

 

$

772

 

3.50% Notes due 2024

 

 

1,000

 

 

 

(6

)

 

 

994

 

 

 

1,044

 

 

1,000

 

 

 

(3

)

 

 

997

 

 

 

1,080

 

1.25% Notes due 2025

 

 

828

 

 

 

(6

)

 

 

822

 

 

 

846

 

 

830

 

 

 

(3

)

 

 

827

 

 

 

873

 

3.20% Notes due 2027

 

 

700

 

 

 

(7

)

 

 

693

 

 

 

708

 

 

700

 

 

 

(5

)

 

 

695

 

 

 

774

 

3.25% Notes due 2029

 

1,000

 

 

 

(11

)

 

 

989

 

 

 

1,117

 

2.40% Notes due 2030

 

1,000

 

 

 

(6

)

 

 

994

 

 

 

1,045

 

1.90% Notes due 2031

 

1,250

 

 

 

(11

)

 

 

1,239

 

 

 

1,248

 

Total Long-term Borrowings

 

$

5,028

 

 

$

(28

)

 

$

5,000

 

 

$

5,248

 

$

6,530

 

 

$

(39

)

 

$

6,491

 

 

$

6,909

 

 

In May 2021, the Company fully repaid $750 million of 4.25% notes at maturity.

Long-term borrowings at December 31, 20162020 had a carrying value of $4.9$7.3 billion and a fair value of $5.2$7.9 billion, determined using market prices at the end of December 2016.           

2027 Notes. In March 2017, the Company issued $700 million in aggregate principal amount of 3.20% senior unsecured and unsubordinated notes maturing on March 15, 2027 (the “2027 Notes”). Interest is payable semi-annually on March 15 and September 15 of each year, commencing September 15, 2017, and is approximately $22 million per year. The 2027 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a “make-whole” redemption price.  The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2027 Notes.

In April 2017, the net proceeds of the 2027 Notes were used to fully repay $700 million in aggregate principal amount outstanding of 6.25% notes prior to their maturity in September 2017.31, 2020.

See Note 12, 15, Borrowings, in the 20162020 Form 10-K for more information regarding the Company’s borrowings.

 

11.15. Commitments and Contingencies

Investment Commitments. At SeptemberJune 30, 2017,2021, the Company had $328$930 million of various capital commitments to fund sponsored investment funds,products, including consolidated VIEs.CIPs. These fundsproducts include private equity funds, real assets funds and opportunistic funds. This amount excludes additional commitments made by consolidated funds of funds to underlying third-party funds as third-party noncontrolling interest holders have the legal obligation to fund the respective commitments of such funds of funds. Generally, the timing of the funding of these commitments is unknown and the commitments are callable on demand at any time prior to the expiration of the commitment. These unfunded commitments are not recorded on the condensed consolidated statements of financial condition. These commitments do not include potential future commitments approved by the Company that are not yet legally binding. The Company intends to make additional capital commitments from time to time to fund additional investment products for, and with, its clients.

25


Lease Commitment.In May 2017, the Company entered into an agreement with 50 HYMC Owner LLC, for the lease of approximately 847,000 square feet of office space located at 50 Hudson Yards, New York, New York. The term of the lease is twenty years from the date that rental payments begin, expected to occur in May 2023, with the option to renew for a specified term.

Future minimum commitments of annual base rental payments under this operating lease are as follows:

(in millions)

 

 

 

Year

Amount

 

2023

$

34

 

2024

 

51

 

2025

 

51

 

2026

 

51

 

2027

 

51

 

Thereafter

 

1,007

 

Total

$

1,245

 

Contingencies

Contingent Payments Related to Business Acquisitions.  In connection with certain acquisitions, BlackRock is required to make contingent payments, subject to achieving specified performance targets, which may include revenue related tofrom acquired contracts or new capital commitments for certain products.contracts. The fair value of the remaining aggregate contingent payments at SeptemberJune 30, 20172021 totaled $228$34 million including $125 million related to the First Reserve Transaction, and is included in other liabilities on the condensed consolidated statements of financial condition.

Other Contingent Payments.The Company acts as the portfolio manager in a series of derivative transactions and has a maximum potential exposure of $17 million between the Company and counterparty. See Note 7, 9, Derivatives and Hedging, for further discussion.

Legal Proceedings.From time to time, BlackRock receives subpoenas or other requests for information from various U.S.US federal and state governmental and domesticregulatory authorities and international governmental and regulatory authorities in connection with certain industry-wide or other investigations or proceedings. It is BlackRock’s policy to cooperate fully with such inquiries.matters. The Company, and certain of its subsidiaries and employees have been named as defendants in various legal actions, including arbitrations and other litigation arising in connection with BlackRock’s activities. Additionally, BlackRock advisedBlackRock-advised investment portfolios may be subject to lawsuits, any of which potentially could harm the investment returns of the applicable portfolio or result in the Company being liable to the portfolios for any resulting damages.

On May 27, 2014, certain purported investors in the BlackRock Global Allocation Fund, Inc. and the BlackRock Equity Dividend Fund (collectively, the “Funds”) filed a consolidated complaint (the “Consolidated Complaint”) in the U.S. District Court for the District of New Jersey against BlackRock Advisors, LLC, BlackRock Investment Management, LLC and BlackRock International Limited under the caption In re BlackRock Mutual Funds Advisory Fee Litigation. The Consolidated Complaint, which purports to be brought derivatively on behalf of the Funds, alleges that the defendants violated Section 36(b) of the Investment Company Act by receiving allegedly excessive investment advisory fees from the Funds. On February 24, 2015, the same plaintiffs filed another complaint in the same court against BlackRock Investment Management, LLC and BlackRock Advisors, LLC. The allegations and legal claims in both complaints are substantially similar, with the new complaint purporting to challenge fees received by defendants after the plaintiffs filed their prior complaint. Both complaints seek, among other things, to recover on behalf of the Funds all allegedly excessive advisory fees received by defendants in the twelve month period preceding the start of each lawsuit, along with purported lost investment returns on those amounts, plus interest. The defendants believe the claims in both lawsuits are without merit and intend to vigorously defend the actions.  On September 25, 2017, the defendants filed a motion for summary judgment to dismiss the lawsuit.

Between November 12, 2015 and November 16, 2015, BlackRock, Inc., BlackRock Realty Advisors, Inc. (“BRA”), BlackRock US Core Property Fund, Inc. (formerly known as BlackRock Granite Property Fund, Inc.) (“Granite Fund”), and certain other Granite Fund related entities (collectively, the “BlackRock Parties”) were named as defendants in thirteen lawsuits filed in the Superior Court of the State of California for the County of Alameda arising out of the June

26


16, 2015 collapse of a balcony at the Library Gardens apartment complex in Berkeley, California (the “Property”). The Property is indirectly owned by the Granite Fund, which is managed by BRA. The plaintiffs also named as defendants in the lawsuits Greystar, which manages the Property, and certain other non-BlackRock related entities, including the developer of the Property, building contractors and building materials suppliers. The plaintiffs allege, among other things, that the BlackRock Parties were negligent in their ownership, control and maintenance of the Property’s balcony, and seek monetary, including punitive, damages. Additionally, on March 16, 2016, three former tenants of the Library Gardens apartment unit that experienced the balcony collapse sued the BlackRock Parties. The former tenants, who witnessed (but were not physically injured in) the accident make allegations virtually identical to those in the other previously filed actions and claim that, as a result of the collapse, they suffered unspecified emotional damage. Several defendants also filed cross-complaints alleging a variety of claims, including claims against the BlackRock Parties for contribution, negligence, and declaratory relief. BlackRock, Inc. believes the claims against it are without merit and intends to vigorously defend the actions. A trial on all claims is scheduled to begin on February 5, 2018.  

On June 16, 2016, iShares Trust, BlackRock, Inc. and certain of its advisory affiliates, and the directors and certain officers of the iShares ETFs were named as defendants in a purported class action lawsuit filed in California state court.  The lawsuit was filed by investors in certain iShares ETFs (the "ETFs"), and alleges the defendants violated the federal securities laws, purportedly by failing to adequately disclose in prospectuses issued by the ETFs the risks to the ETFs’ shareholders in the event of a "flash crash."  Plaintiffs seek unspecified monetary damages. The Plaintiffs’ complaint was dismissed in December 2016 and on January 6, 2017, plaintiffs filed an amended complaint. The defendants filed a motion for judgment on the pleadings dismissing that complaint. On September 18, 2017, the court dismissed the lawsuit.


On April 5, 2017, BlackRock, Inc., BlackRock Institutional Trust Company, N.A. (“BTC”), the BlackRock, Inc. Retirement Committee and various sub-committees, and a BlackRock employee were named as defendants in a purported class action lawsuit brought in the U.S.US District Court for the Northern District of California by a former employee on behalf of all participants and beneficiaries in the BlackRock employee 401(k) Plan (the “Plan”) participants and beneficiaries in the Plan from April 5, 2011 to the present. The lawsuit generally alleges that the defendants breached their duties towards Plan participants in violation of the Employee Retirement Income Security Act of 1974 by, among other things, offering investment options that were overly expensive, underperformed unaffiliated peer funds, focused disproportionately on active versus passive strategies, and were unduly concentrated within investment options managed by BlackRock. While the complaint does not contain any specific amount in alleged damages, it claims that the purported underperformance and hidden fees cost Plan participants more than $60 million.  On October 10,18, 2017, the plaintiffs filed an Amended Complaint, which, among other things, addsadded as defendants certain current and former members of the BlackRock Retirement and Investment Committees. The Amended Complaint also includesincluded a new purported class claim on behalf of investors in certain Collective Trust Funds (“CTFs”)CTFs managed by BTC. Specifically, the plaintiffs allege that BTC, exercisedas fiduciary authority over its compensation forto the CTFs, engaged in self-dealing by, most significantly, selecting itself as the securities lending servicesagent on terms that the plaintiffs claim were excessive. The Amended Complaint also alleged that BlackRock took undue risks in its management of securities lending cash reinvestment vehicles during the financial crisis. On August 23, 2018, the court granted permission to the CTFs.  Theplaintiffs to file a Second Amended Complaint (“SAC”) which added as defendants believe the claimsBlackRock, Inc. Management Development and Compensation Committee, the Plan’s independent investment consultant and the Plan’s Administrative Committee and its members. On October 22, 2018, BlackRock filed a motion to dismiss the SAC, and on June 3, 2019, the plaintiffs filed a motion seeking to certify both the Plan and the CTF classes. On September 3, 2019, the court granted BlackRock’s motion to dismiss part of the plaintiffs’ claim seeking to recover alleged losses in this lawsuit are without meritthe securities lending vehicles but denied the motion to dismiss in all other respects. On February 11, 2020, the court denied the plaintiffs’ motion to certify the CTF class and intendgranted their motion to vigorously defendcertify the action.

Plan class. On April 27, 2020, the Ninth Circuit denied the plaintiffs’ request to immediately appeal the class certification ruling. On September 24, 2020, the parties cross-moved for summary judgment, both of which were denied on January 12, 2021. On February 5, 2021, the parties reached a settlement in principle for $9.65 million which, if approved by the court, will resolve the lawsuit. On March 23, 2021, the plaintiffs filed a motion for preliminary approval of the settlement, which was granted on July 12, 2021. A hearing where the court will consider final approval of the settlement is currently scheduled for October 21, 2021.

Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability arising out of regulatory matters or lawsuits will have a material effect on BlackRock’s results of operations, financial position, or cash flows. However, there is no assurance as to whether any such pending or threatened matters will have a material effect on BlackRock’s results of operations, financial position or cash flows in any future reporting period. Due to uncertainties surrounding the outcome of these matters, management cannot reasonably estimate the possible loss or range of loss that may arise from these matters.

Indemnifications.   In the ordinary course of business or in connection with certain acquisition agreements, BlackRock enters into contracts pursuant to which it may agree to indemnify third parties in certain circumstances. The terms of these indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined or the likelihood of any liability is considered remote. Consequently, no liability has been recorded on the condensed consolidated statements of financial condition.

27


In connection with securities lending transactions, BlackRock has issued certain indemnificationsagreed to indemnify certain securities lending clients against potential loss resulting from a borrower’s failure to fulfill its obligations under the securities lending agreement should the value of the collateral pledged by the borrower at the time of default be insufficient to cover the borrower’s obligation under the securities lending agreement. At SeptemberThe amount of securities on loan as of June 30, 2017,2021 and subject to this type of indemnification was $297 billion. In the Company indemnified certain of its clients for their securitiesCompany’s capacity as lending loan balances of approximately $197.6 billion. The Company held, as agent, cash and securities totaling $210.6$316 billion were held as collateral for indemnified securities on loan at SeptemberJune 30, 2017.2021. The fair value of these indemnifications was not material at SeptemberJune 30, 2017.2021.


16. Revenue

The table below presents detail of revenue for the three and six months ended June 30, 2021 and 2020 and includes the product mix of investment advisory, administration fees and securities lending revenue, and performance fees.

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Investment advisory, administration fees and

   securities lending revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

$

641

 

 

$

381

 

 

$

1,217

 

 

$

779

 

ETFs

 

1,156

 

 

 

792

 

 

 

2,224

 

 

 

1,671

 

Non-ETF Index

 

198

 

 

 

178

 

 

 

374

 

 

 

341

 

Equity subtotal

 

1,995

 

 

 

1,351

 

 

 

3,815

 

 

 

2,791

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

545

 

 

 

464

 

 

 

1,070

 

 

 

945

 

ETFs

 

294

 

 

 

261

 

 

 

589

 

 

 

520

 

Non-ETF Index

 

116

 

 

 

129

 

 

 

229

 

 

 

241

 

Fixed income subtotal

 

955

 

 

 

854

 

 

 

1,888

 

 

 

1,706

 

Multi-asset

 

344

 

 

 

270

 

 

 

672

 

 

 

563

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illiquid alternatives

 

167

 

 

 

128

 

 

 

335

 

 

 

276

 

Liquid alternatives

 

150

 

 

 

117

 

 

 

297

 

 

 

229

 

Currency and commodities(1)

 

55

 

 

 

35

 

 

 

108

 

 

 

67

 

Alternatives subtotal

 

372

 

 

 

280

 

 

 

740

 

 

 

572

 

Long-term

 

3,666

 

 

 

2,755

 

 

 

7,115

 

 

 

5,632

 

Cash management

 

91

 

 

 

211

 

 

 

234

 

 

 

389

 

Total investment advisory, administration fees and

   securities lending revenue

 

3,757

 

 

 

2,966

 

 

 

7,349

 

 

 

6,021

 

Investment advisory performance fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

36

 

 

 

23

 

 

 

62

 

 

 

25

 

Fixed income

 

15

 

 

 

2

 

 

 

29

 

 

 

4

 

Multi-asset

 

9

 

 

 

2

 

 

 

17

 

 

 

3

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illiquid alternatives

 

90

 

 

 

32

 

 

 

97

 

 

 

49

 

Liquid alternatives

 

190

 

 

 

53

 

 

 

264

 

 

 

72

 

Alternatives subtotal

 

280

 

 

 

85

 

 

 

361

 

 

 

121

 

Total performance fees

 

340

 

 

 

112

 

 

 

469

 

 

 

153

 

Technology services revenue

 

316

 

 

 

278

 

 

 

622

 

 

 

552

 

Distribution fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrocessions

 

264

 

 

 

162

 

 

 

502

 

 

 

331

 

12b-1 fees (US mutual fund distribution fees)

 

87

 

 

 

78

 

 

 

172

 

 

 

169

 

Other

 

18

 

 

 

13

 

 

 

35

 

 

 

29

 

Total distribution fees

 

369

 

 

 

253

 

 

 

709

 

 

 

529

 

Advisory and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

 

9

 

 

 

17

 

 

 

24

 

 

 

34

 

Other

 

29

 

 

 

22

 

 

 

45

 

 

 

69

 

Total advisory and other revenue

 

38

 

 

 

39

 

 

 

69

 

 

 

103

 

Total revenue

$

4,820

 

 

$

3,648

 

 

$

9,218

 

 

$

7,358

 

(1)      Amounts include commodity ETFs.


The tables below present the investment advisory, administration fees and securities lending revenue by client type and investment style:

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

By client type:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

$

1,231

 

 

$

825

 

 

$

2,356

 

 

$

1,697

 

ETFs

 

1,505

 

 

 

1,089

 

 

 

2,922

 

 

 

2,259

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

657

 

 

 

546

 

 

 

1,307

 

 

 

1,120

 

Index

 

273

 

 

 

295

 

 

 

530

 

 

 

556

 

Total institutional

 

930

 

 

 

841

 

 

 

1,837

 

 

 

1,676

 

Long-term

 

3,666

 

 

 

2,755

 

 

 

7,115

 

 

 

5,632

 

Cash management

 

91

 

 

 

211

 

 

 

234

 

 

 

389

 

Total

$

3,757

 

 

$

2,966

 

 

$

7,349

 

 

$

6,021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By investment style:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

$

1,842

 

 

$

1,354

 

 

$

3,581

 

 

$

2,781

 

Index and ETFs

 

1,824

 

 

 

1,401

 

 

 

3,534

 

 

 

2,851

 

Long-term

 

3,666

 

 

 

2,755

 

 

 

7,115

 

 

 

5,632

 

Cash management

 

91

 

 

 

211

 

 

 

234

 

 

 

389

 

Total

$

3,757

 

 

$

2,966

 

 

$

7,349

 

 

$

6,021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Investment advisory and administration fees – remaining performance obligation

The tables below present estimated investment advisory and administration fees expected to be recognized in the future related to the unsatisfied portion of the performance obligations at June 30, 2021 and 2020:

June 30, 2021

 

Remainder of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2021

 

 

 

2022

 

 

 

2023

 

 

 

2024

 

 

Thereafter

 

 

Total

 

Investment advisory and

   administration fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternatives(1)(2)

$

86

 

 

$

168

 

 

$

137

 

 

$

82

 

 

$

51

 

 

$

524

 

June 30, 2020

 

Remainder of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2020

 

 

 

2021

 

 

 

2022

 

 

 

2023

 

 

Thereafter

 

 

Total

 

Investment advisory and

   administration fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternatives(1)(2)

$

63

 

 

$

114

 

 

$

98

 

 

$

84

 

 

$

55

 

 

$

414

 

(1)

Investment advisory and administration fees include management fees related to certain alternative products, which are based on contractual committed capital outstanding at June 30, 2021 and 2020. Actual management fees could be higher to the extent additional committed capital is raised. These fees are generally billed on a quarterly basis in arrears.

(2)

The Company elected the following practical expedients and therefore does not include amounts related to (1) performance obligations with an original duration of one year or less, and (2) variable consideration related to future service periods.  

Change in Deferred Carried Interest Liability

The table below presents changes in the deferred carried interest liability, which is included in other liabilities on the condensed consolidated statements of financial condition, for the three and six months ended June 30, 2021 and 2020:

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Beginning balance

$

748

 

 

$

535

 

 

$

584

 

 

$

483

 

Net increase (decrease) in unrealized allocations

 

461

 

 

 

(87

)

 

 

627

 

 

 

(25

)

Performance fee revenue recognized

 

(77

)

 

 

(30

)

 

 

(79

)

 

 

(40

)

Ending balance

$

1,132

 

 

$

418

 

 

$

1,132

 

 

$

418

 


Technology services revenue – remaining performance obligation

The tables below present estimated technology services revenue expected to be recognized in the future related to the unsatisfied portion of the performance obligations at June 30, 2021 and 2020:

June 30, 2021

 

Remainder of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2021

 

 

 

2022

 

 

 

2023

 

 

 

2024

 

 

Thereafter

 

 

Total

 

Technology services revenue(1)(2)

$

67

 

 

$

71

 

 

$

40

 

 

$

20

 

 

$

14

 

 

$

212

 

June 30, 2020

 

Remainder of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

2020

 

 

 

2021

 

 

 

2022

 

 

 

2023

 

 

Thereafter

 

 

Total

 

Technology services revenue(1)(2)

$

72

 

 

$

75

 

 

$

40

 

 

$

17

 

 

$

12

 

 

$

216

 

(1)

Technology services revenue primarily includes upfront payments from customers, which the Company generally recognizes as services are performed.

(2)

The Company elected the following practical expedients and therefore does not include amounts related to (1) performance obligations with an original duration of one year or less, and (2) variable consideration related to future service periods.

In addition to amounts disclosed in the tables above, certain technology services contracts require fixed minimum fees, which are billed on a monthly or quarterly basis in arrears. The Company recognizes such revenue as services are performed. As of June 30, 2021, the estimated fixed minimum fees for the remainder of the year approximated $375 million. The term for these contracts, which are either in their initial or renewal period, ranges from one to five years.

The table below presents changes in the technology services deferred revenue liability for the three and six months ended June 30, 2021 and 2020, which is included in other liabilities on the condensed consolidated statements of financial condition:

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Beginning balance

$

111

 

 

$

114

 

 

$

123

 

 

$

116

 

Additions (1)

 

26

 

 

 

28

 

 

 

44

 

 

 

58

 

Revenue recognized that was included

   in the beginning balance

 

(30

)

 

 

(34

)

 

 

(60

)

 

 

(66

)

Ending balance

$

107

 

 

$

108

 

 

$

107

 

 

$

108

 

(1)

Amounts are net of revenue recognized.

 

 


12.

17. Stock-Based Compensation

Restricted Stock and RSUs.

Restricted stock and restricted stock units (“RSUs”) activity for the ninesix months ended SeptemberJune 30, 20172021 is summarized below.

 

Outstanding at

 

Restricted

Stock and

RSUs

 

 

Weighted-

Average

Grant Date

Fair Value

 

Restricted

Stock and

RSUs

 

 

Weighted-

Average

Grant Date

Fair Value

 

December 31, 2016

 

 

2,987,588

 

 

$

318.04

 

December 31, 2020

 

2,139,930

 

 

$

489.81

 

Granted

 

 

1,061,915

 

 

$

377.36

 

 

842,669

 

 

$

741.31

 

Converted

 

 

(1,363,701

)

 

$

320.27

 

 

(721,020

)

 

$

507.97

 

Forfeited

 

 

(39,164

)

 

$

338.57

 

 

(33,638

)

 

$

574.77

 

September 30, 2017(1)

 

 

2,646,638

 

 

$

340.39

 

June 30, 2021

 

2,227,941

 

 

$

577.78

 

 

(1)

At September 30, 2017, approximately 2.3 million awards are expected to vest and 0.3 million awards have vested but have not been converted.

In January 2017,2021, the Company granted 699,991470,253 RSUs or shares of restricted stock to employees as part of 20162020 annual incentive compensation that vest ratably over three years from the date of grant and 277,313247,621 RSUs or shares of restricted stock to employees that cliff vest 100% on January 31, 2020.2024. The Company values restricted stock and RSUs at their grant-date fair value as measured by BlackRock’s common stock price. The total fair market value of RSUs/restricted stock granted to employees during the ninesix months ended SeptemberJune 30, 20172021 was $401$625 million.

At SeptemberJune 30, 2017,2021, the intrinsic value of outstanding RSUs was $1.2$1.9 billion, reflecting a closing stock price of $447.09.$874.97.

At SeptemberJune 30, 2017,2021, total unrecognized stock-based compensation expense related to unvested RSUs was $351$717 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 1.11.5 years.

Performance-Based RSUs.

Performance-based RSU activity for the ninesix months ended SeptemberJune 30, 20172021 is summarized below.

 

Outstanding at

 

Performance-

Based RSUs

 

 

Weighted-

Average

Grant Date

Fair Value

 

December 31, 2016

 

 

610,371

 

 

$

315.65

 

Granted

 

 

294,584

 

 

$

375.27

 

Forfeited

 

 

(1,430

)

 

$

296.12

 

September 30, 2017

 

 

903,525

 

 

$

335.12

 

Outstanding at

Performance-

Based RSUs

 

 

Weighted-

Average

Grant Date

Fair Value

 

December 31, 2020

 

700,217

 

 

$

494.51

 

Granted

 

162,029

 

 

$

739.22

 

Additional shares granted due to attainment of

    performance measures

 

4,545

 

 

$

566.44

 

Converted

 

(193,872

)

 

$

566.44

 

June 30, 2021

 

672,919

 

 

$

533.19

 

 

In January 2017,2021, the Company granted 293,385162,029 performance-based RSUs to certain employees that cliff vest 100% on January 31, 2020.2024. These awards are amortized over a service period of three years. The number of shares distributed at vesting could be higher or lower than the original grant based on the level of attainment of predetermined Company performance measures. In January 2021, the Company granted 4,545 additional RSUs to certain employees based on the attainment of Company performance measures during the performance period.

28


The Company initially values performance-based RSUs at their grant-date fair value as measured by BlackRock’s common stock price. The total grant-date fair market value of performance-based RSUs granted to employees during the ninesix months ended SeptemberJune 30, 20172021 was $111$122 million.

At SeptemberJune 30, 2017,2021, the intrinsic value of outstanding performance-based RSUs was $404$589 million, reflecting a closing stock price of $447.09.$874.97.


At SeptemberJune 30, 2017,2021, total unrecognized stock-based compensation expense related to unvested performance-based awards was $137$220 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 1.41.5 years.

Market Performance-based RSUs.        

Market performance-based RSUs activity for the nine months ended September 30, 2017 is summarized below.

Outstanding at

 

Market

Performance-

Based RSUs

 

 

Weighted-

Average

Grant Date

Fair Value

 

December 31, 2016

 

 

803,474

 

 

$

151.20

 

Converted

 

 

(517,138

)

 

$

126.76

 

September 30, 2017(1)

 

 

286,336

 

 

$

195.33

 

(1)   The market performance-based RSUs require that separate 15%, 25% and 35% share price appreciation targets be achieved during the six-year term of the awards. The awards are split into three tranches and each tranche may vest if the specified target increase in share price is met.  At September 30, 2017, approximately 0.3 million awards are expected to vest.  

See Note 14, 18, Stock-Based Compensation, in the 20162020 Form 10-K for more information on market performance-based RSUs.

At SeptemberPerformance-based Stock Options.

Stock options outstanding at both June 30, 2017,2021 and December 31, 2020 were 1,915,792 with a weighted-average exercise price of $513.50.

Vesting of the intrinsic valueperformance-based stock options is contingent upon the achievement of outstanding market performance-based RSUs was $128 million reflecting a closingobtaining 125% of BlackRock's grant-date stock price within five years from the grant date and the attainment of $447.09.Company performance measures during the four-year performance period. If both hurdles are achieved, the award will vest in 3 equal installments at the end of 2022, 2023 and 2024, respectively. The stock price hurdle was achieved in December of 2020.

At SeptemberJune 30, 2017,2021, total unrecognized stock-based compensation expense related to unvested market performance-based awardsstock options was $4$62 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of less than one year.2.4 years. At June 30, 2021, the weighted-average remaining life of the awards is approximately 5.4 years.

Long-Term Incentive Plans Funded by PNC.    Under a share surrender agreement, PNC committed to provide up to 4 million shares of BlackRock stock, held by PNC, to fund certain BlackRock long-term incentive plans (“LTIP”), including performance-based and market performance-based RSUs. The current share surrender agreement commits PNC to provide BlackRock Series C nonvoting participating preferred stock to fund the remaining committed shares. As of September 30, 2017, 3.8 million shares had been surrendered by PNC.

517,138 shares were surrendered by PNCSee Note 18, Stock-Based Compensation, in the first quarter of 2017.

At September 30, 2017, the remaining shares committed by PNC of 0.2 million were available to fund certain future long-term incentive awards.2020 Form 10-K for more information on performance-based stock options.

 

13.

18. Net Capital Requirements

The Company is required to maintain net capital in certain regulated subsidiaries within a number of jurisdictions, which is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries of the Company may be restricted in their ability to transfer cash between different jurisdictions and to their parents. Additionally, transfers of cash between international jurisdictions including repatriation to the United States, may have adverse tax consequences that could discourage such transfers.

29


At SeptemberJune 30, 2017,2021, the Company was required to maintain approximately $1.7$2.4 billion in net capital in certain regulated subsidiaries, including BlackRock Institutional Trust Company, N.A.BTC (a wholly owned subsidiary of the Company that is chartered as a national bank whose powers are limited to trust and other fiduciary activities and which is subject to regulatory capital requirements administered by the US Office of the Comptroller of the Currency), entities regulated by the Financial Conduct Authority and Prudential Regulation Authority in the United Kingdom (“UK”), and the Company’s broker-dealers. The Company was in compliance with all applicable regulatory net capital requirements.

 

 

14.19. Accumulated Other Comprehensive Income (Loss)

The following tables presenttable presents changes in accumulated other comprehensive income (loss) by componentAOCI for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016:2020:

 

(in millions)

 

Foreign

currency

translation

adjustments(1)

 

 

Other(2)

 

 

Total

 

For the Three Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2017

 

$

(579

)

 

$

4

 

 

$

(575

)

Net other comprehensive income (loss) for

   the three months ended September 30, 2017

 

 

102

 

 

 

 

 

 

102

 

September 30, 2017

 

$

(477

)

 

$

4

 

 

$

(473

)

For the Nine Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

$

(721

)

 

$

5

 

 

$

(716

)

Net other comprehensive income (loss) for

   the nine months ended September 30, 2017

 

 

244

 

 

 

(1

)

 

 

243

 

September 30, 2017

 

$

(477

)

 

$

4

 

 

$

(473

)

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Beginning balance

$

(411

)

 

$

(810

)

 

$

(337

)

 

$

(571

)

Foreign currency translation adjustments(1)

 

23

 

 

 

29

 

 

 

(51

)

 

 

(210

)

Ending balance

$

(388

)

 

$

(781

)

 

$

(388

)

 

$

(781

)

 

(1)

AmountAmounts for the three and nine months ended SeptemberJune 30, 2017 includes2021 and 2020 include a loss from a net investment hedge of $18$6 million (net of a tax benefit of $11$2 million) and $56$14 million (net of a tax benefit of $33$4 million), respectively. Amount for the six months ended June 30, 2021 includes a gain from a net investment hedge of $20 million (net of tax expense of $6 million). Gain (loss) from a net investment hedge was immaterial for the six months ended June 30, 2020.

(2)  Other includes amounts related to benefit plans and available-for-sale investments.

 

(in millions)

 

Foreign

currency

translation

adjustments(1)

 

 

Other(2)

 

 

Total

 

 

For the Three Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2016

 

$

(565

)

 

$

5

 

 

$

(560

)

 

Net other comprehensive income (loss) for

   the three months ended September 30, 2016

 

 

(38

)

 

 

 

 

 

(38

)

 

September 30, 2016

 

$

(603

)

 

$

5

 

 

$

(598

)

 

For the Nine Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

$

(452

)

 

$

4

 

 

$

(448

)

 

Net other comprehensive income (loss) for

   the nine months ended September 30, 2016

 

 

(151

)

 

 

1

 

 

 

(150

)

 

September 30, 2016

 

$

(603

)

 

$

5

 

 

$

(598

)

 


 

(1) Amount for20. Capital Stock

Share Repurchases.  During the three and ninesix months ended SeptemberJune 30, 2016 includes a loss from a net investment hedge of $5 million (net of a tax benefit of $4 million) and $16 million (net of a tax benefit of $10 million), respectively.

(2) Other includes amounts related to benefit plans and available-for-sale investments.

30


15.  Capital Stock

Nonvoting Participating Preferred Stock.    The Company’s preferred shares authorized, issued and outstanding consisted of2021, the following:

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Series A

 

 

 

 

 

 

 

 

Shares authorized, $0.01 par value

 

 

20,000,000

 

 

 

20,000,000

 

Shares issued and outstanding

 

 

 

 

 

 

Series B

 

 

 

 

 

 

 

 

Shares authorized, $0.01 par value

 

 

150,000,000

 

 

 

150,000,000

 

Shares issued and outstanding(1)

 

 

823,188

 

 

 

823,188

 

Series C

 

 

 

 

 

 

 

 

Shares authorized, $0.01 par value

 

 

6,000,000

 

 

 

6,000,000

 

Shares issued and outstanding(1)

 

 

246,522

 

 

 

763,660

 

Series D

 

 

 

 

 

 

 

 

Shares authorized, $0.01 par value

 

 

20,000,000

 

 

 

20,000,000

 

Shares issued and outstanding

 

 

 

 

 

 

(1)

Shares held by PNC.

Share Repurchases.    The Company repurchased 2.10.8 million common shares in open market transactions under the Company’s existing share repurchase program for approximately $825 million during the nine months ended September$600 million. At June 30, 2017.  At September 30, 2017,2021, there were 6.94.3 million shares still authorized to be repurchased.repurchased under the program.

PNC Capital Contribution.  During

21. Income Taxes

Income tax expense for the three and six months ended March 31, 2017, PNC surrendered to BlackRock 517,138 shares of BlackRock Series C Preferred to fund certain LTIP awards.

16. Restructuring Charge

A restructuring charge of $76June 30, 2021 included $171 million ($53 million after-tax), comprised of $44 million of severance and $32 million ofnoncash net expense related to the accelerated amortizationrevaluation of previously grantedcertain deferred cashtax assets and equityliabilities as a result of legislation enacted in the UK increasing its corporate tax rate.

The six months ended June 30, 2021 and 2020 income tax expense reflected $39 million and $66 million, respectively, of discrete tax benefits, including benefits related to stock-based compensation awards was recordedthat vested in the first quarter of 2016each year.  

The six months ended June 30, 2020 income tax expense included discrete tax benefit of $241 million recognized in connection with a project to streamline and simplify the organization.  There was no restructuring liability outstanding at September 30, 2017.charitable contribution of BlackRock’s remaining 20% stake in PennyMac Financial Services, Inc. (the “Charitable Contribution”).

 

31


17.22. Earnings Per Share

Due to the similarities in terms between BlackRock nonvoting participating preferred stock and the Company’s common stock, the Company considers its participating preferred stock to be a common stock equivalent for purposes of earnings per share (“EPS”) calculations. As such, the Company has included the outstanding nonvoting participating preferred stock in the calculation of average basic and diluted shares outstanding.

The following table sets forth the computation of basic and diluted EPSearnings per share (“EPS”) for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 under the treasury stock method:

 

 

Three Months Ended

 

 

Nine Months Ended

 

Three Months Ended

 

 

Six Months Ended

 

 

September 30,

 

 

September 30,

 

June 30,

 

 

June 30,

 

(in millions, except shares and per share data)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income attributable to BlackRock

 

$

947

 

 

$

875

 

 

$

2,666

 

 

$

2,321

 

Net income attributable to BlackRock, Inc.

$

1,378

 

 

$

1,214

 

 

$

2,577

 

 

$

2,020

 

Basic weighted-average shares outstanding

 

 

161,872,716

 

 

 

164,129,214

 

 

 

162,459,737

 

 

 

164,756,355

 

 

152,443,039

 

 

 

153,732,878

 

 

 

152,504,902

 

 

 

154,488,079

 

Dilutive effect of nonparticipating RSUs and stock

options

 

 

1,900,830

 

 

 

2,127,384

 

 

 

1,829,305

 

 

 

2,004,557

 

Dilutive effect of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonparticipating RSUs

 

1,304,463

 

 

 

979,154

 

 

 

1,294,242

 

 

 

1,068,108

 

Stock options

 

670,079

 

 

 

 

 

 

560,209

 

 

 

 

Total diluted weighted-average shares outstanding

 

 

163,773,546

 

 

 

166,256,598

 

 

 

164,289,042

 

 

 

166,760,912

 

 

154,417,581

 

 

 

154,712,032

 

 

 

154,359,353

 

 

 

155,556,187

 

Basic earnings per share

 

$

5.85

 

 

$

5.33

 

 

$

16.41

 

 

$

14.09

 

$

9.04

 

 

$

7.90

 

 

$

16.90

 

 

$

13.08

 

Diluted earnings per share

 

$

5.78

 

 

$

5.26

 

 

$

16.23

 

 

$

13.92

 

$

8.92

 

 

$

7.85

 

 

$

16.69

 

 

$

12.99

 

 

The amount of anti-dilutive RSUs was immaterial for the three and six months ended June 30, 2021 and 2020. Certain performance-based RSUs were excluded from the diluted EPS calculation because the designated contingency was not met for the three and six months ended June 30, 2021 and 2020, respectively. In addition, performance-based stock options were excluded from the diluted EPS calculation for the three and six months ended June 30, 2020 because the designated contingency was not met.

18.


23. Segment Information

The Company’s management directs BlackRock’s operations as one1 business, the asset management business. The Company utilizes a consolidated approach to assess performance and allocate resources. As such, the Company operates in one business segment as defined in ASC 280-10.segment.

The following table illustrates investment advisory, administration fees, securities lending revenue and performance fees by product type, technology and risk management revenue, distribution fees, and advisory and other revenue for the three and nine months ended September 30, 2017 and 2016.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

 

September 30,

 

 

September 30,

 

 

(in millions)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

Equity

 

$

1,457

 

 

$

1,284

 

 

$

4,134

 

 

$

3,746

 

 

Fixed income

 

 

749

 

 

 

695

 

 

 

2,153

 

 

 

1,975

 

 

Multi-asset

 

 

291

 

 

 

286

 

 

 

857

 

 

 

866

 

 

Alternatives

 

 

342

 

 

 

221

 

 

 

754

 

 

 

633

 

 

Cash management

 

 

144

 

 

 

118

 

 

 

408

 

 

 

340

 

 

Total investment advisory, administration fees,

    securities lending revenue and performance fees

 

 

2,983

 

 

 

2,604

 

 

 

8,306

 

 

 

7,560

 

 

Technology and risk management revenue

 

 

175

 

 

 

152

 

 

 

497

 

 

 

439

 

 

Distribution fees

 

 

5

 

 

 

10

 

 

 

17

 

 

 

32

 

 

Advisory and other revenue

 

 

70

 

 

 

71

 

 

 

202

 

 

 

234

 

 

Total revenue

 

$

3,233

 

 

$

2,837

 

 

$

9,022

 

 

$

8,265

 

 

 

The following table illustrates total revenue for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the customer resides or affiliated services are provided.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

(in millions)

 

September 30,

 

 

September 30,

 

 

June 30,

 

 

June 30,

 

Revenue

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Americas

 

$

2,126

 

 

$

1,934

 

 

$

6,077

 

 

$

5,580

 

 

$

3,158

 

 

$

2,470

 

 

$

5,968

 

 

$

4,950

 

Europe

 

 

946

 

 

 

773

 

 

 

2,496

 

 

 

2,287

 

 

 

1,440

 

 

 

1,020

 

 

 

2,827

 

 

 

2,087

 

Asia-Pacific

 

 

161

 

 

 

130

 

 

 

449

 

 

 

398

 

 

 

222

 

 

 

158

 

 

 

423

 

 

 

321

 

Total revenue

 

$

3,233

 

 

$

2,837

 

 

$

9,022

 

 

$

8,265

 

 

$

4,820

 

 

$

3,648

 

 

$

9,218

 

 

$

7,358

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32


See Note 16, Revenue, for further information on the Company’s sources of revenue.

 

The following table illustrates long-lived assets that consist of goodwill and property and equipment at SeptemberJune 30, 20172021 and December 31, 20162020 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located.

 

(in millions)

 

September 30,

 

 

December 31,

 

 

June 30,

 

 

December 31,

 

Long-lived Assets

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Americas

 

$

13,546

 

 

$

13,424

 

 

$

14,660

 

 

$

13,784

 

Europe

 

 

166

 

 

 

163

 

 

 

1,349

 

 

 

1,360

 

Asia-Pacific

 

 

85

 

 

 

90

 

 

 

94

 

 

 

88

 

Total long-lived assets

 

$

13,797

 

 

$

13,677

 

 

$

16,103

 

 

$

15,232

 

 

Americas is primarily is comprised of the United States, Latin America and Canada, while Europe is primarily is comprised of the United KingdomUK, the Netherlands, France and Luxembourg. Asia-Pacific is primarily is comprised of Hong Kong, Australia, Japan and Singapore.

19.24. Subsequent Events

In June 2017, the Company announced that it entered into an agreement for a minority investment in Scalable Capital, a digital investment manager in Europe.  The transaction is expected to be completed in the fourth quarter of 2017, subject to customary regulatory approvals and closing conditions. This transaction is not expected to be material to the Company’s condensed consolidated statements of financial condition or results of operations.  

The Company conducted a review for additional subsequent events and determined that no subsequent events had occurred that would require accrual or additional disclosures.

 


 

33


ItemItem 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This report, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions.

BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

BlackRock has previously disclosed risk factors in its Securities and Exchange Commission (“SEC”) reports. These risk factors and those identified elsewhere in this report, among others, could cause actual results to differ materially from forward-looking statements or historical performance and include: (1) a pandemic or health crisis, including the COVID-19 pandemic, and its continued impact on financial institutions, the global economy or capital markets, as well as BlackRock’s products, clients, vendors and employees, and BlackRock’s results of operations, the full extent of which may be unknown; (2) the introduction, withdrawal, success and timing of business initiatives and strategies; (2)(3) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management (“AUM”); (3)(4) the relative and absolute investment performance of BlackRock’s investment products; (4)(5) BlackRock’s ability to develop new products and services that address client preferences; (6) the impact of increased competition; (5)(7) the impact of future acquisitions or divestitures; (6)(8) BlackRock’s ability to integrate acquired businesses successfully; (9) the unfavorable resolution of legal proceedings; (7)(10) the extent and timing of any share repurchases; (8)(11) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (9)(12) attempts to circumvent BlackRock’s operational control environment or the potential for human error in connection with BlackRock’s operational systems; (10)(13) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or The PNC Financial Services Group, Inc. (“PNC”); (11)BlackRock; (14) changes in law and policy and uncertainty pending any such changes; (12)(15) any failure to effectively manage conflicts of interest; (16) damage to BlackRock’s reputation; (17) terrorist activities, civil unrest, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (13)(18) the ability to attract and retain highly talented professionals; (14)(19) fluctuations in the carrying value of BlackRock’s economic investments; (15)(20) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (16)(21) BlackRock’s success in negotiating distribution arrangements and maintaining distribution channels for its products; (17)(22) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (18)(23) operational, technological and regulatory risks associated with BlackRock’s major technology partnerships; (24) any disruption to the operations of third parties whose functions are integral to BlackRock’s exchange-traded funds (“ETF”) platform; (19)(25) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (20)(26) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.


34


OVERVIEW

BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, “BlackRock” or the “Company”) is a leading publicly traded investment management firm with $5.977$9.5 trillion of AUM at SeptemberJune 30, 2017.2021. With approximately 13,70016,900 employees in more than 30 countries who serve clients in over 100 countries across the globe, BlackRock provides a broad range of investment management and risk managementtechnology services to institutional and retail clients worldwide.

BlackRock’s diverse platform of alpha-seeking active, (alpha)index and index (beta)cash management investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Product offerings include single- and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares®ETFs, separate accounts, collective investmenttrust funds and other pooled investment vehicles. BlackRock also offers technology services, including the investment and risk management technology platform, Aladdin®, risk analytics,Aladdin Wealth, eFront, Cachematrix and FutureAdvisor, as well as advisory and technology services and solutions to a broad base of institutional and wealth management investors.clients.

BlackRock serves a diverse mix of institutional and retail clients across the globe. Clients include tax-exempt institutions, such as defined benefit and defined contribution pension plans, charities, foundations and endowments; official institutions, such as central banks, sovereign wealth funds, supranationals and other government entities; taxable institutions, including insurance companies, financial institutions, corporations and third-party fund sponsors, and retail investors.intermediaries.

BlackRock maintains a significant global sales and marketing presence that is focused on establishing and maintaining retail and institutional investment management and technology service relationships by marketing its services to investors directly and through third-party distribution relationships, including financial professionals and pension consultants,consultants.

Certain prior period presentations and establishing third-party distribution relationships.disclosures, while not required to be recast, were reclassified to ensure comparability with current period classifications.

At September 30, 2017, PNC held 21.4%COVID-19 Impact

BlackRock continues to actively monitor COVID-19 developments and their potential impact on the Company’s employees, business and operations, particularly in jurisdictions where BlackRock has significant employee populations and/or business activity.

The aggregate extent to which COVID-19, and existing and new variants of COVID-19, affect BlackRock’s business, results of operations and financial condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the Company’s voting common stockpandemic and 21.9%any recovery period, the emergence and spread of variants of the Company’s capital stock, which includes outstanding commonCOVID-19 virus, the continuing prevalence of severe, unconstrained and/or escalating rates of infection in certain countries and nonvoting preferred stock.

Certain items previously reported have been reclassified to conform toregions, and the current period presentation.  For moreavailability, adoption and efficacy of treatments and vaccines. See Part II, Item 1A - Risk Factors, of this filing for further information on the current period’s reclassification, see “Discussion of Financial Results – Revenue” herein.

OTHER DEVELOPMENTS

Acquisitions

In June 2017, the Company completed the acquisitionpossible future impact of the equity infrastructure franchise of First Reserve (“First Reserve Transaction”), expanding the Company’s energy and power infrastructure platform. Total consideration for the transaction was approximately $193 million, including $120 million of contingent consideration at fair value at time of close.

In July 2017, the Company completed the acquisition of Cachematrix (“Cachematrix Transaction”), a leading provider of financial technology which simplifies the cash management process for banks and their corporate clients in a streamlined, open-architecture platform.  Total consideration for the transaction was approximately $38 million.

In June 2017, the Company announced that it entered into an agreement for a minority investment in Scalable Capital, a digital investment manager in Europe.  The transaction is expected to be completed in the fourth quarter of 2017, subject to customary regulatory approvals and closing conditions. This transaction is not expected to be material to the Company’s condensed consolidated statements of financial condition orCOVID-19 pandemic on BlackRock’s business, results of operations.  operations and financial condition.


United Kingdom Exit from European Union

FollowingOn December 31, 2020, the June 2016 vote to exitUnited Kingdom (“UK”) and the European Union (“EU”), the United Kingdom served notice under Article 50 of the Treaty on European Union on March 29, 2017 reverted to initiate the process of exiting from the EU, commonly referred to as "Brexit".being distinct regulatory, legal and customs territories. The outcome of the negotiations between the United KingdomUK and the EU concluded a free trade agreement, known as the “EU-UK Trade and Cooperation Agreement.” The agreement does not include any substantive provisions governing cross-border trade in financial services between the UK and the EU. As a result, since January 1, 2021, cross-border financial services trade between the UK and the EU has been governed by their respective financial services regulations and market access regimes. BlackRock implemented a number of steps to prepare for this outcome. These steps, which may add complexity to BlackRock’s future European operations, include effecting organizational, governance and operational changes, applying for and receiving additional licenses and permissions in the EU, and engaging in client communications. In addition, depending on how the future relationship between the UK and the EU develops, BlackRock may experience further organizational and operational challenges and incur additional costs in connection with Brexit is highly uncertainits European operations, particularly with regard to delegation and information regardingoutsourcing, which may impede the long-term consequences is expected to become clearer over time as negotiations progress.Company’s growth or impact its financial performance.

Acquisition

On February 1, 2021, the Company acquired 100% of the equity interests of Aperio Group, LLC (the “Aperio Transaction” or “Aperio”), a pioneer in customizing tax-optimized index equity separately managed accounts (“SMAs”) for approximately $1.1 billion in cash, using existing cash resources. The Company continues to prepare for a rangeacquisition of potential outcomes in connection with Brexit.

35


EXECUTIVE SUMMARYAperio increased BlackRock’s SMA assets under management and expanded the breadth of the Company’s capabilities via tax-managed strategies across factors, broad market indexing, and investor Environmental, Social, and Governance preferences across all asset classes.

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in millions, except shares and per share data)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

GAAP basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

3,233

 

 

$

2,837

 

 

$

9,022

 

 

$

8,265

 

Total expense

 

 

1,839

 

 

 

1,628

 

 

 

5,239

 

 

 

4,920

 

Operating income

 

 

1,394

 

 

 

1,209

 

 

 

3,783

 

 

 

3,345

 

Operating margin

 

 

43.1

%

 

 

42.6

%

 

 

41.9

%

 

 

40.5

%

Nonoperating income (expense), less net income (loss)

     attributable to noncontrolling interests

 

 

(2

)

 

 

(1

)

 

 

(27

)

 

 

(70

)

Income tax expense

 

 

(445

)

 

 

(333

)

 

 

(1,090

)

 

 

(954

)

Net income attributable to BlackRock

 

$

947

 

 

$

875

 

 

$

2,666

 

 

$

2,321

 

Diluted earnings per common share

 

$

5.78

 

 

$

5.26

 

 

$

16.23

 

 

$

13.92

 

Effective tax rate

 

 

32.0

%

 

 

27.6

%

 

 

29.0

%

 

 

29.1

%

As adjusted(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

1,398

 

 

$

1,216

 

 

$

3,795

 

 

$

3,442

 

Operating margin

 

 

45.0

%

 

 

44.8

%

 

 

43.9

%

 

 

43.5

%

Nonoperating income (expense), less net income (loss)

     attributable to noncontrolling interests

 

 

(2

)

 

 

(1

)

 

 

(27

)

 

 

(70

)

Net income attributable to BlackRock

 

$

969

 

 

$

854

 

 

$

2,694

 

 

$

2,362

 

Diluted earnings per common share

 

$

5.92

 

 

$

5.14

 

 

$

16.40

 

 

$

14.16

 

Effective tax rate

 

 

30.6

%

 

 

29.7

%

 

 

28.5

%

 

 

30.0

%

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets under management (end of period)

 

$

5,976,892

 

 

$

5,117,421

 

 

$

5,976,892

 

 

$

5,117,421

 

Diluted weighted-average common shares outstanding(2)

 

 

163,773,546

 

 

 

166,256,598

 

 

 

164,289,042

 

 

 

166,760,912

 

Common and preferred shares outstanding

    (end of period)

 

 

161,597,770

 

 

 

163,858,070

 

 

 

161,597,770

 

 

 

163,858,070

 

Book value per share(3)

 

$

185.91

 

 

$

176.40

 

 

$

185.91

 

 

$

176.40

 

Cash dividends declared and paid per share

 

$

2.50

 

 

$

2.29

 

 

$

7.50

 

 

$

6.87

 


EXECUTIVE SUMMARY

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions, except shares and per share data)

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

$

4,820

 

 

$

3,648

 

 

$

9,218

 

 

$

7,358

 

Total expense

 

2,889

 

 

 

2,242

 

 

 

5,742

 

 

 

5,268

 

Operating income

$

1,931

 

 

$

1,406

 

 

$

3,476

 

 

$

2,090

 

Operating margin

 

40.1

%

 

 

38.5

%

 

 

37.7

%

 

 

28.4

%

Nonoperating income (expense), less net income (loss)

     attributable to noncontrolling interests

 

101

 

 

 

169

 

 

 

73

 

 

 

277

 

Income tax expense

 

(654

)

 

 

(361

)

 

 

(972

)

 

 

(347

)

Net income attributable to BlackRock

$

1,378

 

 

$

1,214

 

 

$

2,577

 

 

$

2,020

 

Diluted earnings per common share

$

8.92

 

 

$

7.85

 

 

$

16.69

 

 

$

12.99

 

Effective tax rate

 

32.2

%

 

 

22.9

%

 

 

27.4

%

 

 

14.7

%

As adjusted(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

1,931

 

 

$

1,406

 

 

$

3,476

 

 

$

2,679

 

Operating margin

 

44.9

%

 

 

43.7

%

 

 

44.7

%

 

 

42.7

%

Nonoperating income (expense), less net income (loss)

     attributable to noncontrolling interests

$

101

 

 

$

169

 

 

$

73

 

 

$

155

 

Net income attributable to BlackRock

$

1,549

 

 

$

1,214

 

 

$

2,748

 

 

$

2,246

 

Diluted earnings per common share

$

10.03

 

 

$

7.85

 

 

$

17.80

 

 

$

14.44

 

Effective tax rate

 

23.8

%

 

 

22.9

%

 

 

22.6

%

 

 

20.7

%

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM (end of period)

$

9,495,993

 

 

$

7,317,949

 

 

$

9,495,993

 

 

$

7,317,949

 

Diluted weighted-average common shares outstanding

 

154,417,581

 

 

 

154,712,032

 

 

 

154,359,353

 

 

 

155,556,187

 

Shares outstanding (end of period)

 

152,298,784

 

 

 

152,460,239

 

 

 

152,298,784

 

 

 

152,460,239

 

Book value per share(2)

$

236.59

 

 

$

214.68

 

 

$

236.59

 

 

$

214.68

 

Cash dividends declared and paid per share

$

4.13

 

 

$

3.63

 

 

$

8.26

 

 

$

7.26

 

 

  

((1)1)

As adjusted items are described in more detail in Non-GAAP Financial Measures.

(2)

Nonvoting participating preferred shares are considered to be common stock equivalents for purposes of determining basic and diluted earnings per share calculations.

(3)

Total BlackRock stockholders’ equity divided by total common and preferred shares outstanding at SeptemberJune 30 of the respective period-end.

 


 

THREE MONTHS ENDED SEPTEMBERJUNE 30, 20172021 COMPARED WITH THREE MONTHS ENDED SEPTEMBERJUNE 30, 20162020

GAAP.Operating income of $1,394$1,931 million increased $185$525 million and operating margin of 43.1%40.1% increased 50160 bps from the thirdsecond quarter of 2016. Operating2020. Increases in operating income and operating margin reflected significant market gains as well as strong organic growth, reflected higher year-over-year base fees, performance fees and technology and risk managementservices revenue, partially offset by higher expense, including higher employee compensation and benefits, expense, higher direct fundvolume-related expense and higher general and administration expense. Nonoperating income (expense) less net income (loss) attributable to noncontrolling interests (“NCI”) decreased $68 million from the second quarter of 2020, reflecting lower mark-to-market gains on the Company’s un-hedged seed capital portfolios and certain minority investments, partially offset by higher mark-to-market gains on the Company’s private equity co-investment portfolio.

ThirdSecond quarter 20172021 income tax expense included $171 million of noncash net noncash expense of $19 million related to the revaluation of certain deferred income tax liabilities as a result of domestic stateassets and local changes. Third quarter 2016 income tax expense included a $26 million net noncash tax benefit, primarily related to the revaluation of certain deferred income tax liabilities as a result of legislation enacted in the United Kingdom, and domestic state and local incomeUK increasing its corporate tax changes.  Third quarter 2016 income tax expense also included nonrecurring tax benefits of $16 million primarily due to the resolution of certain outstanding tax matters.rate. See Income Tax Expense within Discussion of Financial Results for more information.

Earnings per diluted common share increased $0.52,$1.07, or 10%14%, from the thirdsecond quarter of 2016, driven primarily by2020, reflecting higher operating income, and the benefit of share repurchases, partially offset by lower nonoperating income and a higher incomeeffective tax expense.rate in the current quarter.

36


As Adjusted.Adjusted.  Operating income of $1,398$1,931 million increased $182 million from the third quarter of 2016, and operating margin of 45.0% increased 20 bps from the third quarter of 2016.  Income tax expense for the third quarter of 2017 and 2016 excluded the $19 million net noncash expense and $26 million net noncash benefit, respectively, described above.  Earnings per diluted common share increased $0.78, or 15%, from the third quarter of 2016.

NINE MONTHS ENDED SEPTEMBER 30, 2017 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2016

GAAP.    Operating income of $3,783 million increased $438$525 million and operating margin of 41.9%44.9% increased 140120 bps from the ninesecond quarter of 2020. Earnings perdiluted common share increased $2.18, or 28%, from the second quarter of 2020. The noncash net tax expense related to the revaluation of certain deferred tax assets and liabilities described above has been excluded from as adjusted results.

SIX MONTHS ENDED JUNE 30, 2021 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2020

GAAP.Operating income of $3,476 million increased $1,386 million and operating margin of 37.7% increased 930 bps from the six months ended SeptemberJune 30, 2016.2020. Increases in operating income and operating margin reflected the impact of $589 million related to the previously reported charitable contribution of BlackRock’s remaining 20% stake in PennyMac Financial Services, Inc. (the “Charitable Contribution”) during the six months ended June 30, 2020. Operating income and operating margin growth primarilyalso reflected higher year-over-year baseinvestment advisory and administration fees (collectively “base fees”), performance fees and technology and risk managementservices revenue, partially offset by higher employee compensation and benefits higher direct fund expense and higher general and administration expense. The nine months ended September 30, 2017 also included approximately $22product launch costs in 2021, including the impact of $178 million of expense associated with the strategic repositioningMarch 2021 close of the active equity platform.  Operating income for the nine months ended September 30, 2016 included a restructuring charge of $76 million in connection with a project to streamline$4.9 billion BlackRock Innovation and simplify the organization.  Growth Trust.

Nonoperating income (expense), less net income (loss) attributable to noncontrolling interest (“NCI”), increased $43NCI decreased $204 million driven by higher net gains on investments.  Nonoperating results forfrom the ninesix months ended SeptemberJune 30, 2017 included2020, reflecting the impact of a “make-whole” redemption premiumpre-tax gain of $14approximately $240 million in connection with a recapitalization of iCapital Network, Inc. (“iCapital”) and $122 million pre-tax gain related to the refinancing of $700 million of 6.25% notes, which were paid prior to their September 2017 maturity.  Charitable Contribution during the six months ended June 30, 2020, partially offset by mark-to-market gains on the Company’s co-investment and un-hedged seed capital portfolios during the six months ended June 30, 2021.

Income tax expense for the ninesix months ended SeptemberJune 30, 20172021 reflected the $171 million noncash net expense described above. Income tax expense for the six months ended June 30, 2020 included an $81 milliona discrete tax benefit reflectingof $241 million recognized in connection with the adoptionCharitable Contribution. Income tax expense for the six months ended June 30, 2021 and 2020 also reflected $39 million and $66 million, respectively, of new accounting guidancediscrete tax benefits, including benefits related to stock-based compensation awards that vested in the first quarter of 2017 and the $19 million net noncash expense mentioned above.  Income tax expense for the nine months ended September 30, 2016 included the $26 million net noncash benefit mentioned above and nonrecurring tax benefits of $35 million.each year.  See Income Tax Expense within Discussion of Financial Results for more information.

Earnings per diluted common share increased $2.31,$3.70, or 17%28%, from the ninesix months ended SeptemberJune 30, 2016, driven primarily2020, reflecting the impact of the Charitable Contribution incurred in the six months ended June 30, 2020. The increase in earnings per diluted common share also included higher revenue, partially offset by higher netproduct launch costs, lower nonoperating income, and a higher effective tax rate in the benefit of share repurchases.six months ended June 30, 2021.

As Adjusted.Adjusted.  Operating income of $3,795$3,476 million increased $353$797 million and operating margin of 43.9%44.7% increased 40200 bps from the ninesix months ended SeptemberJune 30, 2016.  2020. Earnings per diluted common share increased $3.36, or 23%, from the six months ended June 30, 2020,primarily due to higher operating income, partially offset by lower nonoperating income and a higher effective tax rate in the six months ended June 30, 2021.Income tax expense for the six months ended June 30, 2021 excluded the $171 million noncash net expense described above. The pre-tax restructuring charge of $76 million described above wasfinancial impact related to the Charitable Contribution has been excluded from as adjusted results for the ninesix months ended SeptemberJune 30, 2016.  Income tax expense for the nine months ended September 30, 2017 and 2016 excluded the previously described net noncash expense of $19 million and net noncash benefit of $26 million, respectively, and included the nonrecurring tax benefits described above.  Earnings per diluted common share increased $2.24, or 16%, from the nine months ended September 30, 2016.2020.

See Non-GAAP Financial Measures for further information on as adjusted items and the reconciliation to accounting principles generally accepted in the United States (“GAAP“GAAP”).

For further discussion of BlackRock’s revenue, expense, nonoperating results and income tax expense, see Discussion of Financial Results herein.


37


NON-GAAP FINANCIAL MEASURES

BlackRock reports its financial results in accordance with GAAP; however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be helpful, for both management and investors, in evaluating BlackRock’s financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include all of BlackRock’s revenue and expense. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock’s financial performance. Adjustments to GAAP financial measures (“non-GAAP adjustments”) include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

Computations for all periods are derived from the condensed consolidated statements of income as follows:

(1) Operating income, as adjusted, and operating margin, as adjusted:adjusted

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating income, GAAP basis

$

1,931

 

 

$

1,406

 

 

$

3,476

 

 

$

2,090

 

Non-GAAP expense adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charitable Contribution

 

 

 

 

 

 

 

 

 

 

589

 

Operating income, as adjusted

 

1,931

 

 

 

1,406

 

 

 

3,476

 

 

 

2,679

 

Product launch costs and commissions

 

 

 

 

 

 

 

185

 

 

 

87

 

Operating income used for operating margin

   measurement

$

1,931

 

 

$

1,406

 

 

$

3,661

 

 

$

2,766

 

Revenue, GAAP basis

$

4,820

 

 

$

3,648

 

 

$

9,218

 

 

$

7,358

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution fees

 

(369

)

 

 

(253

)

 

 

(709

)

 

 

(529

)

Investment advisory fees

 

(154

)

 

 

(176

)

 

 

(319

)

 

 

(345

)

Revenue used for operating margin measurement

$

4,297

 

 

$

3,219

 

 

$

8,190

 

 

$

6,484

 

Operating margin, GAAP basis

 

40.1

%

 

 

38.5

%

 

 

37.7

%

 

 

28.4

%

Operating margin, as adjusted

 

44.9

%

 

 

43.7

%

 

 

44.7

%

 

 

42.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock’s financial performance over time, and, therefore, provide useful disclosure to investors.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in millions)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Operating income, GAAP basis

 

$

1,394

 

 

$

1,209

 

 

$

3,783

 

 

$

3,345

 

Non-GAAP expense adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charge

 

 

 

 

 

 

 

 

 

 

 

76

 

PNC LTIP funding obligation

 

 

4

 

 

 

7

 

 

 

12

 

 

 

21

 

Operating income, as adjusted

 

$

1,398

 

 

$

1,216

 

 

$

3,795

 

 

$

3,442

 

Revenue, GAAP basis

 

$

3,233

 

 

$

2,837

 

 

$

9,022

 

 

$

8,265

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution and servicing costs

 

 

(123

)

 

 

(114

)

 

 

(361

)

 

 

(320

)

Amortization of deferred sales commissions

 

 

(4

)

 

 

(8

)

 

 

(13

)

 

 

(27

)

Revenue used for operating margin measurement

 

$

3,106

 

 

$

2,715

 

 

$

8,648

 

 

$

7,918

 

Operating margin, GAAP basis

 

 

43.1

%

 

 

42.6

%

 

 

41.9

%

 

 

40.5

%

Operating margin, as adjusted

 

 

45.0

%

 

 

44.8

%

 

 

43.9

%

 

 

43.5

%

Operating income, Management believes that operating margin, as adjusted, includes non-GAAP expense adjustments.reflects the Company’s long-term ability to manage ongoing costs in relation to its revenues. The portion of compensation expense associated with certain long-term incentive plans (“LTIP”) funded, orCompany uses operating margin, as adjusted, to be funded, through share distributions to participants of BlackRock stock held by PNC has been excluded because it ultimately does not impact BlackRock’s book value. Forassess the nine months ended September 30, 2016, a restructuring charge comprised of severance and accelerated amortization expense of previously granted deferred compensation awards has been excluded to provide an analysis of BlackRock’s ongoing operationsCompany’s financial performance and to ensure comparability among periods presented.determine the long-term and annual compensation of the Company’s senior-level employees. Furthermore, this metric is used to evaluate the Company’s relative performance against industry peers, as it eliminates margin variability arising from the accounting of revenues and expenses related to distributing different product structures in multiple distribution channels utilized by asset managers.

Operating income, as adjusted, includes a non-GAAP expense adjustment during the six months ended June 30, 2020. The Charitable Contribution expense of $589 million has been excluded from operating income, as adjusted, due to its nonrecurring nature.

 

RevenueOperating income used for measuring operating margin, as adjusted, excludes distributionis equal to operating income, as adjusted, excluding the impact of product launch costs (e.g. closed-end fund launch costs) and servicing costs paid to related parties and other third parties.commissions. Management believes such costs represent a benchmark for the amount of revenue passed through to external parties who distribute the Company’s products.  In addition, management believes the exclusion of such costs and related commissions is useful because it creates consistency inthese costs can fluctuate considerably and revenue associated with the treatment for certain contracts for similar services, which due to the termsexpenditure of the contracts, are accounted for under GAAP on a net basis within investment advisory, administration fees and securities lending revenue. Amortization of deferred sales commissions is excluded from revenue used for operating margin measurement, as adjusted, because suchthese costs over time, substantially offset distribution fee revenue thewill not fully impact BlackRock’s results until future periods.

38



 

Company earns. For each of these items, BlackRock excludes from revenueRevenue used for calculating operating margin, as adjusted, is reduced to exclude all of the costs related to each of these itemsCompany’s distribution fees, which are recorded as a proxyseparate line item on the condensed consolidated statements of income, as well as a portion of investment advisory fees received that is used to pay distribution and servicing costs. For certain products, based on distinct arrangements, distribution fees are collected by the Company and then passed-through to third-party client intermediaries. For other products, investment advisory fees are collected by the Company and a portion is passed-through to third-party client intermediaries. However, in both structures, the third-party client intermediary similarly owns the relationship with the retail client and is responsible for such offsetting revenue.distributing the product and servicing the client. The amount of distribution and investment advisory fees fluctuates each period primarily based on a predetermined percentage of the value of AUM during the period. These fees also vary based on the type of investment product sold and the geographic location where it is sold. In addition, the Company may waive fees on certain products that could result in the reduction of payments to the third-party intermediaries.

(2) Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted:  

(2)

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Nonoperating income (expense), GAAP basis

$

270

 

 

$

357

 

 

$

316

 

 

$

286

 

Less: Net income (loss) attributable to NCI

 

169

 

 

 

188

 

 

 

243

 

 

 

9

 

Nonoperating income (expense), net of NCI

 

101

 

 

 

169

 

 

 

73

 

 

 

277

 

Less: Gain related to the Charitable Contribution

 

 

 

 

 

 

 

 

 

 

122

 

Nonoperating income (expense), less net income (loss)

   attributable to NCI, as adjusted

$

101

 

 

$

169

 

 

$

73

 

 

$

155

 

Management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, is an effective measure for reviewing BlackRock’s nonoperating contribution to its results and provides comparability of this information among reporting periods.  Management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, provides a useful measure, for both management and investors, of BlackRock’s nonoperating results, which ultimately impact BlackRock’s book value. During the six months ended June 30, 2020, the noncash, nonoperating pre-tax gain of $122 million related to the Charitable Contribution has been excluded from nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, due to its nonrecurring nature.

(3) Net income attributable to BlackRock, Inc., as adjusted:adjusted:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in millions, except per share data)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income attributable to BlackRock, Inc., GAAP basis

 

$

947

 

 

$

875

 

 

$

2,666

 

 

$

2,321

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charge (including $23 tax benefit)

 

 

 

 

 

 

 

 

 

 

 

53

 

PNC LTIP funding obligation, net of tax

 

 

3

 

 

 

5

 

 

 

9

 

 

 

14

 

Income tax matters

 

 

19

 

 

 

(26

)

 

 

19

 

 

 

(26

)

Net income attributable to BlackRock, Inc., as adjusted

 

$

969

 

 

$

854

 

 

$

2,694

 

 

$

2,362

 

Diluted weighted-average common shares outstanding(3)

 

 

163.8

 

 

 

166.3

 

 

 

164.3

 

 

 

166.8

 

Diluted earnings per common share, GAAP basis(3)

 

$

5.78

 

 

$

5.26

 

 

$

16.23

 

 

$

13.92

 

Diluted earnings per common share, as adjusted(3)

 

$

5.92

 

 

$

5.14

 

 

$

16.40

 

 

$

14.16

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions, except per share data)

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income attributable to BlackRock, Inc., GAAP basis

$

1,378

 

 

$

1,214

 

 

$

2,577

 

 

$

2,020

 

Non-GAAP adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charitable Contribution, net of tax

 

 

 

 

 

 

 

 

 

 

226

 

Income tax matters

 

171

 

 

 

 

 

 

171

 

 

 

 

Net income attributable to BlackRock, Inc., as adjusted

$

1,549

 

 

$

1,214

 

 

$

2,748

 

 

$

2,246

 

Diluted weighted-average common shares outstanding

 

154.4

 

 

 

154.7

 

 

 

154.4

 

 

 

155.6

 

Diluted earnings per common share, GAAP basis

$

8.92

 

 

$

7.85

 

 

$

16.69

 

 

$

12.99

 

Diluted earnings per common share, as adjusted

$

10.03

 

 

$

7.85

 

 

$

17.80

 

 

$

14.44

 

Management believes net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock’s profitability and financial performance. Net income attributable to BlackRock, Inc., as adjusted, equals net income attributable to BlackRock, Inc., GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

See aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, and nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, for information on the PNC LTIP funding obligation andCharitable Contribution.


The six months ended June 30, 2020 included a discrete tax benefit of $241 million that was recognized in connection with the restructuring charge.

For each period presented, the non-GAAP adjustment relatedCharitable Contribution. The discrete tax benefit has been excluded from as adjusted results due to the restructuring charge and PNC LTIP funding obligation was tax effected atnonrecurring nature of the respective blended rates applicable to the adjustments.Charitable Contribution. Amounts for income tax matters represent net noncash (benefits) expense primarily associated with the revaluation of certain deferred tax liabilities related to intangible assets and goodwill.  Amountsgoodwill as a result of tax rate changes. These amounts have been excluded from the as adjusted results as these items will not have a cash flow impact and to ensure comparability among periods presented.

Per share amounts reflect net income attributable to BlackRock, Inc., as adjusted divided by diluted weighted averageweighted-average common shares outstanding.


(3) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.

39


ASSETS UNDER MANAGEMENT

AUM for reporting purposes generally is based upon how investment advisory and administrationbase fees are calculated for each portfolio. Net asset values, total assets, committed assets or other measures may be used to determine portfolio AUM.

 

AUM and Net Inflows (Outflows) by Client Type

 

AUM and Net Inflows (Outflows) by Client Type and Product Type

AUM and Net Inflows (Outflows) by Client Type and Product Type

 

AUM

 

 

Net inflows (outflows)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

Six Months

 

 

Twelve Months

 

 

AUM

 

 

Net inflows (outflows)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

Ended

 

 

Ended

 

 

September 30,

 

 

June 30,

 

 

December 31,

 

 

September 30,

 

 

Three

Months

Ended

September 30,

 

 

Nine

Months

Ended

September 30,

 

 

Twelve

Months

Ended

September 30,

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

(in millions)

 

2017

 

 

2017

 

 

2016

 

 

2016

 

 

2017

 

 

2017

 

 

2017

 

2021

 

 

2021

 

 

2020

 

 

2020

 

 

2021

 

 

2021

 

 

2021

 

Retail

 

$

608,521

 

 

$

586,756

 

 

$

541,952

 

 

$

554,778

 

 

$

7,367

 

 

$

18,501

 

 

$

16,055

 

$

995,483

 

 

$

934,177

 

 

$

845,917

 

 

$

695,154

 

 

$

21,386

 

 

$

57,896

 

 

$

112,767

 

iShares ETFs

 

 

1,640,437

 

 

 

1,528,236

 

 

 

1,287,879

 

 

 

1,246,166

 

 

 

52,306

 

 

 

190,541

 

 

 

239,841

 

ETFs

 

3,031,505

 

 

 

2,813,524

 

 

 

2,669,007

 

 

 

2,162,597

 

 

 

75,147

 

 

 

143,636

 

 

 

263,723

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

1,105,224

 

 

 

1,075,855

 

 

 

1,009,974

 

 

 

1,039,653

 

 

 

155

 

 

 

3,735

 

 

 

10,043

 

 

1,624,049

 

 

 

1,524,430

 

 

 

1,524,462

 

 

 

1,341,610

 

 

 

43,469

 

 

 

60,002

 

 

 

90,975

 

Index

 

 

2,194,701

 

 

 

2,093,193

 

 

 

1,901,681

 

 

 

1,877,501

 

 

 

15,976

 

 

 

36,883

 

 

 

71,486

 

 

3,097,073

 

 

 

3,009,150

 

 

 

2,948,683

 

 

 

2,482,336

 

 

 

(80,298

)

 

 

(69,192

)

 

 

(61,319

)

Total institutional

 

 

3,299,925

 

 

 

3,169,048

 

 

 

2,911,655

 

 

 

2,917,154

 

 

 

16,131

 

 

 

40,618

 

 

 

81,529

 

Institutional subtotal

 

4,721,122

 

 

 

4,533,580

 

 

 

4,473,145

 

 

 

3,823,946

 

 

 

(36,829

)

 

 

(9,190

)

 

 

29,656

 

Long-term

 

8,748,110

 

 

 

8,281,281

 

 

 

7,988,069

 

 

 

6,681,697

 

 

 

59,704

 

 

 

192,342

 

 

 

406,146

 

Cash management

 

727,603

 

 

 

703,916

 

 

 

666,252

 

 

 

619,351

 

 

 

23,339

 

 

 

62,529

 

 

 

99,239

 

Advisory(1)

 

20,280

 

 

 

22,214

 

 

 

22,359

 

 

 

16,901

 

 

 

(2,083

)

 

 

(2,269

)

 

 

2,853

 

Total

$

9,495,993

 

 

$

9,007,411

 

 

$

8,676,680

 

 

$

7,317,949

 

 

$

80,960

 

 

$

252,602

 

 

$

508,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM and Net Inflows (Outflows) by Investment Style and Product Type

AUM and Net Inflows (Outflows) by Investment Style and Product Type

 

AUM

 

 

Net inflows (outflows)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

Six Months

 

 

Twelve Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

Ended

 

 

Ended

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2021

 

 

2020

 

 

2020

 

 

2021

 

 

2021

 

 

2021

 

Active

$

2,446,632

 

 

$

2,297,642

 

 

$

2,250,887

 

 

$

1,943,828

 

 

$

62,750

 

 

$

121,704

 

 

$

199,824

 

Index and ETFs

 

6,301,478

 

 

 

5,983,639

 

 

 

5,737,182

 

 

 

4,737,869

 

 

 

(3,046

)

 

 

70,638

 

 

 

206,322

 

Long-term

 

 

5,548,883

 

 

 

5,284,040

 

 

 

4,741,486

 

 

 

4,718,098

 

 

 

75,804

 

 

 

249,660

 

 

 

337,425

 

 

8,748,110

 

 

 

8,281,281

 

 

 

7,988,069

 

 

 

6,681,697

 

 

 

59,704

 

 

 

192,342

 

 

 

406,146

 

Cash management

 

 

425,423

 

 

 

402,575

 

 

 

403,584

 

 

 

388,982

 

 

 

20,381

 

 

 

14,854

 

 

 

32,526

 

 

727,603

 

 

 

703,916

 

 

 

666,252

 

 

 

619,351

 

 

 

23,339

 

 

 

62,529

 

 

 

99,239

 

Advisory(1)

 

 

2,586

 

 

 

2,658

 

 

 

2,782

 

 

 

10,341

 

 

 

(73

)

 

 

(188

)

 

 

(7,573

)

 

20,280

 

 

 

22,214

 

 

 

22,359

 

 

 

16,901

 

 

 

(2,083

)

 

 

(2,269

)

 

 

2,853

 

Total

 

$

5,976,892

 

 

$

5,689,273

 

 

$

5,147,852

 

 

$

5,117,421

 

 

$

96,112

 

 

$

264,326

 

 

$

362,378

 

$

9,495,993

 

 

$

9,007,411

 

 

$

8,676,680

 

 

$

7,317,949

 

 

$

80,960

 

 

$

252,602

 

 

$

508,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM and Net Inflows (Outflows) by Product Type

AUM and Net Inflows (Outflows) by Product Type

 

AUM and Net Inflows (Outflows) by Product Type

 

 

AUM

 

 

Net inflows (outflows)

 

AUM

 

 

Net inflows (outflows)

 

 

September 30,

 

 

June 30,

 

 

December 31,

 

 

September 30,

 

 

Three

Months

Ended

September 30,

 

 

Nine

Months

Ended

September 30,

 

 

Twelve

Months

Ended

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

Six Months

 

 

Twelve Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

Ended

 

 

Ended

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

(in millions)

 

2017

 

 

2017

 

 

2016

 

 

2016

 

 

2017

 

 

2017

 

 

2017

 

2021

 

 

2021

 

 

2020

 

 

2020

 

 

2021

 

 

2021

 

 

2021

 

Equity

 

$

3,172,465

 

 

$

3,014,696

 

 

$

2,657,176

 

 

$

2,566,039

 

 

$

11,935

 

 

$

94,362

 

 

$

152,328

 

$

5,034,391

 

 

$

4,745,781

 

 

$

4,419,806

 

 

$

3,519,225

 

 

$

(26,453

)

 

$

23,407

 

 

$

73,654

 

Fixed income

 

 

1,788,420

 

 

 

1,704,624

 

 

 

1,572,365

 

 

 

1,628,268

 

 

 

59,549

 

 

 

135,837

 

 

 

161,144

 

 

2,712,165

 

 

 

2,620,460

 

 

 

2,674,488

 

 

 

2,411,092

 

 

 

41,290

 

 

 

102,129

 

 

 

235,197

 

Multi-asset

 

 

457,027

 

 

 

436,736

 

 

 

395,007

 

 

 

402,261

 

 

 

4,334

 

 

 

15,406

 

 

 

20,262

 

 

748,770

 

 

 

677,372

 

 

 

658,733

 

 

 

551,362

 

 

 

36,137

 

 

 

49,889

 

 

 

63,467

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

 

99,168

 

 

 

97,551

 

 

 

88,630

 

 

 

88,731

 

 

 

(504

)

 

 

2,353

 

 

 

3,569

 

Illiquid alternatives

 

95,961

 

 

 

92,207

 

 

 

85,770

 

 

 

76,607

 

 

 

3,347

 

 

 

9,572

 

 

 

16,303

 

Liquid alternatives

 

81,560

 

 

 

76,266

 

 

 

73,218

 

 

 

63,120

 

 

 

3,319

 

 

 

5,673

 

 

 

9,262

 

Currency and

commodities(2)

 

 

31,803

 

 

 

30,433

 

 

 

28,308

 

 

 

32,799

 

 

 

490

 

 

 

1,702

 

 

 

122

 

 

75,263

 

 

 

69,195

 

 

 

76,054

 

 

 

60,291

 

 

 

2,064

 

 

 

1,672

 

 

 

8,263

 

Subtotal

 

 

130,971

 

 

 

127,984

 

 

 

116,938

 

 

 

121,530

 

 

 

(14

)

 

 

4,055

 

 

 

3,691

 

Alternatives subtotal

 

252,784

 

 

 

237,668

 

 

 

235,042

 

 

 

200,018

 

 

 

8,730

 

 

 

16,917

 

 

 

33,828

 

Long-term

 

 

5,548,883

 

 

 

5,284,040

 

 

 

4,741,486

 

 

 

4,718,098

 

 

 

75,804

 

 

 

249,660

 

 

 

337,425

 

 

8,748,110

 

 

 

8,281,281

 

 

 

7,988,069

 

 

 

6,681,697

 

 

 

59,704

 

 

 

192,342

 

 

 

406,146

 

Cash management

 

 

425,423

 

 

 

402,575

 

 

 

403,584

 

 

 

388,982

 

 

 

20,381

 

 

 

14,854

 

 

 

32,526

 

 

727,603

 

 

 

703,916

 

 

 

666,252

 

 

 

619,351

 

 

 

23,339

 

 

 

62,529

 

 

 

99,239

 

Advisory(1)

 

 

2,586

 

 

 

2,658

 

 

 

2,782

 

 

 

10,341

 

 

 

(73

)

 

 

(188

)

 

 

(7,573

)

 

20,280

 

 

 

22,214

 

 

 

22,359

 

 

 

16,901

 

 

 

(2,083

)

 

 

(2,269

)

 

 

2,853

 

Total

 

$

5,976,892

 

 

$

5,689,273

 

 

$

5,147,852

 

 

$

5,117,421

 

 

$

96,112

 

 

$

264,326

 

 

$

362,378

 

$

9,495,993

 

 

$

9,007,411

 

 

$

8,676,680

 

 

$

7,317,949

 

 

$

80,960

 

 

$

252,602

 

 

$

508,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM and Net Inflows (Outflows) by Investment Style

 

 

AUM

 

 

Net inflows (outflows)

 

 

September 30,

 

 

June 30,

 

 

December 31,

 

 

September 30,

 

 

Three

Months

Ended

September 30,

 

 

Nine

Months

Ended

September 30,

 

 

Twelve

Months

Ended

September 30,

 

(in millions)

 

2017

 

 

2017

 

 

2016

 

 

2016

 

 

2017

 

 

2017

 

 

2017

 

Active

 

$

1,645,352

 

 

$

1,598,591

 

 

$

1,501,052

 

 

$

1,547,473

 

 

$

5,796

 

 

$

11,489

 

 

$

10,946

 

Index and iShares ETFs

 

 

3,903,531

 

 

 

3,685,449

 

 

 

3,240,434

 

 

 

3,170,625

 

 

 

70,008

 

 

 

238,171

 

 

 

326,479

 

Long-term

 

 

5,548,883

 

 

 

5,284,040

 

 

 

4,741,486

 

 

 

4,718,098

 

 

 

75,804

 

 

 

249,660

 

 

 

337,425

 

Cash management

 

 

425,423

 

 

 

402,575

 

 

 

403,584

 

 

 

388,982

 

 

 

20,381

 

 

 

14,854

 

 

 

32,526

 

Advisory(1)

 

 

2,586

 

 

 

2,658

 

 

 

2,782

 

 

 

10,341

 

 

 

(73

)

 

 

(188

)

 

 

(7,573

)

Total

 

$

5,976,892

 

 

$

5,689,273

 

 

$

5,147,852

 

 

$

5,117,421

 

 

$

96,112

 

 

$

264,326

 

 

$

362,378

 

 

(1)

Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $2.2 billion of ETFs AUM held in advisory accounts associated with the Federal Reserve Bank of New York (“FRBNY”) assignment as of June 30, 2021 (disclosed via FRBNY reporting as of July 13, 2021) are included within ETFs AUM or Fixed Income AUM above. These holdings are excluded from Advisory AUM.

(2)

Amounts include commodity iShares ETFs.

40



Component Changes in AUM for the Three Months Ended SeptemberJune 30, 20172021

The following table presents the component changes in AUM by client type and product type for the three months ended SeptemberJune 30, 2017.2021.

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

Net

inflows

 

 

Market

 

 

FX

 

 

September 30,

 

 

Average

 

March 31,

 

 

inflows

 

 

Market

 

 

FX

 

 

June 30,

 

 

Average

 

(in millions)

 

2017

 

 

(outflows)

 

 

change

 

 

impact(1)

 

 

2017

 

 

AUM(2)

 

2021

 

 

(outflows)

 

 

change

 

 

impact(1)

 

 

2021

 

 

AUM(2)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

$

215,808

 

 

$

1,734

 

 

$

6,110

 

 

$

2,016

 

 

$

225,668

 

 

$

220,944

 

$

407,715

 

 

$

9,866

 

 

$

28,643

 

 

$

103

 

 

$

446,327

 

 

$

431,075

 

Fixed income

 

 

240,932

 

 

 

4,613

 

 

 

1,569

 

 

 

1,234

 

 

 

248,348

 

 

 

245,193

 

 

349,640

 

 

 

6,689

 

 

 

2,480

 

 

 

671

 

 

 

359,480

 

 

 

355,500

 

Multi-asset

 

 

113,903

 

 

 

1,046

 

 

 

2,796

 

 

 

317

 

 

 

118,062

 

 

 

116,183

 

 

139,115

 

 

 

879

 

 

 

7,161

 

 

 

73

 

 

 

147,228

 

 

 

144,138

 

Alternatives

 

 

16,113

 

 

 

(26

)

 

 

224

 

 

 

132

 

 

 

16,443

 

 

 

17,198

 

 

37,707

 

 

 

3,952

 

 

 

748

 

 

 

41

 

 

 

42,448

 

 

 

40,310

 

Retail subtotal

 

 

586,756

 

 

 

7,367

 

 

 

10,699

 

 

 

3,699

 

 

 

608,521

 

 

 

599,518

 

 

934,177

 

 

 

21,386

 

 

 

39,032

 

 

 

888

 

 

 

995,483

 

 

 

971,023

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

1,139,850

 

 

 

33,102

 

 

 

50,806

 

 

 

4,637

 

 

 

1,228,395

 

 

 

1,184,488

 

 

2,077,818

 

 

 

51,376

 

 

 

126,762

 

 

 

1,872

 

 

 

2,257,828

 

 

 

2,186,497

 

Fixed income

 

 

364,991

 

 

 

17,526

 

 

 

1,055

 

 

 

2,695

 

 

 

386,267

 

 

 

376,880

 

 

667,829

 

 

 

21,710

 

 

 

9,639

 

 

 

831

 

 

 

700,009

 

 

 

686,205

 

Multi-asset

 

 

3,240

 

 

 

169

 

 

 

77

 

 

 

5

 

 

 

3,491

 

 

 

3,359

 

 

6,958

 

 

 

379

 

 

 

310

 

 

 

16

 

 

 

7,663

 

 

 

7,359

 

Alternatives

 

 

20,155

 

 

 

1,509

 

 

 

576

 

 

 

44

 

 

 

22,284

 

 

 

21,283

 

 

60,919

 

 

 

1,682

 

 

 

3,380

 

 

 

24

 

 

 

66,005

 

 

 

65,379

 

iShares ETFs subtotal

 

 

1,528,236

 

 

 

52,306

 

 

 

52,514

 

 

 

7,381

 

 

 

1,640,437

 

 

 

1,586,010

 

ETFs subtotal

 

2,813,524

 

 

 

75,147

 

 

 

140,091

 

 

 

2,743

 

 

 

3,031,505

 

 

 

2,945,440

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

126,446

 

 

 

(3,296

)

 

 

5,866

 

 

 

1,350

 

 

 

130,366

 

 

 

128,842

 

 

176,081

 

 

 

(3,958

)

 

 

11,876

 

 

 

175

 

 

 

184,174

 

 

 

181,046

 

Fixed income

 

 

553,652

 

 

 

496

 

 

 

4,513

 

 

 

3,366

 

 

 

562,027

 

 

 

559,121

 

 

692,474

 

 

 

9,058

 

 

 

14,558

 

 

 

581

 

 

 

716,671

 

 

 

706,642

 

Multi-asset

 

 

311,921

 

 

 

3,477

 

 

 

7,827

 

 

 

4,508

 

 

 

327,733

 

 

 

320,619

 

 

522,220

 

 

 

35,148

 

 

 

26,086

 

 

 

1,128

 

 

 

584,582

 

 

 

549,152

 

Alternatives

 

 

83,836

 

 

 

(522

)

 

 

1,161

 

 

 

623

 

 

 

85,098

 

 

 

83,851

 

 

133,655

 

 

 

3,221

 

 

 

1,708

 

 

 

38

 

 

 

138,622

 

 

 

136,351

 

Active subtotal

 

 

1,075,855

 

 

 

155

 

 

 

19,367

 

 

 

9,847

 

 

 

1,105,224

 

 

 

1,092,433

 

 

1,524,430

 

 

 

43,469

 

 

 

54,228

 

 

 

1,922

 

 

 

1,624,049

 

 

 

1,573,191

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

1,532,592

 

 

 

(19,605

)

 

 

65,291

 

 

 

9,758

 

 

 

1,588,036

 

 

 

1,562,897

 

 

2,084,167

 

 

 

(83,737

)

 

 

143,764

 

 

 

1,868

 

 

 

2,146,062

 

 

 

2,127,456

 

Fixed income

 

 

545,049

 

 

 

36,914

 

 

 

(1,451

)

 

 

11,266

 

 

 

591,778

 

 

 

572,049

 

 

910,517

 

 

 

3,833

 

 

 

21,230

 

 

 

425

 

 

 

936,005

 

 

 

931,252

 

Multi-asset

 

 

7,672

 

 

 

(358

)

 

 

389

 

 

 

38

 

 

 

7,741

 

 

 

7,824

 

 

9,079

 

 

 

(269

)

 

 

500

 

 

 

(13

)

 

 

9,297

 

 

 

9,193

 

Alternatives

 

 

7,880

 

 

 

(975

)

 

 

156

 

 

 

85

 

 

 

7,146

 

 

 

7,544

 

 

5,387

 

 

 

(125

)

 

 

451

 

 

 

(4

)

 

 

5,709

 

 

 

5,671

 

Index subtotal

 

 

2,093,193

 

 

 

15,976

 

 

 

64,385

 

 

 

21,147

 

 

 

2,194,701

 

 

 

2,150,314

 

 

3,009,150

 

 

 

(80,298

)

 

 

165,945

 

 

 

2,276

 

 

 

3,097,073

 

 

 

3,073,572

 

Institutional subtotal

 

 

3,169,048

 

 

 

16,131

 

 

 

83,752

 

 

 

30,994

 

 

 

3,299,925

 

 

 

3,242,747

 

 

4,533,580

 

 

 

(36,829

)

 

 

220,173

 

 

 

4,198

 

 

 

4,721,122

 

 

 

4,646,763

 

Long-term

 

 

5,284,040

 

 

 

75,804

 

 

 

146,965

 

 

 

42,074

 

 

 

5,548,883

 

 

 

5,428,275

 

 

8,281,281

 

 

 

59,704

 

 

 

399,296

 

 

 

7,829

 

 

 

8,748,110

 

 

 

8,563,226

 

Cash management

 

 

402,575

 

 

 

20,381

 

 

 

224

 

 

 

2,243

 

 

 

425,423

 

 

 

415,082

 

 

703,916

 

 

 

23,339

 

 

 

(84

)

 

 

432

 

 

 

727,603

 

 

 

732,270

 

Advisory(3)

 

 

2,658

 

 

 

(73

)

 

 

(98

)

 

 

99

 

 

 

2,586

 

 

 

2,621

 

 

22,214

 

 

 

(2,083

)

 

 

141

 

 

 

8

 

 

 

20,280

 

 

 

21,596

 

Total

 

$

5,689,273

 

 

$

96,112

 

 

$

147,091

 

 

$

44,416

 

 

$

5,976,892

 

 

$

5,845,978

 

$

9,007,411

 

 

$

80,960

 

 

$

399,353

 

 

$

8,269

 

 

$

9,495,993

 

 

$

9,317,092

 

 

(1) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

(2) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.

(3) Advisory AUM represents long-term portfolio liquidation assignments.

41


The following table presents component changes in AUM by investment style and product type for the three months ended September 30, 2017.

 

June 30,

 

 

Net

inflows

 

 

Market

 

 

FX

 

 

September 30,

 

 

Average

 

(in millions)

2017

 

 

(outflows)

 

 

change

 

 

impact(1)

 

 

2017

 

 

AUM(2)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

290,196

 

 

$

(3,015

)

 

$

10,433

 

 

$

2,562

 

 

$

300,176

 

 

$

295,895

 

Fixed income

 

782,622

 

 

 

4,836

 

 

 

6,079

 

 

 

4,303

 

 

 

797,840

 

 

 

792,042

 

Multi-asset

 

425,824

 

 

 

4,523

 

 

 

10,623

 

 

 

4,825

 

 

 

445,795

 

 

 

436,802

 

Alternatives

 

99,949

 

 

 

(548

)

 

 

1,385

 

 

 

755

 

 

 

101,541

 

 

 

101,049

 

Active subtotal

 

1,598,591

 

 

 

5,796

 

 

 

28,520

 

 

 

12,445

 

 

 

1,645,352

 

 

 

1,625,788

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,139,850

 

 

 

33,102

 

 

 

50,806

 

 

 

4,637

 

 

 

1,228,395

 

 

 

1,184,488

 

Fixed income

 

364,991

 

 

 

17,526

 

 

 

1,055

 

 

 

2,695

 

 

 

386,267

 

 

 

376,880

 

Multi-asset

 

3,240

 

 

 

169

 

 

 

77

 

 

 

5

 

 

 

3,491

 

 

 

3,359

 

Alternatives

 

20,155

 

 

 

1,509

 

 

 

576

 

 

 

44

 

 

 

22,284

 

 

 

21,283

 

iShares ETFs subtotal

 

1,528,236

 

 

 

52,306

 

 

 

52,514

 

 

 

7,381

 

 

 

1,640,437

 

 

 

1,586,010

 

Non-ETF Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,584,650

 

 

 

(18,152

)

 

 

66,834

 

 

 

10,562

 

 

 

1,643,894

 

 

 

1,616,788

 

Fixed income

 

557,011

 

 

 

37,187

 

 

 

(1,448

)

 

 

11,563

 

 

 

604,313

 

 

 

584,321

 

Multi-asset

 

7,672

 

 

 

(358

)

 

 

389

 

 

 

38

 

 

 

7,741

 

 

 

7,824

 

Alternatives

 

7,880

 

 

 

(975

)

 

 

156

 

 

 

85

 

 

 

7,146

 

 

 

7,544

 

Non-ETF Index subtotal

 

2,157,213

 

 

 

17,702

 

 

 

65,931

 

 

 

22,248

 

 

 

2,263,094

 

 

 

2,216,477

 

Index & iShares ETFs subtotal

 

3,685,449

 

 

 

70,008

 

 

 

118,445

 

 

 

29,629

 

 

 

3,903,531

 

 

 

3,802,487

 

Long-term

 

5,284,040

 

 

 

75,804

 

 

 

146,965

 

 

 

42,074

 

 

 

5,548,883

 

 

 

5,428,275

 

Cash management

 

402,575

 

 

 

20,381

 

 

 

224

 

 

 

2,243

 

 

 

425,423

 

 

 

415,082

 

Advisory(3)

 

2,658

 

 

 

(73

)

 

 

(98

)

 

 

99

 

 

 

2,586

 

 

 

2,621

 

Total

$

5,689,273

 

 

$

96,112

 

 

$

147,091

 

 

$

44,416

 

 

$

5,976,892

 

 

$

5,845,978

 

The following table presents component changes in AUM by product type for the three months ended September 30, 2017.

 

June 30,

 

 

Net

inflows

 

 

Market

 

 

FX

 

 

September 30,

 

 

Average

 

(in millions)

2017

 

 

(outflows)

 

 

change

 

 

impact(1)

 

 

2017

 

 

AUM(2)

 

Equity

$

3,014,696

 

 

$

11,935

 

 

$

128,073

 

 

$

17,761

 

 

$

3,172,465

 

 

$

3,097,171

 

Fixed income

 

1,704,624

 

 

 

59,549

 

 

 

5,686

 

 

 

18,561

 

 

 

1,788,420

 

 

 

1,753,243

 

Multi-asset

 

436,736

 

 

 

4,334

 

 

 

11,089

 

 

 

4,868

 

 

 

457,027

 

 

 

447,985

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

97,551

 

 

 

(504

)

 

 

1,355

 

 

 

766

 

 

 

99,168

 

 

 

98,746

 

Currency and commodities(4)

 

30,433

 

 

 

490

 

 

 

762

 

 

 

118

 

 

 

31,803

 

 

 

31,130

 

Alternatives subtotal

 

127,984

 

 

 

(14

)

 

 

2,117

 

 

 

884

 

 

 

130,971

 

 

 

129,876

 

Long-term

 

5,284,040

 

 

 

75,804

 

 

 

146,965

 

 

 

42,074

 

 

 

5,548,883

 

 

 

5,428,275

 

Cash management

 

402,575

 

 

 

20,381

 

 

 

224

 

 

 

2,243

 

 

 

425,423

 

 

 

415,082

 

Advisory(3)

 

2,658

 

 

 

(73

)

 

 

(98

)

 

 

99

 

 

 

2,586

 

 

 

2,621

 

Total

$

5,689,273

 

 

$

96,112

 

 

$

147,091

 

 

$

44,416

 

 

$

5,976,892

 

 

$

5,845,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

(2)(1)

Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(2)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.

(3)

Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $2.2 billion of ETFs AUM held in advisory accounts associated with the FRBNY assignment as of June 30, 2021 (disclosed via FRBNY reporting as of July 13, 2021) are included within Fixed Income ETFs AUM above. These holdings are excluded from Advisory AUM.

(4)

Amounts include commodity iShares ETFs.


The following table presents the component changes in AUM increased $287.6 billion, or 5%, to $6.0 trillion at September 30, 2017 from $5.7 trillion atby investment style and product type for the three months ended June 30, 2017, driven by net market appreciation, positive net inflows and the impact of foreign exchange movements.2021.

Net market appreciation of $147.1 billion was driven by higher U.S. and global equity markets.

Long-term net inflows of $75.8 billion included $52.3 billion, $16.1 billion and $7.4 billion from iShares ETFs, institutional clients and retail clients, respectively.  Net flows in long-term products are described below.

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

inflows

 

 

Market

 

 

FX

 

 

June 30,

 

 

Average

 

(in millions)

2021

 

 

(outflows)

 

 

change

 

 

impact(1)

 

 

2021

 

 

AUM(2)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

443,780

 

 

$

4,182

 

 

$

31,012

 

 

$

266

 

 

$

479,240

 

 

$

465,115

 

Fixed income

 

1,021,168

 

 

 

15,370

 

 

 

16,743

 

 

 

1,236

 

 

 

1,054,517

 

 

 

1,040,682

 

Multi-asset

 

661,333

 

 

 

36,026

 

 

 

33,246

 

 

 

1,201

 

 

 

731,806

 

 

 

693,285

 

Alternatives

 

171,361

 

 

 

7,172

 

 

 

2,457

 

 

 

79

 

 

 

181,069

 

 

 

176,660

 

Active subtotal

 

2,297,642

 

 

 

62,750

 

 

 

83,458

 

 

 

2,782

 

 

 

2,446,632

 

 

 

2,375,742

 

Index and ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

2,077,818

 

 

 

51,376

 

 

 

126,762

 

 

 

1,872

 

 

 

2,257,828

 

 

 

2,186,497

 

Fixed income

 

667,829

 

 

 

21,710

 

 

 

9,639

 

 

 

831

 

 

 

700,009

 

 

 

686,205

 

Multi-asset

 

6,958

 

 

 

379

 

 

 

310

 

 

 

16

 

 

 

7,663

 

 

 

7,359

 

Alternatives

 

60,919

 

 

 

1,682

 

 

 

3,380

 

 

 

24

 

 

 

66,005

 

 

 

65,379

 

ETFs subtotal

 

2,813,524

 

 

 

75,147

 

 

 

140,091

 

 

 

2,743

 

 

 

3,031,505

 

 

 

2,945,440

 

Non-ETF Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

2,224,183

 

 

 

(82,011

)

 

 

153,271

 

 

 

1,880

 

 

 

2,297,323

 

 

 

2,274,462

 

Fixed income

 

931,463

 

 

 

4,210

 

 

 

21,525

 

 

 

441

 

 

 

957,639

 

 

 

952,712

 

Multi-asset

 

9,081

 

 

 

(268

)

 

 

501

 

 

 

(13

)

 

 

9,301

 

 

 

9,198

 

Alternatives

 

5,388

 

 

 

(124

)

 

 

450

 

 

 

(4

)

 

 

5,710

 

 

 

5,672

 

Non-ETF Index subtotal

 

3,170,115

 

 

 

(78,193

)

 

 

175,747

 

 

 

2,304

 

 

 

3,269,973

 

 

 

3,242,044

 

Index & ETFs subtotal

 

5,983,639

 

 

 

(3,046

)

 

 

315,838

 

 

 

5,047

 

 

 

6,301,478

 

 

 

6,187,484

 

Long-term

 

8,281,281

 

 

 

59,704

 

 

 

399,296

 

 

 

7,829

 

 

 

8,748,110

 

 

 

8,563,226

 

Cash management

 

703,916

 

 

 

23,339

 

 

 

(84

)

 

 

432

 

 

 

727,603

 

 

 

732,270

 

Advisory(3)

 

22,214

 

 

 

(2,083

)

 

 

141

 

 

 

8

 

 

 

20,280

 

 

 

21,596

 

Total

$

9,007,411

 

 

$

80,960

 

 

$

399,353

 

 

$

8,269

 

 

$

9,495,993

 

 

$

9,317,092

 

 

iShares ETFs net inflows of $52.3 billion reflected strength in iShares Core, precision exposure and financial instrument ETFs. Equity net inflows of $33.1 billion were driven by both U.S. and international

42


equity market exposures. Fixed income net inflows of $17.5 billion reflected inflows into treasury, investment grade corporate and broad fixed income funds. Commodities iShares generated $1.5 billion of net inflows.

Institutional index net inflows of $16 billion included fixed income net inflows of $36.9 billion, driven by demand for liability-driven solutions, partially offset by equity net outflows of $19.6 billion.

Retail net inflows of $7.4 billion reflected net inflows of $3.7 billion in the United States and $3.7 billion internationally. Fixed income net inflows of $4.6 billion were diversified across the Company’s top-performing active platform, led by net inflows into unconstrained, municipal and emerging market debt strategies. Equity net inflows of $1.7 billion reflected inflows into index mutual funds. Multi-asset net inflows of $1 billion were largely due to inflows into the Multi-asset Income fund family, partially offset by outflows from world allocation strategies.

Cash management AUM increased 6% to $425.4 billion, driven by $20.4 billion of net inflows.

AUM increased $44.4 billion due to the impact of foreign exchange movements, primarily resulting from the weakening of the U.S. dollar against the British pound and the Euro.


43


Component Changes in AUM for the Nine Months Ended September 30, 2017

The following table presents the component changes in AUM by clientproduct type and product for the ninethree months ended SeptemberJune 30, 2017.2021.

 

 

December 31,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

September 30,

 

 

Average

 

(in millions)

 

2016

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2017

 

 

AUM(3)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

$

196,221

 

 

$

3,009

 

 

$

-

 

 

$

20,892

 

 

$

5,546

 

 

$

225,668

 

 

$

212,224

 

Fixed income

 

 

222,256

 

 

 

16,497

 

 

 

-

 

 

 

6,003

 

 

 

3,592

 

 

 

248,348

 

 

 

236,065

 

Multi-asset

 

 

107,997

 

 

 

(847

)

 

 

-

 

 

 

10,005

 

 

 

907

 

 

 

118,062

 

 

 

112,831

 

Alternatives

 

 

15,478

 

 

 

(158

)

 

 

-

 

 

 

725

 

 

 

398

 

 

 

16,443

 

 

 

16,522

 

Retail subtotal

 

 

541,952

 

 

 

18,501

 

 

 

-

 

 

 

37,625

 

 

 

10,443

 

 

 

608,521

 

 

 

577,642

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

951,252

 

 

 

129,488

 

 

 

-

 

 

 

134,562

 

 

 

13,093

 

 

 

1,228,395

 

 

 

1,095,500

 

Fixed income

 

 

314,707

 

 

 

58,779

 

 

 

-

 

 

 

5,105

 

 

 

7,676

 

 

 

386,267

 

 

 

351,985

 

Multi-asset

 

 

3,149

 

 

 

61

 

 

 

-

 

 

 

272

 

 

 

9

 

 

 

3,491

 

 

 

3,122

 

Alternatives

 

 

18,771

 

 

 

2,213

 

 

 

-

 

 

 

1,138

 

 

 

162

 

 

 

22,284

 

 

 

20,470

 

iShares ETFs subtotal

 

 

1,287,879

 

 

 

190,541

 

 

 

-

 

 

 

141,077

 

 

 

20,940

 

 

 

1,640,437

 

 

 

1,471,077

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

120,699

 

 

 

(12,357

)

 

 

-

 

 

 

18,023

 

 

 

4,001

 

 

 

130,366

 

 

 

126,223

 

Fixed income

 

 

536,727

 

 

 

(2,967

)

 

 

-

 

 

 

17,705

 

 

 

10,562

 

 

 

562,027

 

 

 

551,117

 

Multi-asset

 

 

276,933

 

 

 

16,692

 

 

 

-

 

 

 

21,531

 

 

 

12,577

 

 

 

327,733

 

 

 

301,793

 

Alternatives

 

 

75,615

 

 

 

2,367

 

 

 

3,264

 

 

 

2,021

 

 

 

1,831

 

 

 

85,098

 

 

 

79,818

 

Active subtotal

 

 

1,009,974

 

 

 

3,735

 

 

 

3,264

 

 

 

59,280

 

 

 

28,971

 

 

 

1,105,224

 

 

 

1,058,951

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

1,389,004

 

 

 

(25,778

)

 

 

-

 

 

 

193,874

 

 

 

30,936

 

 

 

1,588,036

 

 

 

1,504,119

 

Fixed income

 

 

498,675

 

 

 

63,528

 

 

 

-

 

 

 

97

 

 

 

29,478

 

 

 

591,778

 

 

 

540,163

 

Multi-asset

 

 

6,928

 

 

 

(500

)

 

 

-

 

 

 

1,098

 

 

 

215

 

 

 

7,741

 

 

 

7,518

 

Alternatives

 

 

7,074

 

 

 

(367

)

 

 

-

 

 

 

194

 

 

 

245

 

 

 

7,146

 

 

 

7,538

 

Index subtotal

 

 

1,901,681

 

 

 

36,883

 

 

 

-

 

 

 

195,263

 

 

 

60,874

 

 

 

2,194,701

 

 

 

2,059,338

 

Institutional subtotal

 

 

2,911,655

 

 

 

40,618

 

 

 

3,264

 

 

 

254,543

 

 

 

89,845

 

 

 

3,299,925

 

 

 

3,118,289

 

Long-term

 

 

4,741,486

 

 

 

249,660

 

 

 

3,264

 

 

 

433,245

 

 

 

121,228

 

 

 

5,548,883

 

 

 

5,167,008

 

Cash management

 

 

403,584

 

 

 

14,854

 

 

 

-

 

 

 

850

 

 

 

6,135

 

 

 

425,423

 

 

 

406,729

 

Advisory(4)

 

 

2,782

 

 

 

(188

)

 

 

-

 

 

 

(189

)

 

 

181

 

 

 

2,586

 

 

 

2,691

 

Total

 

$

5,147,852

 

 

$

264,326

 

 

$

3,264

 

 

$

433,906

 

 

$

127,544

 

 

$

5,976,892

 

 

$

5,576,428

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

inflows

 

 

Market

 

 

FX

 

 

June 30,

 

 

Average

 

(in millions)

2021

 

 

(outflows)

 

 

change

 

 

impact(1)

 

 

2021

 

 

AUM(2)

 

Equity

$

4,745,781

 

 

$

(26,453

)

 

$

311,045

 

 

$

4,018

 

 

$

5,034,391

 

 

$

4,926,074

 

Fixed income

 

2,620,460

 

 

 

41,290

 

 

 

47,907

 

 

 

2,508

 

 

 

2,712,165

 

 

 

2,679,599

 

Multi-asset

 

677,372

 

 

 

36,137

 

 

 

34,057

 

 

 

1,204

 

 

 

748,770

 

 

 

709,842

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illiquid alternatives

 

92,207

 

 

 

3,347

 

 

 

352

 

 

 

55

 

 

 

95,961

 

 

 

94,238

 

Liquid alternatives

 

76,266

 

 

 

3,319

 

 

 

1,945

 

 

 

30

 

 

 

81,560

 

 

 

79,138

 

Currency and commodities(4)

 

69,195

 

 

 

2,064

 

 

 

3,990

 

 

 

14

 

 

 

75,263

 

 

 

74,335

 

Alternatives subtotal

 

237,668

 

 

 

8,730

 

 

 

6,287

 

 

 

99

 

 

 

252,784

 

 

 

247,711

 

Long-term

 

8,281,281

 

 

 

59,704

 

 

 

399,296

 

 

 

7,829

 

 

 

8,748,110

 

 

 

8,563,226

 

Cash management

 

703,916

 

 

 

23,339

 

 

 

(84

)

 

 

432

 

 

 

727,603

 

 

 

732,270

 

Advisory(3)

 

22,214

 

 

 

(2,083

)

 

 

141

 

 

 

8

 

 

 

20,280

 

 

 

21,596

 

Total

$

9,007,411

 

 

$

80,960

 

 

$

399,353

 

 

$

8,269

 

 

$

9,495,993

 

 

$

9,317,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Amount represents AUM acquired in the First Reserve Transaction. 

(2)(1)

Foreign exchange reflects the impact of translating non-U.S.non-US dollar denominated AUM into U.S.US dollars for reporting purposes.

(3)(2)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing tenfour months.

(4)(3)

Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $2.2 billion of ETFs AUM held in advisory accounts associated with the FRBNY assignment as of June 30, 2021 (disclosed via FRBNY reporting as of July 13, 2021) are included within Fixed IncomeETFsAUM or Fixed Income AUM above. These holdings are excluded from Advisory AUM.

(4)

Amounts include commodity ETFs.


AUM increased $488.6 billion to $9.5 trillion at June 30, 2021, driven by net market appreciation and positive net inflows.

Long-term net inflows of $59.7 billion were comprised of net inflows of $75.1 billion and $21.4 billion into ETFs and retail, respectively, partially offset by net outflows $36.8 billion from institutional clients. Net flows in long-term products are described below.

ETFs net inflows of $75.1 billion reflected continued growth in core equity and sustainable ETFs, as well as inflows into precision exposures and renewed strength in fixed income ETFs. Net inflows were positive across all asset classes and were led by equity and fixed income. Equity net inflows of $51.4 billion were driven by both US and international equity market exposures. Fixed income net inflows of $21.7 billion were led by flows into core, inflation linked, emerging market and municipal bond ETFs. By region, ETFs inflows were diversified with $45.8 billion of net inflows in US-listed ETFs and $25.9 billion of net inflows in European-listed ETFs.

Retail net inflows of $21.4 billion were positive in both the US and internationally, and across all major asset classes. Equity net inflows of $9.9 billion reflected strength in global and thematic equity funds, and fixed income net inflows of $6.7 billion were driven by global and US core fixed income funds. Retail alternatives net inflows of $4.0 billion were led by event-driven and systematic multi-strategy funds.

Institutional active net inflows of $43.5 billion were led by $35.1 billion of multi-asset net inflows largely driven by a significant Outsourced Chief Investment Officer (“OCIO”) mandate from a UK pension client. Net inflows also reflected continued growth in LifePath® target-date funds and alternatives.

Institutional index net outflows of $80.3 billion included the full impact of a $58 billion low-fee institutional index redemption from a large US public pension client.

44Cash management AUM increased to $727.6 billion, driven by net inflows of $23.3 billion.


Net market appreciation of $399.4 billion was primarily driven by global equity and fixed income market appreciation.

AUM increased $8.3 billion due to the positive impact of foreign exchange movements, primarily due to the weakening of the US dollar, largely against the Euro and the Canadian dollar.


Component Changes in AUM for the Six Months Ended June 30, 2021

The following table presents the component changes in AUM by investment styleclient type and product type for the ninesix months ended SeptemberJune 30, 2017.2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

September 30,

 

 

Average

 

(in millions)

2016

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2017

 

 

AUM(3)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

275,033

 

 

$

(17,475

)

 

$

-

 

 

$

34,966

 

 

$

7,652

 

 

$

300,176

 

 

$

289,036

 

Fixed income

 

749,996

 

 

 

10,910

 

 

 

-

 

 

 

23,502

 

 

 

13,432

 

 

 

797,840

 

 

 

775,996

 

Multi-asset

 

384,930

 

 

 

15,845

 

 

 

-

 

 

 

31,536

 

 

 

13,484

 

 

 

445,795

 

 

 

414,624

 

Alternatives

 

91,093

 

 

 

2,209

 

 

 

3,264

 

 

 

2,746

 

 

 

2,229

 

 

 

101,541

 

 

 

96,339

 

Active subtotal

 

1,501,052

 

 

 

11,489

 

 

 

3,264

 

 

 

92,750

 

 

 

36,797

 

 

 

1,645,352

 

 

 

1,575,995

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

951,252

 

 

 

129,488

 

 

 

-

 

 

 

134,562

 

 

 

13,093

 

 

 

1,228,395

 

 

 

1,095,500

 

Fixed income

 

314,707

 

 

 

58,779

 

 

 

-

 

 

 

5,105

 

 

 

7,676

 

 

 

386,267

 

 

 

351,985

 

Multi-asset

 

3,149

 

 

 

61

 

 

 

-

 

 

 

272

 

 

 

9

 

 

 

3,491

 

 

 

3,122

 

Alternatives

 

18,771

 

 

 

2,213

 

 

 

-

 

 

 

1,138

 

 

 

162

 

 

 

22,284

 

 

 

20,470

 

iShares ETFs subtotal

 

1,287,879

 

 

 

190,541

 

 

 

-

 

 

 

141,077

 

 

 

20,940

 

 

 

1,640,437

 

 

 

1,471,077

 

Non-ETF Index

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,430,891

 

 

 

(17,651

)

 

 

-

 

 

 

197,823

 

 

 

32,831

 

 

 

1,643,894

 

 

 

1,553,530

 

Fixed income

 

507,662

 

 

 

66,148

 

 

 

-

 

 

 

303

 

 

 

30,200

 

 

 

604,313

 

 

 

551,349

 

Multi-asset

 

6,928

 

 

 

(500

)

 

 

-

 

 

 

1,098

 

 

 

215

 

 

 

7,741

 

 

 

7,518

 

Alternatives

 

7,074

 

 

 

(367

)

 

 

-

 

 

 

194

 

 

 

245

 

 

 

7,146

 

 

 

7,539

 

Non-ETF Index subtotal

 

1,952,555

 

 

 

47,630

 

 

 

-

 

 

 

199,418

 

 

 

63,491

 

 

 

2,263,094

 

 

 

2,119,936

 

Index & iShares ETFs subtotal

 

3,240,434

 

 

 

238,171

 

 

 

-

 

 

 

340,495

 

 

 

84,431

 

 

 

3,903,531

 

 

 

3,591,013

 

Long-term

 

4,741,486

 

 

 

249,660

 

 

 

3,264

 

 

 

433,245

 

 

 

121,228

 

 

 

5,548,883

 

 

 

5,167,008

 

Cash management

 

403,584

 

 

 

14,854

 

 

 

-

 

 

 

850

 

 

 

6,135

 

 

 

425,423

 

 

 

406,729

 

Advisory(4)

 

2,782

 

 

 

(188

)

 

 

-

 

 

 

(189

)

 

 

181

 

 

 

2,586

 

 

 

2,691

 

Total

$

5,147,852

 

 

$

264,326

 

 

$

3,264

 

 

$

433,906

 

 

$

127,544

 

 

$

5,976,892

 

 

$

5,576,428

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents component changes in AUM by product type for the nine months ended September 30, 2017.

 

December 31,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

September 30,

 

 

Average

 

December 31,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

June 30,

 

 

Average

 

(in millions)

 

2016

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2017

 

 

AUM(3)

 

2020

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2021

 

 

AUM(3)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

$

2,657,176

 

 

$

94,362

 

 

$

-

 

 

$

367,351

 

 

$

53,576

 

 

$

3,172,465

 

 

$

2,938,066

 

$

338,434

 

 

$

24,199

 

 

$

41,324

 

 

$

43,286

 

 

$

(916

)

 

$

446,327

 

 

$

401,271

 

Fixed income

 

 

1,572,365

 

 

 

135,837

 

 

 

-

 

 

 

28,910

 

 

 

51,308

 

 

 

1,788,420

 

 

 

1,679,330

 

 

340,468

 

 

 

21,486

 

 

 

 

 

 

(1,300

)

 

 

(1,174

)

 

 

359,480

 

 

 

350,847

 

Multi-asset

 

 

395,007

 

 

 

15,406

 

 

 

-

 

 

 

32,906

 

 

 

13,708

 

 

 

457,027

 

 

 

425,264

 

 

132,624

 

 

 

4,874

 

 

 

 

 

 

9,837

 

 

 

(107

)

 

 

147,228

 

 

 

139,864

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

 

88,630

 

 

 

2,353

 

 

 

3,264

 

 

 

2,753

 

 

 

2,168

 

 

 

99,168

 

 

 

93,963

 

Currency and commodities(5)

 

 

28,308

 

 

 

1,702

 

 

 

-

 

 

 

1,325

 

 

 

468

 

 

 

31,803

 

 

 

30,385

 

Alternatives subtotal

 

 

116,938

 

 

 

4,055

 

 

 

3,264

 

 

 

4,078

 

 

 

2,636

 

 

 

130,971

 

 

 

124,348

 

Alternatives

 

34,391

 

 

 

7,337

 

 

 

 

 

 

787

 

 

 

(67

)

 

 

42,448

 

 

 

38,207

 

Retail subtotal

 

845,917

 

 

 

57,896

 

 

 

41,324

 

 

 

52,610

 

 

 

(2,264

)

 

 

995,483

 

 

 

930,189

 

ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,905,101

 

 

 

117,798

 

 

 

 

 

 

238,644

 

 

 

(3,715

)

 

 

2,257,828

 

 

 

2,080,914

 

Fixed income

 

690,033

 

 

 

23,315

 

 

 

 

 

 

(11,332

)

 

 

(2,007

)

 

 

700,009

 

 

 

685,500

 

Multi-asset

 

6,268

 

 

 

945

 

 

 

 

 

 

420

 

 

 

30

 

 

 

7,663

 

 

 

6,948

 

Alternatives

 

67,605

 

 

 

1,578

 

 

 

 

 

 

(3,151

)

 

 

(27

)

 

 

66,005

 

 

 

66,467

 

ETFs subtotal

 

2,669,007

 

 

 

143,636

 

 

 

 

 

 

224,581

 

 

 

(5,719

)

 

 

3,031,505

 

 

 

2,839,829

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

169,522

 

 

 

(3,491

)

 

 

 

 

 

18,964

 

 

 

(821

)

 

 

184,174

 

 

 

176,544

 

Fixed income

 

716,269

 

 

 

11,322

 

 

 

 

 

 

(7,836

)

 

 

(3,084

)

 

 

716,671

 

 

 

707,256

 

Multi-asset

 

511,242

 

 

 

43,631

 

 

 

 

 

 

32,733

 

 

 

(3,024

)

 

 

584,582

 

 

 

532,983

 

Alternatives

 

127,429

 

 

 

8,540

 

 

 

 

 

 

3,124

 

 

 

(471

)

 

 

138,622

 

 

 

133,087

 

Active subtotal

 

1,524,462

 

 

 

60,002

 

 

 

 

 

 

46,985

 

 

 

(7,400

)

 

 

1,624,049

 

 

 

1,549,870

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

2,006,749

 

 

 

(115,099

)

 

 

 

 

 

264,295

 

 

 

(9,883

)

 

 

2,146,062

 

 

 

2,076,052

 

Fixed income

 

927,718

 

 

 

46,006

 

 

 

 

 

 

(25,587

)

 

 

(12,132

)

 

 

936,005

 

 

 

925,527

 

Multi-asset

 

8,599

 

 

 

439

 

 

 

 

 

 

499

 

 

 

(240

)

 

 

9,297

 

 

 

8,872

 

Alternatives

 

5,617

 

 

 

(538

)

 

 

 

 

 

685

 

 

 

(55

)

 

 

5,709

 

 

 

5,619

 

Index subtotal

 

2,948,683

 

 

 

(69,192

)

 

 

 

 

 

239,892

 

 

 

(22,310

)

 

 

3,097,073

 

 

 

3,016,070

 

Institutional subtotal

 

4,473,145

 

 

 

(9,190

)

 

 

 

 

 

286,877

 

 

 

(29,710

)

 

 

4,721,122

 

 

 

4,565,940

 

Long-term

 

 

4,741,486

 

 

 

249,660

 

 

 

3,264

 

 

 

433,245

 

 

 

121,228

 

 

 

5,548,883

 

 

 

5,167,008

 

 

7,988,069

 

 

 

192,342

 

 

 

41,324

 

 

 

564,068

 

 

 

(37,693

)

 

 

8,748,110

 

 

 

8,335,958

 

Cash management

 

 

403,584

 

 

 

14,854

 

 

 

-

 

 

 

850

 

 

 

6,135

 

 

 

425,423

 

 

 

406,729

 

 

666,252

 

 

 

62,529

 

 

 

 

 

 

(211

)

 

 

(967

)

 

 

727,603

 

 

 

697,856

 

Advisory(4)

 

 

2,782

 

 

 

(188

)

 

 

-

 

 

 

(189

)

 

 

181

 

 

 

2,586

 

 

 

2,691

 

 

22,359

 

 

 

(2,269

)

 

 

 

 

 

176

 

 

 

14

 

 

 

20,280

 

 

 

21,952

 

Total

 

$

5,147,852

 

 

$

264,326

 

 

$

3,264

 

 

$

433,906

 

��

$

127,544

 

 

$

5,976,892

 

 

$

5,576,428

 

$

8,676,680

 

 

$

252,602

 

 

$

41,324

 

 

$

564,033

 

 

$

(38,646

)

 

$

9,495,993

 

 

$

9,055,766

 

 

(1)

Amount representsAmounts include AUM acquired inattributable to the First ReserveAperio Transaction.

(2)  Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

(3)(2)

Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(3)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing tenseven months.

(4)

Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $2.2 billion of ETFs AUM held in advisory accounts associated with the FRBNY assignment as of June 30, 2021 (disclosed via FRBNY reporting as of July 13, 2021) are included within Fixed Income ETFs AUM above. These holdings are excluded from Advisory AUM.


The following table presents the component changes in AUM by investment style and product type for the six months ended June 30, 2021.

 

December 31,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

June 30,

 

 

Average

 

(in millions)

2020

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2021

 

 

AUM(3)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

410,189

 

 

$

25,202

 

 

$

 

 

$

45,605

 

 

$

(1,756

)

 

$

479,240

 

 

$

445,721

 

Fixed income

 

1,035,015

 

 

 

32,122

 

 

 

 

 

 

(8,317

)

 

 

(4,303

)

 

 

1,054,517

 

 

 

1,036,594

 

Multi-asset

 

643,864

 

 

 

48,504

 

 

 

 

 

 

42,569

 

 

 

(3,131

)

 

 

731,806

 

 

 

672,842

 

Alternatives

 

161,819

 

 

 

15,876

 

 

 

 

 

 

3,912

 

 

 

(538

)

 

 

181,069

 

 

 

171,293

 

Active subtotal

 

2,250,887

 

 

 

121,704

 

 

 

 

 

 

83,769

 

 

 

(9,728

)

 

 

2,446,632

 

 

 

2,326,450

 

Index and ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,905,101

 

 

 

117,798

 

 

 

 

 

 

238,644

 

 

 

(3,715

)

 

 

2,257,828

 

 

 

2,080,914

 

Fixed income

 

690,033

 

 

 

23,315

 

 

 

 

 

 

(11,332

)

 

 

(2,007

)

 

 

700,009

 

 

 

685,500

 

Multi-asset

 

6,268

 

 

 

945

 

 

 

 

 

 

420

 

 

 

30

 

 

 

7,663

 

 

 

6,948

 

Alternatives

 

67,605

 

 

 

1,578

 

 

 

 

 

 

(3,151

)

 

 

(27

)

 

 

66,005

 

 

 

66,467

 

ETFs subtotal

 

2,669,007

 

 

 

143,636

 

 

 

 

 

 

224,581

 

 

 

(5,719

)

 

 

3,031,505

 

 

 

2,839,829

 

Non-ETF Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

2,104,516

 

 

 

(119,593

)

 

 

41,324

 

 

 

280,940

 

 

 

(9,864

)

 

 

2,297,323

 

 

 

2,208,146

 

Fixed income

 

949,440

 

 

 

46,692

 

 

 

 

 

 

(26,406

)

 

 

(12,087

)

 

 

957,639

 

 

 

947,036

 

Multi-asset

 

8,601

 

 

 

440

 

 

 

 

 

 

500

 

 

 

(240

)

 

 

9,301

 

 

 

8,877

 

Alternatives

 

5,618

 

 

 

(537

)

 

 

 

 

 

684

 

 

 

(55

)

 

 

5,710

 

 

 

5,620

 

Non-ETF Index subtotal

 

3,068,175

 

 

 

(72,998

)

 

 

41,324

 

 

 

255,718

 

 

 

(22,246

)

 

 

3,269,973

 

 

 

3,169,679

 

Index & ETFs subtotal

 

5,737,182

 

 

 

70,638

 

 

 

41,324

 

 

 

480,299

 

 

 

(27,965

)

 

 

6,301,478

 

 

 

6,009,508

 

Long-term

 

7,988,069

 

 

 

192,342

 

 

 

41,324

 

 

 

564,068

 

 

 

(37,693

)

 

 

8,748,110

 

 

 

8,335,958

 

Cash management

 

666,252

 

 

 

62,529

 

 

 

 

 

 

(211

)

 

 

(967

)

 

 

727,603

 

 

 

697,856

 

Advisory(4)

 

22,359

 

 

 

(2,269

)

 

 

 

 

 

176

 

 

 

14

 

 

 

20,280

 

 

 

21,952

 

Total

$

8,676,680

 

 

$

252,602

 

 

$

41,324

 

 

$

564,033

 

 

$

(38,646

)

 

$

9,495,993

 

 

$

9,055,766

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents the component changes in AUM by product type for the six months ended June 30, 2021.

 

December 31,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

June 30,

 

 

Average

 

(in millions)

2020

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2021

 

 

AUM(3)

 

Equity

$

4,419,806

 

 

$

23,407

 

 

$

41,324

 

 

$

565,189

 

 

$

(15,335

)

 

$

5,034,391

 

 

$

4,734,781

 

Fixed income

 

2,674,488

 

 

 

102,129

 

 

 

 

 

 

(46,055

)

 

 

(18,397

)

 

 

2,712,165

 

 

 

2,669,130

 

Multi-asset

 

658,733

 

 

 

49,889

 

 

 

 

 

 

43,489

 

 

 

(3,341

)

 

 

748,770

 

 

 

688,667

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illiquid alternatives

 

85,770

 

 

 

9,572

 

 

 

 

 

 

952

 

 

 

(333

)

 

 

95,961

 

 

 

90,987

 

Liquid alternatives

 

73,218

 

 

 

5,673

 

 

 

 

 

 

2,736

 

 

 

(67

)

 

 

81,560

 

 

 

77,169

 

Currency and commodities(5)

 

76,054

 

 

 

1,672

 

 

 

 

 

 

(2,243

)

 

 

(220

)

 

 

75,263

 

 

 

75,224

 

Alternatives subtotal

 

235,042

 

 

 

16,917

 

 

 

 

 

 

1,445

 

 

 

(620

)

 

 

252,784

 

 

 

243,380

 

Long-term

 

7,988,069

 

 

 

192,342

 

 

 

41,324

 

 

 

564,068

 

 

 

(37,693

)

 

 

8,748,110

 

 

 

8,335,958

 

Cash management

 

666,252

 

 

 

62,529

 

 

 

 

 

 

(211

)

 

 

(967

)

 

 

727,603

 

 

 

697,856

 

Advisory(4)

 

22,359

 

 

 

(2,269

)

 

 

 

 

 

176

 

 

 

14

 

 

 

20,280

 

 

 

21,952

 

Total

$

8,676,680

 

 

$

252,602

 

 

$

41,324

 

 

$

564,033

 

 

$

(38,646

)

 

$

9,495,993

 

 

$

9,055,766

 

(1)

Amounts include AUM attributable to the Aperio Transaction.

(5)(2)

Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(3)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing seven months.

(4)

Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $2.2 billion of ETFs AUM held in advisory accounts associated with the FRBNY assignment as of June 30, 2021 (disclosed via FRBNY reporting as of July 13, 2021) are included within Fixed Income ETFs AUM or Fixed Income AUM above. These holdings are excluded from Advisory AUM.

(5)

Amounts include commodity iShares ETFs.


AUM increased $829.0$819.3 billion or 16%, to $6.0$9.5 trillion at SeptemberJune 30, 2017 from $5.1 trillion at December 31, 2016, 2021, driven by net market appreciation, positive net inflows, and AUM acquired in the Aperio Transaction, partially offset by the impact of foreign exchange movements and AUM acquired in the First Reserve Transaction.movements.

Net market appreciation of $433.9 billion was primarily driven by higher U.S. and global equity markets.

45


Long-term net inflows of $249.7$192.3 billion were comprised of net inflows of $190.5 billion, $40.6$143.6 billion and $18.5$57.9 billion into ETFs and retail, respectively, partially offset by net outflows of $9.2 billion from iShares ETFs, institutional clients and retail clients, respectively.clients. Net flows in long-term products are described below.

iShares ETFs net inflows of $190.5 billion were led by equity net inflows of $129.5 billion, driven by both U.S. and international equity market exposures.  Fixed income net inflows of $58.8 billion reflected inflows into corporate investment grade, emerging markets debt and treasury bond funds.

Institutional index net inflows of $36.9 billion were driven by fixed income net inflows of $63.5 billion, partially offset by equity net outflows of $25.8 billion.

Retail net inflows of $18.5 billion reflected net inflows of $12.2 billion internationally and $6.3 billion in the United States. Retail net inflows were led by fixed income net inflows of $16.5 billion, reflecting inflows into emerging markets, municipal bond funds and unconstrained strategies.

ETFs net inflows of $143.6 billion reflected positive flows across core equity, strategic and precision ETFs, and across asset classes. Equity net inflows of $117.8 billion were driven by both US and international equity market exposures. Fixed income net inflows of $23.3 billion were led by flows into investment grade corporate bonds, high yield, treasuries and core bond ETFs. By region, ETFs inflows were diversified with $90.3 billion of net inflows in US-listed ETFs and $44.9 billion of net inflows in European-listed ETFs.

 

Retail net inflows of $57.9 billion primarily reflected net inflows of $33.4 billion and $24.5 billion in the US and internationally, respectively. Retail net inflows reflected strength in thematic and global equity funds, global and US core fixed income funds, and alternatives funds.

Institutional active net inflows of $3.7$60 billion primarilyincluded the previously discussed impact of a significant OCIO mandate from a UK pension client, and also reflected continued growth in LifePath target-date funds, active multi-asset net inflows of $16.7 billion, partially offset by active equityfixed income strategies and illiquid alternatives.

Institutional index net outflows of $12.4 billion. Multi-asset net inflows were driven by ongoing demand for$69.2 billion included the LifePath® target-date series.previously discussed impact of a $58 billion low-fee institutional index redemption. Equity net outflows of $12.4$115.1 billion were primarily from U.S. equity and global strategies.  partially offset by fixed income net inflows of $46 billion.

Cash management AUM increased 5% to $425.4$727.6 billion, driven by $14.9net inflows of $62.5 billion.

Net market appreciation of $564 billion of net inflows.was driven primarily by global equity market appreciation, partially offset by fixed income market declines.

AUM increased $127.5decreased $38.6 billion due to the negative impact of foreign exchange movements, primarily resulting from the weakeningstrengthening of the U.S.US dollar, largely against the British poundJapanese yen and the Euro.

 



46


Component Changes in AUM for the Twelve Months Ended SeptemberJune 30, 20172021

The following table presents the component changes in AUM by client type and product type for the twelve months ended SeptemberJune 30, 2017.2021.

 

 

September 30,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

September 30,

 

 

Average

 

June 30,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

June 30,

 

 

Average

 

(in millions)

 

2016

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2017

 

 

AUM(3)

 

2020

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2021

 

 

AUM(3)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

$

196,131

 

 

$

4,751

 

 

$

-

 

 

$

22,417

 

 

$

2,369

 

 

$

225,668

 

 

$

207,806

 

$

254,104

 

 

$

47,302

 

 

$

41,324

 

 

$

97,009

 

 

$

6,588

 

 

$

446,327

 

 

$

345,277

 

Fixed income

 

 

230,842

 

 

 

14,666

 

 

 

-

 

 

 

1,204

 

 

 

1,636

 

 

 

248,348

 

 

 

234,080

 

 

301,160

 

 

 

44,028

 

 

 

 

 

 

9,401

 

 

 

4,891

 

 

 

359,480

 

 

 

334,847

 

Multi-asset

 

 

111,369

 

 

 

(2,548

)

 

 

-

 

 

 

8,891

 

 

 

350

 

 

 

118,062

 

 

 

111,957

 

 

111,934

 

 

 

9,296

 

 

 

 

 

 

25,148

 

 

 

850

 

 

 

147,228

 

 

 

130,418

 

Alternatives

 

 

16,436

 

 

 

(814

)

 

 

-

 

 

 

693

 

 

 

128

 

 

 

16,443

 

 

 

16,435

 

 

27,956

 

 

 

12,141

 

 

 

 

 

 

1,923

 

 

 

428

 

 

 

42,448

 

 

 

34,768

 

Retail subtotal

 

 

554,778

 

 

 

16,055

 

 

 

-

 

 

 

33,205

 

 

 

4,483

 

 

 

608,521

 

 

 

570,278

 

 

695,154

 

 

 

112,767

 

 

 

41,324

 

 

 

133,481

 

 

 

12,757

 

 

 

995,483

 

 

 

845,310

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

891,010

 

 

 

180,138

 

 

 

-

 

 

 

150,283

 

 

 

6,964

 

 

 

1,228,395

 

 

 

1,049,435

 

 

1,470,314

 

 

 

197,907

 

 

 

 

 

 

578,981

 

 

 

10,626

 

 

 

2,257,828

 

 

 

1,858,812

 

Fixed income

 

 

329,462

 

 

 

58,453

 

 

 

-

 

 

 

(5,239

)

 

 

3,591

 

 

 

386,267

 

 

 

345,114

 

 

634,098

 

 

 

56,540

 

 

 

 

 

 

2,637

 

 

 

6,734

 

 

 

700,009

 

 

 

675,322

 

Multi-asset

 

 

2,506

 

 

 

755

 

 

 

-

 

 

 

223

 

 

 

7

 

 

 

3,491

 

 

 

2,999

 

 

5,074

 

 

 

1,516

 

 

 

 

 

 

997

 

 

 

76

 

 

 

7,663

 

 

 

6,250

 

Alternatives

 

 

23,188

 

 

 

495

 

 

 

-

 

 

 

(1,448

)

 

 

49

 

 

 

22,284

 

 

 

20,724

 

 

53,111

 

 

 

7,760

 

 

 

 

 

 

5,006

 

 

 

128

 

 

 

66,005

 

 

 

65,259

 

iShares ETFs subtotal

 

 

1,246,166

 

 

 

239,841

 

 

 

-

 

 

 

143,819

 

 

 

10,611

 

 

 

1,640,437

 

 

 

1,418,272

 

ETFs subtotal

 

2,162,597

 

 

 

263,723

 

 

 

 

 

 

587,621

 

 

 

17,564

 

 

 

3,031,505

 

 

 

2,605,643

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

123,770

 

 

 

(15,161

)

 

 

-

 

 

 

20,675

 

 

 

1,082

 

 

 

130,366

 

 

 

124,915

 

 

133,932

 

 

 

(2,308

)

 

 

 

 

 

49,350

 

 

 

3,200

 

 

 

184,174

 

 

 

163,639

 

Fixed income

 

 

560,799

 

 

 

(1,700

)

 

 

-

 

 

 

3,168

 

 

 

(240

)

 

 

562,027

 

 

 

550,908

 

 

666,693

 

 

 

26,849

 

 

 

 

 

 

14,142

 

 

 

8,987

 

 

 

716,671

 

 

 

698,882

 

Multi-asset

 

 

280,406

 

 

 

22,351

 

 

 

-

 

 

 

19,126

 

 

 

5,850

 

 

 

327,733

 

 

 

295,524

 

 

426,553

 

 

 

52,413

 

 

 

 

 

 

93,379

 

 

 

12,237

 

 

 

584,582

 

 

 

499,070

 

Alternatives

 

 

74,678

 

 

 

4,553

 

 

 

3,264

 

 

 

2,092

 

 

 

511

 

 

 

85,098

 

 

 

78,678

 

 

114,432

 

 

 

14,021

 

 

 

 

 

 

7,477

 

 

 

2,692

 

 

 

138,622

 

 

 

126,717

 

Active subtotal

 

 

1,039,653

 

 

 

10,043

 

 

 

3,264

 

 

 

45,061

 

 

 

7,203

 

 

 

1,105,224

 

 

 

1,050,025

 

 

1,341,610

 

 

 

90,975

 

 

 

 

 

 

164,348

 

 

 

27,116

 

 

 

1,624,049

 

 

 

1,488,308

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

1,355,128

 

 

 

(17,400

)

 

 

-

 

 

 

246,625

 

 

 

3,683

 

 

 

1,588,036

 

 

 

1,468,656

 

 

1,660,875

 

 

 

(169,247

)

 

 

 

 

 

623,656

 

 

 

30,778

 

 

 

2,146,062

 

 

 

1,937,458

 

Fixed income

 

 

507,165

 

 

 

89,725

 

 

 

-

 

 

 

(15,805

)

 

 

10,693

 

 

 

591,778

 

 

 

528,790

 

 

809,141

 

 

 

107,780

 

 

 

 

 

 

(19,713

)

 

 

38,797

 

 

 

936,005

 

 

 

894,457

 

Multi-asset

 

 

7,980

 

 

 

(296

)

 

 

-

 

 

 

371

 

 

 

(314

)

 

 

7,741

 

 

 

7,603

 

 

7,801

 

 

 

242

 

 

 

 

 

 

1,296

 

 

 

(42

)

 

 

9,297

 

 

 

8,576

 

Alternatives

 

 

7,228

 

 

 

(543

)

 

 

-

 

 

 

408

 

 

 

53

 

 

 

7,146

 

 

 

7,440

 

 

4,519

 

 

 

(94

)

 

 

 

 

 

1,176

 

 

 

108

 

 

 

5,709

 

 

 

5,244

 

Index subtotal

 

 

1,877,501

 

 

 

71,486

 

 

 

-

 

 

 

231,599

 

 

 

14,115

 

 

 

2,194,701

 

 

 

2,012,489

 

 

2,482,336

 

 

 

(61,319

)

 

 

 

 

 

606,415

 

 

 

69,641

 

 

 

3,097,073

 

 

 

2,845,735

 

Institutional subtotal

 

 

2,917,154

 

 

 

81,529

 

 

 

3,264

 

 

 

276,660

 

 

 

21,318

 

 

 

3,299,925

 

 

 

3,062,514

 

 

3,823,946

 

 

 

29,656

 

 

 

 

 

 

770,763

 

 

 

96,757

 

 

 

4,721,122

 

 

 

4,334,043

 

Long-term

 

 

4,718,098

 

 

 

337,425

 

 

 

3,264

 

 

 

453,684

 

 

 

36,412

 

 

 

5,548,883

 

 

 

5,051,064

 

 

6,681,697

 

 

 

406,146

 

 

 

41,324

 

 

 

1,491,865

 

 

 

127,078

 

 

 

8,748,110

 

 

 

7,784,996

 

Cash management

 

 

388,982

 

 

 

32,526

 

 

 

-

 

 

 

1,074

 

 

 

2,841

 

 

 

425,423

 

 

 

404,180

 

 

619,351

 

 

 

99,239

 

 

 

 

 

 

(157

)

 

 

9,170

 

 

 

727,603

 

 

 

673,619

 

Advisory(4)

 

 

10,341

 

 

 

(7,573

)

 

 

-

 

 

 

(137

)

 

 

(45

)

 

 

2,586

 

 

 

4,323

 

 

16,901

 

 

 

2,853

 

 

 

 

 

 

479

 

 

 

47

 

 

 

20,280

 

 

 

20,975

 

Total

 

$

5,117,421

 

 

$

362,378

 

 

$

3,264

 

 

$

454,621

 

 

$

39,208

 

 

$

5,976,892

 

 

$

5,459,567

 

$

7,317,949

 

 

$

508,238

 

 

$

41,324

 

 

$

1,492,187

 

 

$

136,295

 

 

$

9,495,993

 

 

$

8,479,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Amount represents AUM acquired in the First Reserve Transaction. 

(2)(1)

Amounts include AUM attributable to the Aperio Transaction.

(2)

Foreign exchange reflects the impact of translating non-U.S.non-US dollar denominated AUM into U.S.US dollars for reporting purposes.

(3)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.

(4)

Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $2.2 billion of ETFs AUM held in advisory accounts associated with the FRBNY assignment as of June 30, 2021 (disclosed via FRBNY reporting as of July 13, 2021) are included within Fixed Income ETFsAUM above. These holdings are excluded from Advisory AUM.


47


The following table presents the component changes in AUM by investment style and product type for the twelve months ended SeptemberJune 30, 2017.2021.

 

September 30,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

September 30,

 

 

Average

 

June 30,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

June 30,

 

 

Average

 

(in millions)

2016

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2017

 

 

AUM(3)

 

2020

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2021

 

 

AUM(3)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

281,726

 

 

$

(22,023

)

 

$

-

 

 

$

38,028

 

 

$

2,445

 

 

$

300,176

 

 

$

285,819

 

$

312,809

 

 

$

43,888

 

 

$

 

 

$

116,600

 

 

$

5,943

 

 

$

479,240

 

 

$

400,020

 

Fixed income

 

782,858

 

 

 

9,427

 

 

 

-

 

 

 

4,516

 

 

 

1,039

 

 

 

797,840

 

 

 

774,433

 

 

950,143

 

 

 

68,072

 

 

 

 

 

 

23,910

 

 

 

12,392

 

 

 

1,054,517

 

 

 

1,013,129

 

Multi-asset

 

391,775

 

 

 

19,803

 

 

 

-

 

 

 

28,017

 

 

 

6,200

 

 

 

445,795

 

 

 

407,481

 

 

538,489

 

 

 

61,704

 

 

 

 

 

 

118,526

 

 

 

13,087

 

 

 

731,806

 

 

 

629,486

 

Alternatives

 

91,114

 

 

 

3,739

 

 

 

3,264

 

 

 

2,785

 

 

 

639

 

 

 

101,541

 

 

 

95,113

 

 

142,387

 

 

 

26,160

 

 

 

 

 

 

9,402

 

 

 

3,120

 

 

 

181,069

 

 

 

161,484

 

Active subtotal

 

1,547,473

 

 

 

10,946

 

 

 

3,264

 

 

 

73,346

 

 

 

10,323

 

 

 

1,645,352

 

 

 

1,562,846

 

 

1,943,828

 

 

 

199,824

 

 

 

 

 

 

268,438

 

 

 

34,542

 

 

 

2,446,632

 

 

 

2,204,119

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Index and ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

891,010

 

 

 

180,138

 

 

 

-

 

 

 

150,283

 

 

 

6,964

 

 

 

1,228,395

 

 

 

1,049,435

 

 

1,470,314

 

 

 

197,907

 

 

 

 

 

 

578,981

 

 

 

10,626

 

 

 

2,257,828

 

 

 

1,858,812

 

Fixed income

 

329,462

 

 

 

58,453

 

 

 

-

 

 

 

(5,239

)

 

 

3,591

 

 

 

386,267

 

 

 

345,114

 

 

634,098

 

 

 

56,540

 

 

 

 

 

 

2,637

 

 

 

6,734

 

 

 

700,009

 

 

 

675,322

 

Multi-asset

 

2,506

 

 

 

755

 

 

 

-

 

 

 

223

 

 

 

7

 

 

 

3,491

 

 

 

2,999

 

 

5,074

 

 

 

1,516

 

 

 

 

 

 

997

 

 

 

76

 

 

 

7,663

 

 

 

6,250

 

Alternatives

 

23,188

 

 

 

495

 

 

 

-

 

 

 

(1,448

)

 

 

49

 

 

 

22,284

 

 

 

20,724

 

 

53,111

 

 

 

7,760

 

 

 

 

 

 

5,006

 

 

 

128

 

 

 

66,005

 

 

 

65,259

 

iShares ETFs subtotal

 

1,246,166

 

 

 

239,841

 

 

 

-

 

 

 

143,819

 

 

 

10,611

 

 

 

1,640,437

 

 

 

1,418,272

 

ETFs subtotal

 

2,162,597

 

 

 

263,723

 

 

 

 

 

 

587,621

 

 

 

17,564

 

 

 

3,031,505

 

 

 

2,605,643

 

Non-ETF Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,393,303

 

 

 

(5,787

)

 

 

-

 

 

 

251,689

 

 

 

4,689

 

 

 

1,643,894

 

 

 

1,515,558

 

 

1,736,102

 

 

 

(168,141

)

 

 

41,324

 

 

 

653,415

 

 

 

34,623

 

 

 

2,297,323

 

 

 

2,046,354

 

Fixed income

 

515,948

 

 

 

93,264

 

 

 

-

 

 

 

(15,949

)

 

 

11,050

 

 

 

604,313

 

 

 

539,345

 

 

826,851

 

 

 

110,585

 

 

 

 

 

 

(20,080

)

 

 

40,283

 

 

 

957,639

 

 

 

915,057

 

Multi-asset

 

7,980

 

 

 

(296

)

 

 

-

 

 

 

371

 

 

 

(314

)

 

 

7,741

 

 

 

7,603

 

 

7,799

 

 

 

247

 

 

 

 

 

 

1,297

 

 

 

(42

)

 

 

9,301

 

 

 

8,578

 

Alternatives

 

7,228

 

 

 

(543

)

 

 

-

 

 

 

408

 

 

 

53

 

 

 

7,146

 

 

 

7,440

 

 

4,520

 

 

 

(92

)

 

 

 

 

 

1,174

 

 

 

108

 

 

 

5,710

 

 

 

5,245

 

Non-ETF Index subtotal

 

1,924,459

 

 

 

86,638

 

 

 

-

 

 

 

236,519

 

 

 

15,478

 

 

 

2,263,094

 

 

 

2,069,946

 

 

2,575,272

 

 

 

(57,401

)

 

 

41,324

 

 

 

635,806

 

 

 

74,972

 

 

 

3,269,973

 

 

 

2,975,234

 

Index & iShares ETFs subtotal

 

3,170,625

 

 

 

326,479

 

 

 

-

 

 

 

380,338

 

 

 

26,089

 

 

 

3,903,531

 

 

 

3,488,218

 

Index & ETFs subtotal

 

4,737,869

 

 

 

206,322

 

 

 

41,324

 

 

 

1,223,427

 

 

 

92,536

 

 

 

6,301,478

 

 

 

5,580,877

 

Long-term

 

4,718,098

 

 

 

337,425

 

 

 

3,264

 

 

 

453,684

 

 

 

36,412

 

 

 

5,548,883

 

 

 

5,051,064

 

 

6,681,697

 

 

 

406,146

 

 

 

41,324

 

 

 

1,491,865

 

 

 

127,078

 

 

 

8,748,110

 

 

 

7,784,996

 

Cash management

 

388,982

 

 

 

32,526

 

 

 

-

 

 

 

1,074

 

 

 

2,841

 

 

 

425,423

 

 

 

404,180

 

 

619,351

 

 

 

99,239

 

 

 

 

 

 

(157

)

 

 

9,170

 

 

 

727,603

 

 

 

673,619

 

Advisory(4)

 

10,341

 

 

 

(7,573

)

 

 

-

 

 

 

(137

)

 

 

(45

)

 

 

2,586

 

 

 

4,323

 

 

16,901

 

 

 

2,853

 

 

 

 

 

 

479

 

 

 

47

 

 

 

20,280

 

 

 

20,975

 

Total

$

5,117,421

 

 

$

362,378

 

 

$

3,264

 

 

$

454,621

 

 

$

39,208

 

 

$

5,976,892

 

 

$

5,459,567

 

$

7,317,949

 

 

$

508,238

 

 

$

41,324

 

 

$

1,492,187

 

 

$

136,295

 

 

$

9,495,993

 

 

$

8,479,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents the component changes in AUM by product type for the twelve months ended SeptemberJune 30, 2017.2021.

 

September 30,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

September 30,

 

 

Average

 

June 30,

 

 

Net

inflows

 

 

 

 

 

 

Market

 

 

FX

 

 

June 30,

 

 

Average

 

(in millions)

 

2016

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2017

 

 

AUM(3)

 

2020

 

 

(outflows)

 

 

Acquisition(1)

 

 

change

 

 

impact(2)

 

 

2021

 

 

AUM(3)

 

Equity

 

$

2,566,039

 

 

$

152,328

 

 

$

-

 

 

$

440,000

 

 

$

14,098

 

 

$

3,172,465

 

 

$

2,850,812

 

$

3,519,225

 

 

$

73,654

 

 

$

41,324

 

 

$

1,348,996

 

 

$

51,192

 

 

$

5,034,391

 

 

$

4,305,186

 

Fixed income

 

 

1,628,268

 

 

 

161,144

 

 

 

-

 

 

 

(16,672

)

 

 

15,680

 

 

 

1,788,420

 

 

 

1,658,892

 

 

2,411,092

 

 

 

235,197

 

 

 

 

 

 

6,467

 

 

 

59,409

 

 

 

2,712,165

 

 

 

2,603,508

 

Multi-asset

 

 

402,261

 

 

 

20,262

 

 

 

-

 

 

 

28,611

 

 

 

5,893

 

 

 

457,027

 

 

 

418,083

 

 

551,362

 

 

 

63,467

 

 

 

 

 

 

120,820

 

 

 

13,121

 

 

 

748,770

 

 

 

644,314

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

 

88,731

 

 

 

3,569

 

 

 

3,264

 

 

 

2,773

 

 

 

831

 

 

 

99,168

 

 

 

92,758

 

Illiquid alternatives

 

76,607

 

 

 

16,303

 

 

 

 

 

 

1,570

 

 

 

1,481

 

 

 

95,961

 

 

 

85,690

 

Liquid alternatives

 

63,120

 

 

 

9,262

 

 

 

 

 

 

7,496

 

 

 

1,682

 

 

 

81,560

 

 

 

72,848

 

Currency and commodities(5)

 

 

32,799

 

 

 

122

 

 

 

-

 

 

 

(1,028

)

 

 

(90

)

 

 

31,803

 

 

 

30,519

 

 

60,291

 

 

 

8,263

 

 

 

 

 

 

6,516

 

 

 

193

 

 

 

75,263

 

 

 

73,450

 

Alternatives subtotal

 

 

121,530

 

 

 

3,691

 

 

 

3,264

 

 

 

1,745

 

 

 

741

 

 

 

130,971

 

 

 

123,277

 

 

200,018

 

 

 

33,828

 

 

 

 

 

 

15,582

 

 

 

3,356

 

 

 

252,784

 

 

 

231,988

 

Long-term

 

 

4,718,098

 

 

 

337,425

 

 

 

3,264

 

 

 

453,684

 

 

 

36,412

 

 

 

5,548,883

 

 

 

5,051,064

 

 

6,681,697

 

 

 

406,146

 

 

 

41,324

 

 

 

1,491,865

 

 

 

127,078

 

 

 

8,748,110

 

 

 

7,784,996

 

Cash management

 

 

388,982

 

 

 

32,526

 

 

 

-

 

 

 

1,074

 

 

 

2,841

 

 

 

425,423

 

 

 

404,180

 

 

619,351

 

 

 

99,239

 

 

 

 

 

 

(157

)

 

 

9,170

 

 

 

727,603

 

 

 

673,619

 

Advisory(4)

 

 

10,341

 

 

 

(7,573

)

 

 

-

 

 

 

(137

)

 

 

(45

)

 

 

2,586

 

 

 

4,323

 

 

16,901

 

 

 

2,853

 

 

 

 

 

 

479

 

 

 

47

 

 

 

20,280

 

 

 

20,975

 

Total

 

$

5,117,421

 

 

$

362,378

 

 

$

3,264

 

 

$

454,621

 

 

$

39,208

 

 

$

5,976,892

 

 

$

5,459,567

 

$

7,317,949

 

 

$

508,238

 

 

$

41,324

 

 

$

1,492,187

 

 

$

136,295

 

 

$

9,495,993

 

 

$

8,479,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Amount represents AUM acquired in the First Reserve Transaction.  

(2)  Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

(3)(1)

Amounts include AUM attributable to the Aperio Transaction.

(2)

Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(3)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.

(4)

Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $2.2 billion of ETFs AUM held in advisory accounts associated with the FRBNY assignment as of June 30, 2021 (disclosed via FRBNY reporting as of July 13, 2021) are included within Fixed Income ETFsAUM or Fixed Income AUM above. These holdings are excluded from Advisory AUM.

(5)

Amounts include commodity iShares ETFs.


AUM increased $859.5 billion, or 17%,$2.18 trillion to $6.0$9.5 trillion at SeptemberJune 30, 2017 from $5.1 trillion at September 30, 2016, 2021, driven by net market appreciation, positive net inflows, the positive impact of foreign exchange movements and AUM acquired in the First ReserveAperio Transaction.

Net market appreciation of $454.6 billion was primarily driven by higher U.S. and global equity markets.

Long-term net inflows of $337.4$406.1 billion were comprised of net inflows of $239.8$263.7 billion, $81.5$112.8 billion and $16.1$29.6 billion from iShares ETFs,, institutional clients retail and retailinstitutional clients, respectively. Net flows in long-term products are described below.

48


 

iSharesETFs net inflows of $239.8$263.7 billion were led byreflected positive flows across core equity, strategic and precision ETFs, and across asset classes. Equity net inflows of $180.1$197.9 billion reflecting demand for iShares Corewere driven by both US and broadinternational equity market exposures. Fixed income net inflows of $58.5$56.5 billion reflected inflowswere led by flows into corporate investment grade emerging markets debtcorporate bonds, high yield, treasuries and treasurycore bond funds.ETFs. By region, ETFs net inflows were diversified with $166.7 billion of net inflows in US-listed ETFs and $83.1 billion of net inflows in European-listed ETFs.

Institutional index net inflows of $71.5 billion were driven by fixed income net inflows of $89.7 billion, partially offset by equity net outflows of $17.4 billion.

Retail net inflows of $112.8 billion included net inflows of $51.1 billion and $61.7 billion in the US and internationally, respectively. Retail net inflows reflected strength in thematic and global equity funds, global and US core fixed income funds, and alternatives funds.

Institutional active net inflows of $10.0 billion reflected multi-asset net inflows of $22.4 billion and alternatives net inflows of $4.6 billion, partially offset by equity net outflows of $15.2 billion. Multi-asset net inflows were driven by ongoing demand for the LifePath target-date series.  Alternatives net inflows of $4.6 billion were led by inflows into infrastructure offerings. Equity net outflows of $15.2 billion were primarily from U.S. equity and global strategies.

Institutional active net inflows of $91 billion included the previously discussed impact of a significant OCIO mandate from a UK pension client, and also reflected continued growth in LifePath target-date funds, active fixed income strategies and illiquid alternatives.

Retail net inflows of $16.1 billion reflected net inflows of $11.5 billion internationally and $4.6 billion in the United States. Retail net inflows primarily reflected net inflows of $14.7 billion from fixed income products, led by core, unconstrained, emerging market and municipal bond strategies, and $4.8 billion from equity products.  

Institutional index net outflows of $61.4 billion included the previously discussed impact of a $58 billion low-fee institutional index redemption. Equity net outflows of $169.2 billion were partially offset fixed income net inflows of $107.8 billion.

Cash management AUM increased 9% to $425.4$727.6 billion, driven by $32.5 billionnet inflows of net inflows.$99.2 billion.

Net market appreciation of $1.49 trillion was driven primarily by global equity market appreciation.

AUM increased $39.2$136.3 billion due to the positive impact of foreign exchange movements, primarily due toresulting from the weakening of the U.S.US dollar, largely against the Euro and British pound partially offset byand the strengthening of the U.S. dollar against the Japanese yen.Euro.

 


 

49


DISCUSSION OF FINANCIAL RESULTS

The Company’s results of operations for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 are discussed below. For a further description of the Company’s revenue and expense, see the Company’s Annual Report on Form 10-K for the year ended December 31, 20162020 (“20162020 Form 10-K”).

Revenue

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in millions)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Investment advisory, administration fees and

   securities lending revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

$

421

 

 

$

409

 

 

$

1,235

 

 

$

1,201

 

iShares ETFs

 

 

836

 

 

 

691

 

 

 

2,333

 

 

 

1,970

 

Non-ETF index

 

 

170

 

 

 

170

 

 

 

509

 

 

 

508

 

Equity subtotal

 

 

1,427

 

 

 

1,270

 

 

 

4,077

 

 

 

3,679

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

442

 

 

 

427

 

 

 

1,281

 

 

 

1,237

 

iShares ETFs

 

 

210

 

 

 

188

 

 

 

595

 

 

 

512

 

Non-ETF index

 

 

88

 

 

 

78

 

 

 

257

 

 

 

217

 

Fixed income subtotal

 

 

740

 

 

 

693

 

 

 

2,133

 

 

 

1,966

 

Multi-asset

 

 

289

 

 

 

285

 

 

 

843

 

 

 

860

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

 

169

 

 

 

156

 

 

 

469

 

 

 

488

 

Currency and commodities

 

 

23

 

 

 

24

 

 

 

67

 

 

 

61

 

Alternatives subtotal

 

 

192

 

 

 

180

 

 

 

536

 

 

 

549

 

Long-term

 

 

2,648

 

 

 

2,428

 

 

 

7,589

 

 

 

7,054

 

Cash management

 

 

144

 

 

 

118

 

 

 

408

 

 

 

340

 

Total base fees

 

 

2,792

 

 

 

2,546

 

 

 

7,997

 

 

 

7,394

 

Investment advisory performance fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

30

 

 

 

14

 

 

 

57

 

 

 

67

 

Fixed income

 

 

9

 

 

 

2

 

 

 

20

 

 

 

9

 

Multi-asset

 

 

2

 

 

 

1

 

 

 

14

 

 

 

6

 

Alternatives

 

 

150

 

 

 

41

 

 

 

218

 

 

 

84

 

Total performance fees

 

 

191

 

 

 

58

 

 

 

309

 

 

 

166

 

Technology and risk management revenue(1)

 

 

175

 

 

 

152

 

 

 

497

 

 

 

439

 

Distribution fees

 

 

5

 

 

 

10

 

 

 

17

 

 

 

32

 

Advisory and other revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory(1)

 

 

25

 

 

 

22

 

 

 

74

 

 

 

78

 

Other

 

 

45

 

 

 

49

 

 

 

128

 

 

 

156

 

Advisory and other revenue

 

 

70

 

 

 

71

 

 

 

202

 

 

 

234

 

Total revenue

 

$

3,233

 

 

$

2,837

 

 

$

9,022

 

 

$

8,265

 

(1)

Beginning with the first quarter of 2017, Aladdin revenue previously reported within “BlackRock Solutions® and advisory” has been presented within “Technology and risk management revenue” on the condensed consolidated statement of income.  The remaining previously reported “BlackRock Solutions and advisory” revenue is currently reported as part of “Advisory and other revenue.” Under the historical presentation, BlackRock Solutions and advisory revenue would have totaled $200 million and $571 million for the three and nine months ended September 30, 2017, respectively. The prior period amounts reported for BlackRock Solutions and advisory of $174 million and $517 million for the three and nine months ended September 30, 2016, respectively, have been reclassified to conform to the current presentation.  

50


The table below listspresents detail of revenue for the assetthree and six months ended June 30, 2021 and 2020 and includes the product type mix of investment advisory, administrationbase fees and securities lending revenue (collectively “base fees”) and mixperformance fees.

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Investment advisory, administration fees and

   securities lending revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

$

641

 

 

$

381

 

 

$

1,217

 

 

$

779

 

ETFs

 

1,156

 

 

 

792

 

 

 

2,224

 

 

 

1,671

 

Non-ETF Index

 

198

 

 

 

178

 

 

 

374

 

 

 

341

 

Equity subtotal

 

1,995

 

 

 

1,351

 

 

 

3,815

 

 

 

2,791

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

545

 

 

 

464

 

 

 

1,070

 

 

 

945

 

ETFs

 

294

 

 

 

261

 

 

 

589

 

 

 

520

 

Non-ETF Index

 

116

 

 

 

129

 

 

 

229

 

 

 

241

 

Fixed income subtotal

 

955

 

 

 

854

 

 

 

1,888

 

 

 

1,706

 

Multi-asset

 

344

 

 

 

270

 

 

 

672

 

 

 

563

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illiquid alternatives

 

167

 

 

 

128

 

 

 

335

 

 

 

276

 

Liquid alternatives

 

150

 

 

 

117

 

 

 

297

 

 

 

229

 

Currency and commodities(1)

 

55

 

 

 

35

 

 

 

108

 

 

 

67

 

Alternatives subtotal

 

372

 

 

 

280

 

 

 

740

 

 

 

572

 

Long-term

 

3,666

 

 

 

2,755

 

 

 

7,115

 

 

 

5,632

 

Cash management

 

91

 

 

 

211

 

 

 

234

 

 

 

389

 

Total investment advisory, administration fees and

   securities lending revenue

 

3,757

 

 

 

2,966

 

 

 

7,349

 

 

 

6,021

 

Investment advisory performance fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

36

 

 

 

23

 

 

 

62

 

 

 

25

 

Fixed income

 

15

 

 

 

2

 

 

 

29

 

 

 

4

 

Multi-asset

 

9

 

 

 

2

 

 

 

17

 

 

 

3

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illiquid alternatives

 

90

 

 

 

32

 

 

 

97

 

 

 

49

 

Liquid alternatives

 

190

 

 

 

53

 

 

 

264

 

 

 

72

 

Alternatives subtotal

 

280

 

 

 

85

 

 

 

361

 

 

 

121

 

Total performance fees

 

340

 

 

 

112

 

 

 

469

 

 

 

153

 

Technology services revenue

 

316

 

 

 

278

 

 

 

622

 

 

 

552

 

Distribution fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrocessions

 

264

 

 

 

162

 

 

 

502

 

 

 

331

 

12b-1 fees (US mutual fund distribution fees)

 

87

 

 

 

78

 

 

 

172

 

 

 

169

 

Other

 

18

 

 

 

13

 

 

 

35

 

 

 

29

 

Total distribution fees

 

369

 

 

 

253

 

 

 

709

 

 

 

529

 

Advisory and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

 

9

 

 

 

17

 

 

 

24

 

 

 

34

 

Other

 

29

 

 

 

22

 

 

 

45

 

 

 

69

 

Total advisory and other revenue

 

38

 

 

 

39

 

 

 

69

 

 

 

103

 

Total revenue

$

4,820

 

 

$

3,648

 

 

$

9,218

 

 

$

7,358

 

(1)

Amounts include commodity ETFs.


The table below lists a percentage breakdown of base fees and securities lending revenue and average AUM by product type:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

Mix of Base Fees

 

 

 

Mix of Average AUM

by Asset Class(1)

 

 

Mix of Base Fees

 

 

 

Mix of Average AUM

by Asset Class(2)

 

Percentage of

Base Fees and

Securities Lending Revenue

 

 

 

Percentage of

Average AUM

by Product Type(1)

 

 

Percentage of

Base Fees and

Securities Lending Revenue

 

 

 

Percentage of

Average AUM

by Product Type(2)

 

 

2017

 

 

2016

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

2017

 

 

2016

 

2021

 

 

2020

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

2021

 

 

2020

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

15

%

 

 

16

%

 

 

 

5

%

 

 

6

%

 

 

15

%

 

 

16

%

 

 

 

5

%

 

 

6

%

 

18

%

 

 

13

%

 

 

 

5

%

 

 

4

%

 

 

19

%

 

 

12

%

 

 

 

5

%

 

 

4

%

iShares ETFs

 

 

30

%

 

 

27

%

 

 

 

20

%

 

 

17

%

 

 

29

%

 

 

27

%

 

 

 

20

%

 

 

17

%

Non-ETF index

 

 

6

%

 

 

7

%

 

 

 

28

%

 

 

27

%

 

 

6

%

 

 

7

%

 

 

 

28

%

 

 

27

%

ETFs

 

31

%

 

 

27

%

 

 

 

24

%

 

 

20

%

 

 

30

%

 

 

28

%

 

 

 

23

%

 

 

21

%

Non-ETF Index

 

5

%

 

 

6

%

 

 

 

23

%

 

 

24

%

 

 

5

%

 

 

6

%

 

 

 

24

%

 

 

24

%

Equity subtotal

 

 

51

%

 

 

50

%

 

 

 

53

%

 

 

50

%

 

 

50

%

 

 

50

%

 

 

 

53

%

 

 

50

%

 

54

%

 

 

46

%

 

 

 

52

%

 

 

48

%

 

 

54

%

 

 

46

%

 

 

 

52

%

 

 

49

%

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

16

%

 

 

17

%

 

 

 

13

%

 

 

15

%

 

 

17

%

 

 

16

%

 

 

 

13

%

 

 

16

%

 

14

%

 

 

16

%

 

 

 

12

%

 

 

12

%

 

 

14

%

 

 

16

%

 

 

 

11

%

 

 

12

%

iShares ETFs

 

 

8

%

 

 

7

%

 

 

 

6

%

 

 

6

%

 

 

7

%

 

 

7

%

 

 

 

6

%

 

 

6

%

Non-ETF index

 

 

3

%

 

 

3

%

 

 

 

10

%

 

 

10

%

 

 

3

%

 

 

3

%

 

 

 

10

%

 

 

10

%

ETFs

 

8

%

 

 

9

%

 

 

 

7

%

 

 

9

%

 

 

8

%

 

 

9

%

 

 

 

8

%

 

 

8

%

Non-ETF Index

 

3

%

 

 

4

%

 

 

 

10

%

 

 

12

%

 

 

3

%

 

 

4

%

 

 

 

10

%

 

 

12

%

Fixed income subtotal

 

 

27

%

 

 

27

%

 

 

 

29

%

 

 

31

%

 

 

27

%

 

 

26

%

 

 

 

29

%

 

 

32

%

 

25

%

 

 

29

%

 

 

 

29

%

 

 

33

%

 

 

25

%

 

 

29

%

 

 

 

29

%

 

 

32

%

Multi-asset

 

 

10

%

 

 

11

%

 

 

 

8

%

 

 

8

%

 

 

11

%

 

 

12

%

 

 

 

8

%

 

 

8

%

 

9

%

 

 

9

%

 

 

 

8

%

 

 

8

%

 

 

9

%

 

 

9

%

 

 

 

8

%

 

 

8

%

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

 

6

%

 

 

6

%

 

 

 

2

%

 

 

2

%

 

 

6

%

 

 

7

%

 

 

 

2

%

 

 

2

%

Currency and commodities

 

 

1

%

 

 

1

%

 

 

 

1

%

 

 

1

%

 

 

1

%

 

 

1

%

 

 

 

1

%

 

 

1

%

Illiquid alternatives

 

5

%

 

 

4

%

 

 

 

1

%

 

 

1

%

 

 

5

%

 

 

5

%

 

 

 

1

%

 

 

1

%

Liquid alternatives

 

4

%

 

 

4

%

 

 

 

1

%

 

 

1

%

 

 

4

%

 

 

4

%

 

 

 

1

%

 

 

1

%

Currency and commodities(3)

 

1

%

 

 

1

%

 

 

 

1

%

 

 

1

%

 

 

1

%

 

 

1

%

 

 

 

1

%

 

 

1

%

Alternatives subtotal

 

 

7

%

 

 

7

%

 

 

 

3

%

 

 

3

%

 

 

7

%

 

 

8

%

 

 

 

3

%

 

 

3

%

 

10

%

 

 

9

%

 

 

 

3

%

 

 

3

%

 

 

10

%

 

 

10

%

 

 

 

3

%

 

 

3

%

Long-term

 

 

95

%

 

 

95

%

 

 

 

93

%

 

 

92

%

 

 

95

%

 

 

96

%

 

 

 

93

%

 

 

93

%

 

98

%

 

 

93

%

 

 

 

92

%

 

 

92

%

 

 

98

%

 

 

94

%

 

 

 

92

%

 

 

92

%

Cash management

 

 

5

%

 

 

5

%

 

 

 

7

%

 

 

8

%

 

 

5

%

 

 

4

%

 

 

 

7

%

 

 

7

%

 

2

%

 

 

7

%

 

 

 

8

%

 

 

8

%

 

 

2

%

 

 

6

%

 

 

 

8

%

 

 

8

%

Total excluding Advisory AUM

 

 

100

%

 

 

100

%

 

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

 

100

%

 

 

100

%

 

100

%

 

 

100

%

 

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

 

100

%

 

 

100

%

 

(1)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.

((2)2)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing tenseven months.

(3)

Amounts include commodity ETFs.

Three Months Ended SeptemberJune 30, 20172021 Compared with Three Months Ended SeptemberJune 30, 20162020

Revenue increased $396$1,172 million, or 14%32%, from the third quarter of 2016, driven bythree months ended June 30, 2020, reflecting significant market gains as well as strong organic growth, in base fees,higher performance fees and 14% growth in technology and risk managementservices revenue.

Investment advisory, administration fees and securities lending revenue of $2,792$3,757 million increased $246$791 million from $2,546$2,966 million infor the third quarterthree months ended June 30, 2020, primarily driven by the positive impact of 2016, reflectingmarket beta and foreign exchange movements on average AUM and strong organic base fee growth, partially offset by the impact of higher marketsyield-related fee waivers on certain money market funds and organic growth on average AUM,strategic pricing changes to certain products, and lower securities lending revenue. Securities lending revenue of $140 million decreased $70 million from $210 million for the three months ended June 30, 2020, primarily reflecting lower spreads, partially offset by previously announced pricing changes to select investment products.  Securities lending revenue was $150 million in the current quarter compared with $142 million in the third quarterhigher average balances of 2016.securities on loan.

Investment advisory performance fees of $191$340 million increased $133$228 million from $112 million for the third quarter of 2016,three months ended June 30, 2020, primarily reflecting improved performance in a broad rangehigher revenue from liquid and illiquid alternative products.

Technology services revenue of hedge and long-only funds, including strong performance from a single hedge fund with an annual performance measurement period that ends in the third quarter.

Technology and risk management revenue of $175$316 million increased $23$38 million from $152$278 million infor the third quarter of 2016,three months ended June 30, 2020, primarily reflecting ongoing demand for higher revenue from Aladdin and other technology offerings..


NineSix Months Ended SeptemberJune 30, 20172021 Compared with NineSix Months Ended SeptemberJune 30, 20162020

Revenue increased $757$1,860 million, or 9%25%, from the ninesix months ended SeptemberJune 30, 2016, driven by growth in2020, reflecting higher base fees,and performance fees and higher technology and risk managementservices revenue, partially offset by lower advisory and othersecurities lending revenue.

Investment advisory, administration fees and securities lending revenue of $7,997$7,349 million increased $603$1,328 million from $7,394$6,021 million for the ninesix months ended SeptemberJune 30, 2016,2020, primarily driven by the positive impact of market beta and foreign exchange movements on average AUM and organic growth, partially offset by the impact of yield-related fee waivers on certain money market funds and strategic pricing changes to certain products, and lower securities lending revenue. Securities lending revenue of $267 million decreased $101 million from $368 million for the six months ended June 30, 2020, primarily reflecting lower spreads, partially offset by higher average balances of securities on loan.

Investment advisory performance fees of $469 million increased $316 million from $153 million for the six months ended June 30, 2020, primarily reflecting higher revenue from liquid and illiquid alternative and long-only products.

Technology services revenue of $622 million increased $70 million from $552 million for the six months ended June 30, 2020, primarily reflecting higher revenue from Aladdin.

Advisory and other revenue of $69 million decreased $34 million from $103 million for the six months ended June 30, 2020, primarily reflecting the impact of higher marketsthe Charitable Contribution and organic growth on average AUM, and the effect of AUM acquired in the BofA® Global Capital Management transaction, partially offset by previously announced pricing changes to select investment products.  Securities lending revenue was $447 million for the nine months ended September 30, 2017 compared with $441 million for the nine months ended September 30, 2016.  

51


Investment advisory performance fees of $309 million increased $143 million from the nine months ended September 30, 2016, primarily reflecting improved performance in a broad range of hedge and long-only funds, including strong performance from a single hedge fund with an annual performance measurement period that ends in the third quarter.

Technology and risk management revenue of $497 million increased $58 million from $439 million for the nine months ended September 30, 2016 reflecting ongoing demand for Aladdin and other technology offerings.

Advisory and other revenue of $202 million decreased $32 million from $234 million for the nine months ended September 30, 2016, reflecting lower fees for distributing certain exchange-traded products, lower earnings from a strategic minority investment and lower commissions for sales of certain funds.advisory assignments.

Expense

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in millions)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Expense, GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

$

1,088

 

 

$

969

 

 

$

3,108

 

 

$

2,893

 

Distribution and servicing costs

 

 

123

 

 

 

114

 

 

 

361

 

 

 

320

 

Amortization of deferred sales commissions

 

 

4

 

 

 

8

 

 

 

13

 

 

 

27

 

Direct fund expense

 

 

234

 

 

 

200

 

 

 

666

 

 

 

583

 

General and administration:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing and promotional

 

 

76

 

 

 

72

 

 

 

231

 

 

 

232

 

Occupancy and office related

 

 

68

 

 

 

65

 

 

 

202

 

 

 

208

 

Portfolio services

 

 

68

 

 

 

57

 

 

 

195

 

 

 

164

 

Technology

 

 

51

 

 

 

41

 

 

 

145

 

 

 

129

 

Professional services

 

 

37

 

 

 

27

 

 

 

92

 

 

 

84

 

Communications

 

 

8

 

 

 

9

 

 

 

24

 

 

 

29

 

Other general and administration

 

 

55

 

 

 

41

 

 

 

125

 

 

 

100

 

Total general and administration expense

 

 

363

 

 

 

312

 

 

 

1,014

 

 

 

946

 

Restructuring charge

 

 

 

 

 

 

 

 

 

 

 

76

 

Amortization of intangible assets

 

 

27

 

 

 

25

 

 

 

77

 

 

 

75

 

Total expense, GAAP

 

$

1,839

 

 

$

1,628

 

 

$

5,239

 

 

$

4,920

 

Less non-GAAP expense adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PNC LTIP funding obligation

 

 

4

 

 

 

7

 

 

 

12

 

 

 

21

 

Restructuring charge

 

 

 

 

 

 

 

 

 

 

 

76

 

Total non-GAAP expense adjustments

 

 

4

 

 

 

7

 

 

 

12

 

 

 

97

 

Expense, as adjusted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

$

1,084

 

 

$

962

 

 

$

3,096

 

 

$

2,872

 

Distribution and servicing costs

 

 

123

 

 

 

114

 

 

 

361

 

 

 

320

 

Amortization of deferred sales commissions

 

 

4

 

 

 

8

 

 

 

13

 

 

 

27

 

Direct fund expense

 

 

234

 

 

 

200

 

 

 

666

 

 

 

583

 

General and administration

 

 

363

 

 

 

312

 

 

 

1,014

 

 

 

946

 

Amortization of intangible assets

 

 

27

 

 

 

25

 

 

 

77

 

 

 

75

 

Total expense, as adjusted

 

$

1,835

 

 

$

1,621

 

 

$

5,227

 

 

$

4,823

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

$

1,548

 

 

$

1,152

 

 

$

2,957

 

 

$

2,289

 

Distribution and servicing costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrocessions

 

264

 

 

 

162

 

 

 

502

 

 

 

331

 

12b-1 costs

 

85

 

 

 

75

 

 

 

168

 

 

 

164

 

Other

 

174

 

 

 

192

 

 

 

358

 

 

 

379

 

Total distribution and servicing costs

 

523

 

 

 

429

 

 

 

1,028

 

 

 

874

 

Direct fund expense

 

320

 

 

 

246

 

 

 

640

 

 

 

523

 

General and administration expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing and promotional

 

53

 

 

 

39

 

 

 

88

 

 

 

108

 

Occupancy and office related

 

80

 

 

 

80

 

 

 

159

 

 

 

158

 

Portfolio services

 

87

 

 

 

65

 

 

 

174

 

 

 

130

 

Technology

 

129

 

 

 

92

 

 

 

233

 

 

 

180

 

Professional services

 

41

 

 

 

41

 

 

 

80

 

 

 

85

 

Communications

 

11

 

 

 

14

 

 

 

22

 

 

 

26

 

Foreign exchange remeasurement

 

(2

)

 

 

1

 

 

 

2

 

 

 

6

 

  Contingent consideration fair value adjustments

 

1

 

 

 

(2

)

 

 

4

 

 

 

23

 

  Product launch costs

 

 

 

 

 

 

 

178

 

 

 

84

 

  Charitable Contribution

 

 

 

 

 

 

 

 

 

 

589

 

  Other general and administration

 

61

 

 

 

58

 

 

 

106

 

 

 

141

 

Total general and administration expense

 

461

 

 

 

388

 

 

 

1,046

 

 

 

1,530

 

Amortization of intangible assets

 

37

 

 

 

27

 

 

 

71

 

 

 

52

 

Total expense

$

2,889

 

 

$

2,242

 

 

$

5,742

 

 

$

5,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Three Months Ended SeptemberJune 30, 20172021 Compared with Three Months Ended SeptemberJune 30, 20162020

GAAP.    Expense increased $211$647 million from the third quarter of 2016,three months ended June 30, 2020, largely driven primarily by higher employee compensation and benefits expense, higher volume-related expense, and higher general and administration expense, and higher direct fund expense.

Employee compensation and benefits expense increased $119$396 million or 12%, from the third quarter of 2016,three months ended June 30, 2020, primarily reflecting higher incentive compensation, driven primarily by higher operating income and higher performance fees, and operating income,higher deferred compensation, reflecting the impact of additional grants associated with prior-year compensation and higher headcount.  Employees at September 30, 2017 totaled approximately 13,700 compared with approximately 13,000 at September 30, 2016.certain previous acquisition-related compensation arrangements.

52


Direct fund expense increased $34$74 million from the third quarter of 2016,three months ended June 30, 2020, primarily reflecting higher average AUM.

General and administration expense increased $51$73 million from the third quarter of 2016, reflectingthree months ended June 30, 2020, largely driven by higher technology, portfolio services, technology, and professional servicesmarketing and promotional expense.

Amortization of intangible assets expense as well as increased foreign exchange remeasurement expense and contingent consideration fair value adjustments.  

As Adjusted.    Expense, as adjusted, increased $214 million, or 13%, to $1,835$10 million from $1,621the three months ended June 30, 2020, primarily reflecting amortization of intangible assets related to the Aperio Transaction.

Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020

Expense increased $474 million infrom the third quarter of 2016. The increase in total expense, as adjusted, issix months ended June 30, 2020, largely driven primarily by higher employee compensation and benefits expense and higher volume-related expense, partially offset by lower general and administration expense, and higher direct fund expense.

Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016

GAAP.    Expense increased $319 million fromreflecting the nineimpact of the Charitable Contribution incurred in the six months ended SeptemberJune 30, 2016, driven primarily by2020. Expense also reflected higher employee compensation and benefits expense, higher direct fund expense, higher general and administration expense, and approximately $22 million of expense associated withproduct launch costs during the strategic repositioning of the active equity platform, partially offset by a restructuring charge recorded in the first quarter of 2016.six months ended June 30, 2021.

Employee compensation and benefits expense increased $215$668 million or 7%, from the ninesix months ended SeptemberJune 30, 2016,2020, primarily reflecting higher incentive compensation, driven by higher headcount,operating income and approximately $20 million of severancehigher performance fees, and accelerated compensation expense associated with the repositioning of the active equity platform.  higher deferred compensation.

Distribution and servicing costs increased $41 million, or 13%, from the nine months ended September 30, 2016, reflecting higher average AUM and the effect of AUM acquired in the BofA Global Capital Management transaction.

Direct fund expense increased $83$117 million from the ninesix months ended SeptemberJune 30, 2016,2020, primarily reflecting higher average AUM.

General and administration expense increased $68 decreased $484 million from the ninesix months ended SeptemberJune 30, 2016, reflecting2020, largely driven by the Charitable Contribution recorded in the six months ended June 30, 2020. General and administration expense also reflected higher product launch costs, higher technology and portfolio services expense, partially offset by lower marketing and technologypromotional expense and contingent consideration fair value adjustments, and the impact of foreign exchange remeasurement expense.  costs related to certain legal matters incurred during the six months ended June 30, 2020.

As Adjusted.    Expense, as adjusted,Amortization of intangible assets expense increased $404 million, or 8%, to $5,227$19 million from $4,823 million in the ninesix months ended SeptemberJune 30, 2016. The increase in total expense, as adjusted, is driven2020, primarily by higher employee compensation and benefit expense, higher direct fund expense, higher general and administration expense andreflecting amortization of intangible assets related to the $22 million expense associated with the repositioning of the active equity platform.  The restructuring charge recorded in the first quarter of 2016 has been excluded from the as adjusted results.  Aperio Transaction.


Nonoperating Results

The summary and reconciliation of U.S. GAAP nonoperating income (expense) to nonoperating income (expense), as adjustedless net income (loss) attributable to NCI for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 was as follows:

 

 

Three Months Ended

 

 

Nine Months Ended

 

Three Months Ended

 

 

Six Months Ended

 

 

September 30,

 

 

September 30,

 

June 30,

 

 

June 30,

 

(in millions)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Nonoperating income (expense), GAAP basis(1)

 

$

10

 

 

$

1

 

 

$

4

 

 

$

(72

)

$

270

 

 

$

357

 

 

$

316

 

 

$

286

 

Less: Net income (loss) attributable to NCI

 

 

12

 

 

 

2

 

 

 

31

 

 

 

(2

)

 

169

 

 

 

188

 

 

 

243

 

 

 

9

 

Nonoperating income (expense), as adjusted, net of NCI(2)(3)

 

$

(2

)

 

$

(1

)

 

$

(27

)

 

$

(70

)

Nonoperating income (expense), net of NCI(2)

$

101

 

 

$

169

 

 

$

73

 

 

$

277

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

(in millions)

2021

 

 

2020

 

 

2021

 

 

2020

 

Net gain (loss) on investments(1)(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private equity

$

66

 

 

$

8

 

 

$

88

 

 

$

(10

)

Real assets

 

3

 

 

 

 

 

 

6

 

 

 

5

 

Other alternatives(3)

 

17

 

 

 

21

 

 

 

30

 

 

 

(4

)

Other investments(4)

 

48

 

 

 

130

 

 

 

45

 

 

 

(20

)

Subtotal

 

134

 

 

 

159

 

 

 

169

 

 

 

(29

)

Gain related to the Charitable Contribution

 

 

 

 

 

 

 

 

 

 

122

 

Other gains (losses)(5)

 

11

 

 

 

51

 

 

 

(16

)

 

 

256

 

Total net gain (loss) on investments(1)(2)

 

145

 

 

 

210

 

 

 

153

 

 

 

349

 

Interest and dividend income

 

8

 

 

 

10

 

 

 

27

 

 

 

25

 

Interest expense

 

(52

)

 

 

(51

)

 

 

(107

)

 

 

(97

)

Net interest expense

 

(44

)

 

 

(41

)

 

 

(80

)

 

 

(72

)

Nonoperating income (expense)(1)

$

101

 

 

$

169

 

 

$

73

 

 

$

277

 

 

(1(1))

Amounts include a gainNet of $29 million and $19 million for the three months ended September 30, 2017 and 2016, respectively,net income (loss) attributable to consolidated variable interest entities (“VIEs”). Amounts include a gain of $95 million and $34 million for the nine months ended September 30, 2017 and 2016, respectively, attributable to consolidated VIEs.NCI.  

((2)2)

Net of income (loss) attributable to NCI.  

(3)

Management believes nonoperating income (expense), as adjusted,less net income (loss) attributable to NCI, is an effective measure for reviewing BlackRock’s nonoperating contribution to results.results, which ultimately impacts BlackRock’s book value. See Non-GAAP Financial Measures for further information on non-GAAP financial measures for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016.


The components of nonoperating income (expense), as adjusted, for the three and nine months ended September 30, 2017 and 2016 were as follows:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in millions)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net gain (loss) on investments(1)(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private equity

 

$

7

 

 

$

2

 

 

$

21

 

 

$

11

 

Real assets

 

 

1

 

 

 

2

 

 

 

2

 

 

 

5

 

Other alternatives(3)

 

 

11

 

 

 

9

 

 

 

34

 

 

 

13

 

Other investments(4)

 

 

10

 

 

 

16

 

 

 

35

 

 

 

22

 

Subtotal

 

 

29

 

 

 

29

 

 

 

92

 

 

 

51

 

Other gains

 

 

 

 

 

 

 

 

5

 

 

 

 

Total net gain (loss) on investments(1)(2)

 

 

29

 

 

 

29

 

 

 

97

 

 

 

51

 

Interest and dividend income

 

 

15

 

 

 

22

 

 

 

35

 

 

 

33

 

Interest expense

 

 

(46

)

 

 

(52

)

 

 

(159

)

 

 

(154

)

Net interest expense

 

 

(31

)

 

 

(30

)

 

 

(124

)

 

 

(121

)

Nonoperating income (expense), as adjusted(1)(2)

 

$

(2

)

 

$

(1

)

 

$

(27

)

 

$

(70

)

(1)

Net of net income (loss) attributable to NCI.  Amounts also include net gain (loss) on consolidated VIEs.2020.

((3)2)

Management believes nonoperating income (expense), as adjusted, is an effective measure for reviewing BlackRock’s nonoperating contribution to results. See Non-GAAP Financial Measures for further information on non-GAAP financial measures for the three and nine months ended September 30, 2017 and 2016.

(3)

Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions.

((4)4)

Amounts primarily include net gains (losses) related to unhedged equity, and fixed income and multi-asset seed investments.

(5)

Amount for the six months ended June 30, 2020 includes a nonoperating pre-tax gain of approximately $240 million in connection with a recapitalization of iCapital. Additional amounts primarily include noncash pre-tax gains (losses) related to the revaluation of certain other corporate minority investments.

 

Interest expense for the nine months ended September 30, 2017 included a “make-whole” redemption premium of $14 million related to refinancing the $700 million 6.25% notes, which were repaid prior to their September 2017 maturity.


 

Income Tax Expense

 

 

GAAP

 

 

As Adjusted

 

GAAP

 

 

As Adjusted(1)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

(in millions)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating income(1)

 

$

1,394

 

 

$

1,209

 

 

$

3,783

 

 

$

3,345

 

 

$

1,398

 

 

$

1,216

 

 

$

3,795

 

 

$

3,442

 

$

1,931

 

 

$

1,406

 

 

$

3,476

 

 

$

2,090

 

 

$

1,931

 

 

$

1,406

 

 

$

3,476

 

 

$

2,679

 

Total nonoperating income (expense)(1)(2)

 

 

(2

)

 

 

(1

)

 

 

(27

)

 

 

(70

)

 

 

(2

)

 

 

(1

)

 

 

(27

)

 

 

(70

)

$

101

 

 

$

169

 

 

$

73

 

 

$

277

 

 

$

101

 

 

$

169

 

 

$

73

 

 

$

155

 

Income before income taxes(2)

 

$

1,392

 

 

$

1,208

 

 

$

3,756

 

 

$

3,275

 

 

$

1,396

 

 

$

1,215

 

 

$

3,768

 

 

$

3,372

 

$

2,032

 

 

$

1,575

 

 

$

3,549

 

 

$

2,367

 

 

$

2,032

 

 

$

1,575

 

 

$

3,549

 

 

$

2,834

 

Income tax expense

 

$

445

 

 

$

333

 

 

$

1,090

 

 

$

954

 

 

$

427

 

 

$

361

 

 

$

1,074

 

 

$

1,010

 

$

654

 

 

$

361

 

 

$

972

 

 

$

347

 

 

$

483

 

 

$

361

 

 

$

801

 

 

$

588

 

Effective tax rate

 

 

32.0

%

 

 

27.6

%

 

 

29.0

%

 

 

29.1

%

 

 

30.6

%

 

 

29.7

%

 

 

28.5

%

 

 

30.0

%

 

32.2

%

 

 

22.9

%

 

 

27.4

%

 

 

14.7

%

 

 

23.8

%

 

 

22.9

%

 

 

22.6

%

 

 

20.7

%

 

(1)

See As adjusted items are described in more detail in Non-GAAP Financial Measures for further information on and reconciliation of as adjusted items.Measures.

((2)2)

Net of net income (loss) attributable to NCI.

2017.  The2021. Income tax expense for the three and ninesix months ended SeptemberJune 30, 2017 income tax2021 included $171 million noncash net expense (GAAP) reflected net noncash expense of $19 million related to the revaluation of certain deferred income tax assets and liabilities as a result of domestic state and locallegislation enacted in the UK increasing its corporate tax changes.

The ninerate. Income tax expense for the six months ended SeptemberJune 30, 2017 income tax expense (GAAP)2021, also included an $81reflected $39 million of discrete tax benefit, reflecting the adoption of new accounting guidancebenefits related to stock-based compensation awards that vested in the first quarter of 2017.  See Note 2, Significant Accounting Policies, for further information.2021.

54


The as adjusted effective tax rate of 30.6%23.8% and 28.5%22.6% for the three and ninesix months ended SeptemberJune 30, 2017,2021, respectively, excluded the net$171 million noncash deferred tax revaluation noncash expense of $19 million mentioned above as it will not have a cash flow impact and to ensure comparability among periods presented.

2016.  The three and nine2020. Income tax expense for the six months ended SeptemberJune 30, 2016 income tax expense (GAAP) reflected:

2020, included a $26 million net noncashdiscrete tax benefit primarilyof $241 million recognized in connection with the Charitable Contribution and $66 million of discrete tax benefits, including benefits related to the revaluation of certain deferred income tax liabilities as a result of legislation enactedstock-based compensation awards that vested in the United Kingdom, and domestic state and local tax changes, and

nonrecurring tax benefits, which totaled $16 million and $35 million for the three and nine months ended September 30, 2016, respectively.

first quarter of 2020.

The as adjusted effective tax rate of 29.7% and 30.0%20.7% for the three and ninesix months ended SeptemberJune 30, 2016, respectively,2020 excluded the net noncash$241 million discrete tax benefit of $26 million mentioned above, as it will not have a cash flow impact andin connection with the Charitable Contribution due to ensure comparability among periods presented.  its nonrecurring nature.

 

 


55


BALANCE SHEETSTATEMENT OF FINANCIAL CONDITION OVERVIEW

As Adjusted Balance SheetStatement of Financial Condition

The following table presents a reconciliation of the condensed consolidated statement of financial condition presented on a GAAP basis to the condensed consolidated statement of financial condition, excluding the impact of separate account assets and separate account collateral held under securities lending agreements (directly related to lending separate account securities) and separate account liabilities and separate account collateral liabilities under securities lending agreements and consolidated sponsored investment funds, including consolidated VIEs.products (“CIPs”).

The Company presents the as adjusted balance sheetstatement of financial condition as additional information to enable investors to exclude certain assets that have equal and offsetting liabilities or noncontrolling interestsNCI that ultimately do not have an impact on stockholders’ equity or cash flows. Management views the as adjusted balance sheet, astatement of financial condition, which contains non-GAAP financial measure,measures, as an economic presentation of the Company’s total assets and liabilities; however, it does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Separate Account Assets and Liabilities and Separate Account Collateral Held under Securities Lending Agreements

Separate account assets are maintained by BlackRock Life Limited, a wholly owned subsidiary of the Company that is a registered life insurance company in the United Kingdom,UK, and represent segregated assets held for purposes of funding individual and group pension contracts. The Company records equal and offsetting separate account liabilities. The separate account assets are not available to creditors of the Company and the holders of the pension contracts have no recourse to the Company’s assets. The net investment income attributable to separate account assets accrues directly to the contract owners and is not reported on the condensed consolidated statements of income. While BlackRock has no economic interest in these assets or liabilities, BlackRock earns an investment advisory fee for the service of managing these assets on behalf of its clients.

In addition, the Company records on its condensed consolidated statements of financial condition the separate account collateral received under BlackRock Life Limited securities lending arrangements as its own asset in addition to an equal and offsetting separate account collateral liability for the obligation to return the collateral. The collateral is not available to creditors of the Company, and the borrowers under the securities lending arrangements have no recourse to the Company’s assets.

Consolidated Sponsored Investment FundsProducts

The Company consolidates certain sponsored investment fundsproducts accounted for as variable interest entities (“VIEs”) and voting rights entities (“VREs”) and VIEs,, (collectively, “Consolidated Sponsored Investment Funds”“consolidated sponsored investment products” or “CIPs”). See Note 2, Significant Accounting Policies, in the notes to the consolidated financial statements contained in the 20162020 Form 10-K for more information on the Company’s consolidation policy.


56


The Company cannot readily access cash and cash equivalents or other assets held by Consolidated Sponsored Investment FundsCIPs to use in its operating activities. In addition, the Company cannot readily sell investments held by Consolidated Sponsored Investment FundsCIPs in order to obtain cash for use in the Company’s operations.

 

 

September 30, 2017

 

 

June 30, 2021

 

(in millions)

 

GAAP

Basis

 

 

Separate

Account

Assets/

Collateral(1)

 

 

Consolidated Sponsored Investment Funds(2)

 

 

As

Adjusted

 

 

GAAP

Basis

 

 

Separate

Account

Assets/

Collateral(1)

 

 

CIPs(2)

 

 

As

Adjusted

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,165

 

 

$

 

 

$

63

 

 

$

6,102

 

 

$

6,416

 

 

$

 

 

$

280

 

 

$

6,136

 

Accounts receivable

 

 

3,183

 

 

 

 

 

 

 

 

 

3,183

 

 

 

3,790

 

 

 

 

 

 

 

 

 

3,790

 

Investments

 

 

1,928

 

 

 

 

 

 

28

 

 

 

1,900

 

 

 

7,595

 

 

 

 

 

 

2,308

 

 

 

5,287

 

Assets of consolidated VIEs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

82

 

 

 

 

 

 

82

 

 

 

 

Investments

 

 

1,286

 

 

 

 

 

 

238

 

 

 

1,048

 

Other assets

 

 

46

 

 

 

 

 

 

46

 

 

 

 

Separate account assets and collateral held

under securities lending agreements

 

 

175,369

 

 

 

175,369

 

 

 

 

 

 

 

 

 

120,042

 

 

 

120,042

 

 

 

 

 

 

 

Other assets(3)

 

 

1,882

 

 

 

 

 

 

8

 

 

 

1,874

 

 

 

5,243

 

 

 

 

 

 

121

 

 

 

5,122

 

Subtotal

 

 

189,941

 

 

 

175,369

 

 

 

465

 

 

 

14,107

 

 

 

143,086

 

 

 

120,042

 

 

 

2,709

 

 

 

20,335

 

Goodwill and intangible assets, net

 

 

30,626

 

 

 

 

 

 

 

 

 

30,626

 

 

 

33,876

 

 

 

 

 

 

 

 

 

33,876

 

Total assets

 

$

220,567

 

 

$

175,369

 

 

$

465

 

 

$

44,733

 

 

$

176,962

 

 

$

120,042

 

 

$

2,709

 

 

$

54,211

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued compensation and benefits

 

$

1,614

 

 

$

 

 

$

 

 

$

1,614

 

 

$

1,704

 

 

$

 

 

$

 

 

$

1,704

 

Accounts payable and accrued liabilities

 

 

1,652

 

 

 

 

 

 

 

 

 

1,652

 

 

 

1,238

 

 

 

 

 

 

 

 

 

1,238

 

Liabilities of consolidated VIEs

 

 

319

 

 

 

 

 

 

319

 

 

 

 

Borrowings

 

 

5,000

 

 

 

 

 

 

 

 

 

5,000

 

 

 

6,491

 

 

 

 

 

 

 

 

 

6,491

 

Separate account liabilities and collateral

liabilities under securities lending agreements

 

 

175,369

 

 

 

175,369

 

 

 

 

 

 

 

 

 

120,042

 

 

 

120,042

 

 

 

 

 

 

 

Deferred income tax liabilities(4)

 

 

4,966

 

 

 

 

 

 

 

 

 

4,966

 

 

 

3,907

 

 

 

 

 

 

 

 

 

3,907

 

Other liabilities

 

 

1,230

 

 

 

 

 

 

(229

)

 

 

1,459

 

 

 

5,190

 

 

 

 

 

 

429

 

 

 

4,761

 

Total liabilities

 

 

190,150

 

 

 

175,369

 

 

 

90

 

 

 

14,691

 

 

 

138,572

 

 

 

120,042

 

 

 

429

 

 

 

18,101

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

30,042

 

 

 

 

 

 

 

 

 

30,042

 

Total BlackRock, Inc. stockholders’ equity

 

 

36,033

 

 

 

 

 

 

 

 

 

36,033

 

Noncontrolling interests

 

 

375

 

 

 

 

 

 

375

 

 

 

 

 

 

2,357

 

 

 

 

 

 

2,280

 

 

 

77

 

Total equity

 

 

30,417

 

 

 

 

 

 

375

 

 

 

30,042

 

 

 

38,390

 

 

 

 

 

 

2,280

 

 

 

36,110

 

Total liabilities and equity

 

$

220,567

 

 

$

175,369

 

 

$

465

 

 

$

44,733

 

 

$

176,962

 

 

$

120,042

 

 

$

2,709

 

 

$

54,211

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amounts represent segregated client assets generating advisory feesand related liabilities, in which BlackRock has no economic interest or liability.interest. BlackRock earns an investment advisory fee for the service of managing these assets on behalf of its clients.

(2)

Amounts represent the portion of assets and liabilities of Consolidated Sponsored Investment FundsCIPs attributable to NCI.

(3)

Amounts include property and equipment and other assets.

(4)

Amount includesAmounts include approximately $5.6$4.4 billion of deferred income tax liabilities related to goodwill and intangibles.

The following discussion summarizes the significant changes in assets and liabilities on a GAAP basis. Please see the condensed consolidated statements of financial condition as of SeptemberJune 30, 20172021 and December 31, 20162020 contained in Part I, Item 1 of this filing. The discussion does not include changes related to assets and liabilities that are equal and offsetting and have no impact on BlackRock’s stockholders’ equity.

Assets.   Cash and cash equivalents at SeptemberJune 30, 20172021 and December 31, 20162020 included $73$280 million and $53$206 million, respectively, of cash held by consolidated VREsCIPs (see Liquidity and Capital Resources for details on the change in cash and cash equivalents during the ninesix months ended SeptemberJune 30, 2017)2021).

Accounts receivable at SeptemberJune 30, 20172021 increased $833$255 million from December 31, 20162020, primarily due to higher base and performance fee receivables. Investments, including the impact of CIPs, increased $676 million from December 31, 2020 (for more information see Investments herein). Goodwill and intangible assets increased $1,062 million from December 31, 2020, primarily due to the Aperio Transaction, partially offset by amortization of intangible assets. Other assets (including property and equipment) increased $1,363 million from December 31, 2020, primarily due to an increase in unit trust receivables (substantially offset by an increase in unit trust payables recorded within accounts payable and accruedother liabilities) and higher BlackRock mutual funds, iShares ETFs and performance fee receivables. Investments were $1,928 million at September 30, 2017 (for more information see Investments herein). Goodwill and intangible assets increased $145 million from December 31, 2016, primarily due to the First Reserve Transaction and Cachematrix Transaction, partially offset by $77 million of amortization of intangible assets. Other assets (including property and equipment) increased $258 million from December 31, 2016, primarily related to an increase in current taxes receivable, certain strategic investments and other assets.receivable.


57


Liabilities.    Accrued compensation and benefits at SeptemberJune 30, 20172021 decreased $266$795 million from December 31, 2016,2020, primarily due to 20162020 incentive compensation cash payments in the first quarter of 2017,2021, partially offset by 20172021 incentive compensation accruals. Accounts payable and accrued liabilities at SeptemberJune 30, 2017 increased $5582021 decreased $210 million from December 31, 20162020, primarily due to increased accruals. Other liabilities increased $1,498 million from December 31, 2020, primarily due to higher unit trust payables (substantially offset by an increase in unit trust receivables recorded within accounts receivable).

other assets) and higher other liabilities of CIPs. Net deferred income tax liabilities at SeptemberJune 30, 20172021 increased $126$234 million partiallyfrom December 31, 2020, primarily due to the Aperio Transaction and the effects of temporary differences associated with stock-based compensation and intangibles. The change also reflects the revaluation of certain deferred income tax liabilities as a result of domestic state and localdue to tax changes. Other liabilities increased $223 million from December 31, 2016, primarily related to an increaselegislation enacted in contingent liabilities related to the First Reserve Transaction, uncertain tax positions, and other operating liabilities.UK.

Investments and Investments of Consolidated VIEs

The Company’s investments and investments of consolidated VIEs (collectively, “Total Investments”) were $1,928$7,595 million and $1,286$6,919 million respectively, at SeptemberJune 30, 2017. Total2021 and December 31, 2020, respectively. Investments include consolidated investments held by sponsored investment fundsCIPs accounted for as VREs and VIEs. Management reviews BlackRock’s Total Investmentsinvestments on an “economic” basis, which eliminates the portion of Total Investmentsinvestments that does not impact BlackRock’s book value or net income attributable to BlackRock. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

The Company presents Total Investments,investments, as adjusted, to enable investors to understand the portion of Total Investmentsinvestments that is owned by the Company, net of NCI, as a gauge to measure the impact of changes in net nonoperating income (expense) on investments to net income (loss) attributable to BlackRock.

The Company further presents net “economic” investment exposure, net of deferred compensation investments and hedged investments, to reflect another helpful measure for investors.  The economic impact of Total Investments held pursuant to deferred compensation arrangements is offset by a change in compensation expense. The impact of certain investments is substantially mitigated by swap hedges. Carried interest capital allocations are excluded as there is no impact to BlackRock’s stockholders’ equity until such amounts are realized as performance fees. Finally, the Company’s regulatory investment in Federal Reserve Bank stock, which is not subject to market or interest rate risk, is excluded from the Company’s net economic investment exposure.

58


 

 

 

September 30,

 

 

December 31,

 

(in millions)

 

2017

 

 

2016

 

Investments, GAAP

 

$

1,928

 

 

$

1,595

 

Investments held by consolidated VIEs, GAAP

 

 

1,286

 

 

 

1,008

 

Total Investments

 

 

3,214

 

 

 

2,603

 

Investments held by consolidated VIEs

 

 

(1,286

)

 

 

(1,008

)

Investments held by consolidated VREs

 

 

(507

)

 

 

(465

)

Net interest in consolidated VREs

 

 

479

 

 

 

444

 

Net interest in consolidated VIEs(1)

 

 

1,048

 

 

 

840

 

Total Investments, as adjusted

 

 

2,948

 

 

 

2,414

 

Federal Reserve Bank stock

 

 

(90

)

 

 

(89

)

Deferred compensation investments

 

 

(58

)

 

 

(66

)

Hedged investments

 

 

(538

)

 

 

(614

)

Carried interest (VIEs/VREs)

 

 

(280

)

 

 

(126

)

Total “economic” investment exposure

 

$

1,982

 

 

$

1,519

 

 

 

June 30,

 

 

December 31,

 

(in millions)

 

2021

 

 

2020

 

Investments, GAAP

 

$

7,595

 

 

$

6,919

 

Investments held by CIPs

 

 

(5,282

)

 

 

(4,976

)

Net interest in CIPs(1)

 

 

2,974

 

 

 

2,490

 

Investments, as adjusted

 

 

5,287

 

 

 

4,433

 

Federal Reserve Bank stock

 

 

(95

)

 

 

(94

)

Deferred compensation investments

 

 

 

 

 

(6

)

Hedged investments

 

 

(863

)

 

 

(833

)

Carried interest

 

 

(1,213

)

 

 

(627

)

Total “economic” investment exposure(2)

 

$

3,116

 

 

$

2,873

 

 

(1)

Amount includes $260 million ofAmounts include carried interest (VIEs) as of September$1.2 billion and $604 million at June 30, 20172021 and $108 million as of December 31, 2016,2020, respectively, which has no impact on the Company’s “economic” investment exposure.

(2)

Amounts exclude corporate minority investments included in other assets on the condensed consolidated statements of financial condition.


 

The following table represents the carrying value of the Company’s economic investment exposure, by asset type, at SeptemberJune 30, 20172021 and December 31, 2016:2020:

 

 

September 30,

 

 

December 31,

 

 

June 30,

 

 

December 31,

 

(in millions)

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Equity(1)

 

$

1,045

 

 

$

835

 

Fixed income(2)

 

 

788

 

 

 

958

 

Multi-asset(3)

 

 

117

 

 

 

127

 

Alternatives:

 

 

 

 

 

 

 

 

Private equity

 

$

333

 

 

$

334

 

 

 

596

 

 

 

418

 

Real assets

 

 

304

 

 

 

94

 

 

 

261

 

 

 

251

 

Other alternatives(1)

 

 

254

 

 

 

245

 

Other investments(2)

 

 

1,091

 

 

 

846

 

Other alternatives(4)

 

 

309

 

 

 

284

 

Alternatives subtotal

 

 

1,166

 

 

 

953

 

Total “economic” investment exposure

 

$

1,982

 

 

$

1,519

 

 

$

3,116

 

 

$

2,873

 

 

(1)

Other alternatives include distressed credit/mortgageEquity includes unhedged seed investments in equity mutual funds/opportunistic fundsstrategies and hedge funds/funds of hedge funds.equity securities.

(2)

Other investments primarily includeFixed income includes unhedged seed investments in fixed income equity and multi-asset mutual funds/strategies, as well as U.K.bank loans and UK government securities, primarily held for regulatory purposes.

(3)

Multi-asset includes unhedged seed investments in multi-asset mutual funds/strategies.

(4)

Other alternatives include direct hedge fund strategies and hedge fund solutions.

As adjusted investment activity for the ninesix months ended SeptemberJune 30, 20172021 was as follows:

 

(in millions)

 

 

 

 

Six Months Ended

June 30, 2021

 

Total Investments, as adjusted, December 31, 2016

 

$

2,414

 

Investments, as adjusted, beginning balance

$

4,433

 

Purchases/capital contributions

 

 

830

 

 

721

 

Sales/maturities

 

 

(603

)

 

(591

)

Distributions(1)

 

 

(67

)

 

(88

)

Market appreciation(depreciation)/earnings from equity method investments

 

 

183

 

 

253

 

Carried interest capital allocations/(distributions)/acquired

 

 

154

 

Carried interest capital allocations/(distributions)

 

586

 

Other(2)

 

 

37

 

 

(27

)

Total Investments, as adjusted, September 30, 2017

 

$

2,948

 

Investments, as adjusted, ending balance

$

5,287

 

 

(1)

(1)  Amount includes distributions representing return of capital and return on investments.

(2)  Amount includes the impact of foreign exchange movements.

Amount includes distributions representing return of capital and return on investments.

 

 


59


LIQUIDITY AND CAPITAL RESOURCES

BlackRock Cash Flows Excluding the Impact of Consolidated Sponsored Investment FundsCIPs

The condensed consolidated statements of cash flows include the cash flows of the Consolidated Sponsored Investment Funds.CIPs. The Company uses an adjusted cash flow statement, which excludes the impact of Consolidated Sponsored Investment Funds,CIPs, as a supplemental non-GAAP measure to assess liquidity and capital requirements. The Company believes that its cash flows, excluding the impact of the Consolidated Sponsored Investment Funds,CIPs, provide investors with useful information on the cash flows of BlackRock relating to its ability to fund additional operating, investing and financing activities. BlackRock’s management does not advocate that investors consider such non-GAAP measures in isolation from, or as a substitute for, its cash flows presented in accordance with GAAP.

The following table presents a reconciliation of the condensed consolidated statements of cash flows presented on a GAAP basis to the condensed consolidated statements of cash flows, excluding the impact of the cash flows of Consolidated Sponsored Investment Funds:CIPs:

 

(in millions)

 

GAAP

Basis

 

 

Impact on

Cash Flows

of Consolidated

Sponsored Investment Funds

 

 

Cash Flows

Excluding

Impact of

Consolidated

Sponsored Investment Funds

 

Cash and cash equivalents, December 31, 2016

 

$

6,091

 

 

$

53

 

 

$

6,038

 

Cash flows from operating activities

 

 

2,486

 

 

 

(252

)

 

 

2,738

 

Cash flows from investing activities

 

 

(490

)

 

 

(52

)

 

 

(438

)

Cash flows from financing activities

 

 

(2,083

)

 

 

324

 

 

 

(2,407

)

Effect of exchange rate changes on cash and cash

   equivalents

 

 

161

 

 

 

 

 

 

161

 

Net change in cash and cash equivalents

 

 

74

 

 

 

20

 

 

 

54

 

Cash and cash equivalents, September 30, 2017

 

$

6,165

 

 

$

73

 

 

$

6,092

 

(in millions)

GAAP

Basis

 

 

Impact on

Cash Flows

of CIPs

 

 

Cash Flows

Excluding

Impact of

CIPs

 

Cash, cash equivalents and restricted cash, December 31, 2020

$

8,681

 

 

$

206

 

 

$

8,475

 

Net cash provided by/(used in) operating activities

 

1,253

 

 

 

(665

)

 

 

1,918

 

Net cash provided by/(used in) investing activities

 

(1,435

)

 

 

(39

)

 

 

(1,396

)

Net cash provided by/(used in) financing activities

 

(2,066

)

 

 

778

 

 

 

(2,844

)

Effect of exchange rate changes on cash, cash equivalents

   and restricted cash

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash, cash equivalents and restricted cash

 

(2,248

)

 

 

74

 

 

 

(2,322

)

Cash, cash equivalents and restricted cash, June 30, 2021

$

6,433

 

 

$

280

 

 

$

6,153

 

 

Sources of BlackRock’s operating cash primarily include investment advisory, administrationbase fees and securities lending revenue, performance fees, revenue from technology and risk management services revenue, advisory and other revenue and distribution fees. BlackRock uses its cash to pay all operating expense,expenses, interest and principal on borrowings, income taxes, dividends on BlackRock’s capital stock, repurchases of the Company’s stock, acquisitions, capital expenditures and purchases of co-investments and seed investments.

 

For details of the Company’s GAAP cash flows from operating, investing and financing activities, see the Condensed Consolidated Statementscondensed consolidated statements of Cash Flowscash flows contained in Part I, Item 1 of this filing.

Cash flows fromprovided by/(used in) operating activities, excluding the impact of Consolidated Sponsored Investment Funds,CIPs, primarily include the receipt of investment advisory and administrationbase fees, securities lending revenue and performance fees offset by the payment of operating expenses incurred in the normal course of business, including year-end incentive compensation accrued for in the prior year.

Cash outflows fromflows used in investing activities, excluding the impact of Consolidated Sponsored Investment Funds,CIPs, for the ninesix months ended SeptemberJune 30, 20172021 were $438 million$1.4 billion and primarily reflected $404 million$1.1 billion of investment purchases, $100cash outflows related to the Aperio Transaction, $178 million of purchases of property and equipment $73and $176 million related to the First Reserve Transaction and $29 million related to the Cachematrix Transaction,of net investment purchases, partially offset by $142$55 million of net proceedsdistributions of capital from sales and maturities of certain investments.equity method investees.

Cash outflows fromflows used in financing activities, excluding the impact of Consolidated Sponsored Investment Funds,CIPs, for the ninesix months ended SeptemberJune 30, 20172021 were $2,407 million,$2.8 billion, primarily resulting from $1,133$1.3 billion of cash dividend payments and $873 million of share repurchases, including $825$600 million in open market transactions and $308$273 million of employee tax withholdings related to employee stock transactions, $1,259 million of cash dividend payments and $700$750 million of repayments of long-term borrowings, partially offset by $697 million of proceeds from issuance of long-term borrowings.


60


The Company manages its financial condition and funding to maintain appropriate liquidity for the business. Liquidity resources at SeptemberJune 30, 20172021 and December 31, 20162020 were as follows:

 

 

September 30,

 

 

December 31,

 

June 30,

 

 

December 31,

 

(in millions)

 

2017

 

 

2016

 

2021

 

 

2020

 

Cash and cash equivalents(1)

 

$

6,165

 

 

$

6,091

 

$

6,416

 

 

$

8,664

 

Cash and cash equivalents held by consolidated VREs(2)

 

 

(73

)

 

 

(53

)

Cash and cash equivalents held by CIPs(2)

 

(280

)

 

 

(206

)

Subtotal

 

 

6,092

 

 

 

6,038

 

 

6,136

 

 

 

8,458

 

Credit facility – undrawn

 

 

4,000

 

 

 

4,000

 

 

4,400

 

 

 

4,000

 

Total liquidity resources(3)

 

$

10,092

 

 

$

10,038

 

$

10,536

 

 

$

12,458

 

 

 

 

 

 

 

 

 

(1)

The percentage of cash and cash equivalents held by the Company’s U.S.US subsidiaries was approximately 40% and 50%55% at SeptemberJune 30, 20172021 and December 31, 2016,2020, respectively. See Net Capital Requirements herein for more information on net capital requirements in certain regulated subsidiaries.

(2)

The Company cannot readily access such cash and cash equivalents to use in its operating activities.

(3)

Amount at December 31, 2016 does not reflect year-end incentive compensation accruals of approximately $1.3 billion, which were paid in the first quarter of 2017.

Total liquidity resources increased $54 milliondecreased $1.9 billion during the ninesix months ended SeptemberJune 30, 2017,2021, primarily reflecting cash flows from operating activities,payments of 2020 year-end incentive awards, cash dividend payments of $1.3 billion, approximately $1.1 billion of cash outflow related to the Aperio Transaction, share repurchases of $873 million and repayments of borrowings of $750 million, partially offset by cash paymentsflows from other operating activities and a $400 million increase in the aggregate commitment amount of 2016 year-end incentive awards, share repurchases of $1,133 million and cash dividend payments of $1,259 million.  the credit facility.

A significant portion of the Company’s $2,948$5,287 million of Total Investments,investments, as adjusted, is illiquid in nature and, as such, cannot be readily convertible to cash.

Share Repurchases.  In January 2017,  During the Board of Directors approved an increase insix months ended June 30, 2021, the Company repurchased 0.8 million common shares that may be repurchased under the Company’s existing share repurchase program to allow for the repurchase of an additional 6 million shares for a total up to 9 million shares of BlackRock common stock.

The Company repurchased 2.1 million common shares in open market transactions under the share repurchase program for approximately $825 million during the nine months ended September$600 million. At June 30, 2017. At September 30, 2017,2021, there were 6.94.3 million shares still authorized to be repurchased.repurchased under the program.

Net Capital Requirements.   The Company is required to maintain net capital in certain regulated subsidiaries within a number of jurisdictions, which is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries of the Company may be restricted in their ability to transfer cash between different jurisdictions and to their parents. Additionally, transfers of cash between international jurisdictions including repatriation to the United States, may have adverse tax consequences that could discourage such transfers.

 

BlackRock Institutional Trust Company, N.A. (“BTC”) is chartered as a national bank that does not accept client deposits or make commercial loans and whose powers are limited to trust and other fiduciary activities. BTC provides investment management and other fiduciary services, including investment advisory and securities lending agency services, to institutional clients. BTC is subject to regulatory capital and liquid asset requirements administered by the US Office of the Comptroller of the Currency.

At SeptemberJune 30, 20172021 and December 31, 2016,2020, the Company was required to maintain approximately $1.7$2.4 billion and $1.4$2.2 billion, respectively, in net capital in certain regulated subsidiaries, including BTC, entities regulated by the Financial Conduct Authority and Prudential Regulation Authority in the United Kingdom,UK, and the Company’s broker-dealers. The Company was in compliance with all applicable regulatory net capital requirements.


Short-Term Borrowings

20172021 Revolving Credit Facility.    The   In March 2021, the Company’s credit facility has anwas amended to increase the aggregate commitment amount of $4.0to $4.4 billion and was amended in April 2017 to extend the maturity date to April 2022March 2026 (the “2017“2021 credit facility”). In addition, the amendment incorporated certain sustainability-linked pricing metrics into the agreement. Specifically, the Company’s applicable interest rate and commitment fee are subject to upward or downward adjustments on an annual basis if the Company achieves, or fails to achieve, certain specified targets. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate, or an applicable replacement benchmark, plus a spread. The 20172021 credit facility permits the Company to request up to an additional $1.0 billion of borrowing capacity, subject to lender credit approval, increasing the overall size of the 20172021 credit facility to an aggregate principal amount not to exceed $5.0$5.4 billion. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate plus a spread. The 20172021 credit facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of less than 1 to 1 at SeptemberJune 30, 2017.2021. The 20172021 credit facility provides back-up liquidity to fund ongoing working capital for general corporate purposes and various investment opportunities. At SeptemberJune 30, 2017,2021, the Company had no amount outstanding under the 20172021 credit facility.

61


Commercial Paper Program.   The Company can issue unsecured commercial paper notes (the “CP Notes”) on a private-placement basis up to a maximum aggregate amount outstanding at any time of $4.0$4 billion. The commercial paper program is currently supported by the 20172021 credit facility. At SeptemberJune 30, 2017,2021, BlackRock had no CP Notes outstanding.

Long-Term Borrowings

At SeptemberJune 30, 2017,2021, the principal amount of long-term borrowings outstanding was $5.0$6.5 billion. See Note 12, 15, Borrowings, in the 20162020 Form 10-K for more information on borrowings outstanding as of December 31, 2016.

In March 2017, the Company issued $700 million in aggregate principal amount of 3.20% senior unsecured and unsubordinated notes maturing on March 15, 2027 (the “2027 Notes”). Interest is payable semi-annually on March 15 and September 15 of each year, commencing September 15, 2017, and is approximately $22 million per year. The 2027 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a “make-whole” redemption price.  The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2027 Notes.

In April 2017, the net proceeds of the 2027 Notes were used to fully repay $700 million in aggregate principal amount outstanding of 6.25% notes prior to their maturity in September 2017.2020.

During the ninesix months ended SeptemberJune 30, 2017,2021, the Company paid approximately $149$108 million of interest on long-term borrowings. Future principal repayments and interest requirements at SeptemberJune 30, 20172021 were as follows:

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

Principal

 

 

Interest

 

 

Total

Payments

 

 

Principal

 

 

Interest

 

 

Total Payments

 

Remainder of 2017

 

$

 

 

$

54

 

 

$

54

 

2018

 

 

 

 

 

175

 

 

 

175

 

2019

 

 

1,000

 

 

 

175

 

 

 

1,175

 

2020

 

 

 

 

 

125

 

 

 

125

 

2021

 

 

750

 

 

 

109

 

 

 

859

 

Remainder of 2021

 

$

 

 

$

82

 

 

$

82

 

2022

 

 

750

 

 

 

80

 

 

 

830

 

 

 

750

 

 

 

161

 

 

 

911

 

2023

 

 

 

 

 

148

 

 

 

148

 

2024

 

 

1,000

 

 

 

131

 

 

 

1,131

 

2025(1)

 

 

830

 

 

 

113

 

 

 

943

 

2026

 

 

 

 

 

103

 

 

 

103

 

Thereafter(1)

 

 

2,528

 

 

 

184

 

 

 

2,712

 

 

 

3,950

 

 

 

283

 

 

 

4,233

 

Total

 

$

5,028

 

 

$

902

 

 

$

5,930

 

 

$

6,530

 

 

$

1,020

 

 

$

7,550

 

__________________________

(1(1))

The amount of principal and interest payments for the 2025 Notes (issued in Euros) represents the expected payment amounts using the EUR/USD foreign exchange ratesrate as of SeptemberJune 30, 2017.2021.

In May 2021, the Company fully repaid $750 million of 4.25% notes at maturity.

Commitments and Contingencies

Investment Commitments.    At SeptemberJune 30, 2017,2021, the Company had $328$930 million of various capital commitments to fund sponsored investment funds,products, including consolidated VIEs.CIPs. These fundsproducts include private equity funds, real assets funds and opportunistic funds. This amount excludes additional commitments made by consolidated funds of funds to underlying third-party funds as third-party noncontrolling interest holders have the legal obligation to fund the respective commitments of such funds of funds. Generally, the timing of the funding of these commitments is unknown and the commitments are callable on demand at any time prior to the expiration of the commitment. These unfunded commitments are not recorded on the condensed consolidated statements of financial condition. These commitments do not include potential future commitments approved by the Company that are not yet legally binding. The Company intends to make additional capital commitments from time to time to fund additional investment products for, and with, its clients.

Lease Commitment.  In May 2017, the Company entered into an agreement with 50 HYMC Owner LLC, for the lease of approximately 847,000 square feet of office space located at 50 Hudson Yards, New York, New York. The term of the lease is twenty years from the date that rental payments begin, expected to occur in May 2023, with the option to renew for a specified term.

62


Future minimum commitments of annual base rental payments under this operating lease are as follows:

(in millions)

 

 

 

Year

Amount

 

2023

$

34

 

2024

 

51

 

2025

 

51

 

2026

 

51

 

2027

 

51

 

Thereafter

 

1,007

 

Total

$

1,245

 


Contingent Payments Related to Business Acquisitions.    In connection with certain acquisitions, BlackRock is required to make contingent payments, subject to achieving specified performance targets, which may include revenue related tofrom acquired contracts or new capital commitments for certain products.  contracts. The fair value of the remaining aggregate contingent payments at SeptemberJune 30, 20172021 totaled $228$34 million including $125 million related to the First Reserve Transaction, and is included in other liabilities on the condensed consolidated statements of financial condition.

Carried Interest Clawback.    As a general partner in certain investment funds,products, including private equity partnerships and certain hedge funds, the Company may receive carried interest cash distributions from the partnerships in accordance with distribution provisions of the partnership agreements. The Company may, from time to time, be required to return all or a portion of such distributions to the limited partners in the event the limited partners do not achieve a return as specified in the various partnership agreements. Therefore, BlackRock records carried interest subject to such clawback provisions in Total Investments,investments, or cash/cash of consolidated VIEsand cash equivalents to the extent that it is distributed, and as a deferred carried interest liability/other liabilities of consolidated VIEsliability on its condensed consolidated statements of financial condition. Carried interest is recorded as performance fees on BlackRock’s condensed consolidated statements of income upon the earlierwhen fees are no longer probable of the termination of the investment fund or when the likelihood of clawback is considered mathematically improbable.significant reversal.

Indemnifications.   On behalf of certain clients, the Company lends securities to highly rated banks and broker-dealers. In these securities lending transactions, the borrower is required to provide and maintain collateral at or above regulatory minimums. Securities on loan are marked to market daily to determine if the borrower is required to pledge additional collateral. BlackRock has issued certain indemnificationsagreed to indemnify certain securities lending clients against potential loss resulting from a borrower’s failure to fulfill its obligations under the securities lending agreement should the value of the collateral pledged by the borrower at the time of default be insufficient to cover the borrower’s obligation under the securities lending agreement. At SeptemberThe amount of securities on loan as of June 30, 2017,2021 and subject to this type of indemnification was $297 billion. In the Company indemnified certain of its clients for their securitiesCompany’s capacity as lending loan balances of approximately $197.6 billion. The Company held, as agent, cash and securities totaling $210.6$316 billion were held as collateral for indemnified securities on loan at SeptemberJune 30, 2017.2021. The fair value of these indemnifications was not material at SeptemberJune 30, 2017.2021.

While the collateral pledged by a borrower is intended to be sufficient to offset the borrower’s obligations to return securities borrowed and any other amounts owing to the lender under the relevant securities lending agreement, in the event of a borrower default, the Company can give no assurance that the collateral pledged by the borrower will be sufficient to fulfill such obligations. If the amount of such pledged collateral is not sufficient to fulfill such obligations to a client for whom the Company has provided indemnification, BlackRock would be responsible for the amount of the shortfall. These indemnifications cover only the collateral shortfall described above, and do not in any way guarantee, assume or otherwise insure the investment performance or return of any cash collateral vehicle into which securities lending cash collateral is invested.

 


 

63


Critical Accounting Policies

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ significantly from those estimates. Management considers the following critical accounting policies important to understanding the condensed consolidated financial statements. For a summary of these and additional accounting policies see Note 2, Significant Accounting Policies, in the notes to the condensed consolidated financial statements contained in Part I, Item 1 of this filing and statements. In addition, see Critical Accounting Policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2016 Form 10-K and Note 2, Significant Accounting Policies, in the 20162020 Form 10-K for further information.

Consolidation.   In the normal course of business, the Company is the manager of various types of sponsored investment vehicles. The Company performs an analysis for investment products to determine if the product is a VIE or a VRE. Assessing whether an entity is a VIE or a VRE involves judgment and analysis. Factors considered in this assessment include the entity’s legal organization, the entity’s capital structure and equity ownership, and any related party or de facto agent implications of the Company’s involvement with the entity. Investments that are determined to be VREs are consolidated if the Company can exert control over the financial and operating policies of the investee, which generally exists if there is greater than 50% voting interest. See Note 4, Consolidated Voting Rights Entities, in the notes to the condensed consolidated financial statements for more information. Investments that are determined to be VIEs are consolidated if the Company is the primary beneficiary (“PB”) of the entity.

At September 30, 2017, BlackRock was determined to be the PB for certain investment funds that were determined to be VIEs, which required BlackRock to consolidate them. BlackRock wasis deemed to be the PB becauseof a VIE if it has the power to direct the activities that most significantly impact the entities’ economic performance and has the obligation to absorb losses or the right to receive benefits that potentially could be significant to the VIE. The Company generally consolidates VIEs in which it holds an equity ownershipeconomic interest of 10% or greater and deconsolidates such VIEs once equity ownership falls below 10%. See Note 5, Variable Interest Entities6, Consolidated Sponsored Investment Products, in the notes to the condensed consolidated financial statements for more information.

In addition to sponsored investment products, the Company consolidates an affiliated entity, which it deems to be a VRE, because it can exert control over its financial and operating policies, based on the Company’s 50.1% ownership and voting rights.  

Fair Value Measurements.   The Company’s assessment of the significance of a particular input to the fair value measurement according to the fair value hierarchy (i.e., Level 1, 2 and 3 inputs, as defined) in its entirety requires judgment and considers factors specific to the financial instrument. See Note 2, Significant Accounting Policies, in the notes to the condensed consolidated financial statements for more information on fair value measurements.

Investment Advisory Performance Fees / Carried Interest.   The Company receives investment advisory performance fees, orincluding incentive allocations (carried interest) from certain actively managed investment funds and certain separately managed accounts.SMAs. These performance fees are dependent upon exceeding specified relative or absolute investment return thresholds. Such fees are recorded upon completion of the measurement period,thresholds, which variesmay vary by product or account, and could beinclude monthly, quarterly, annuallyannual or longer.longer measurement periods.

Performance fees, including carried interest, are recognized when it is determined that they are no longer probable of significant reversal (such as upon the sale of a fund’s investment or when the amount of AUM becomes known as of the end of a specified measurement period). Given the unique nature of each fee arrangement, contracts with customers are evaluated on an individual basis to determine the timing of revenue recognition. Significant judgement is involved in making such determination. Performance fees typically arise from investment management services that began in prior reporting periods. Consequently, a portion of the fees the Company recognizes may be partially related to the services performed in prior periods that meet the recognition criteria in the current period. At each reporting date, the Company considers various factors in estimating performance fees to be recognized, including carried interest. These factors include but are not limited to whether: (1) the fees are dependent on the market and thus are highly susceptible to factors outside the Company’s influence; (2) the fees have a large number and a broad range of possible amounts; and (3) the funds or SMAs have the ability to invest or reinvest their sales proceeds.

In addition, theThe Company is allocated carried interest from certain alternative investment products upon exceeding performance thresholds. BlackRockThe Company may be required to reverse/return all, or part, of such carried interest allocationsallocations/distributions depending upon future performance of these funds. Therefore, BlackRock records carriedproducts. Carried interest subject to such clawback provisions is recorded in Total Investments,investments or cash/cash of consolidated VIEsand cash equivalents to the extent that it is distributed, on its condensed consolidated statements of financial condition. Carried interest is recorded as performance fee revenue upon the earlier of the termination of the investment fund or when the likelihood of clawback is considered mathematically improbable.


The Company records a liability for deferred carried interest liability to the extent it receives cash or capital allocations related to carried interest prior to meeting the revenue recognition criteria. At SeptemberJune 30, 20172021 and December 31, 2016,2020, the Company had $303 million$1.1 billion and $152$584 million, respectively, of deferred carried interest recorded in other liabilities/other liabilities of consolidated VIEs on the condensed consolidated statements of financial condition. A portion of the deferred carried interest liability willmay also be paid to certain employees. The ultimate timing of the recognition of performance fee revenue and related compensation expense, if any, for these products is unknown.

64


The following table presents SeeNote 16, Revenue, in the notes to the condensed consolidated financial statements for detailed changes in the deferred carried interest liability (including the portion related to consolidated VIEs)balance for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016:2020.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(in millions)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Beginning balance

 

$

280

 

 

$

131

 

 

$

152

 

 

$

143

 

Net increase (decrease) in unrealized allocations

 

 

23

 

 

 

8

 

 

 

52

 

 

 

7

 

Performance fee revenue recognized

 

 

 

 

 

(11

)

 

 

(12

)

 

 

(22

)

Acquisition

 

 

 

 

 

 

 

 

111

 

 

 

 

Ending balance

 

$

303

 

 

$

128

 

 

$

303

 

 

$

128

 

 

 

Accounting Developments

Recent Accounting Pronouncements Not Yet Adopted.

Revenue from Contracts with Customers.    In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance also changes the accounting for certain contract costs and revises the criteria for determining if an entity is acting as a principal or agent in certain arrangements. The Company continues to evaluate the impact of ASU 2014-09 on the presentation and recognition of its revenue contracts and certain contract costs. The most significant change identified to date relates to the presentation of certain distribution costs, which are currently presented net against revenues (contra-revenue) and will likely be presented as an expense on a gross basis. The Company currently expects such net gross up to annual revenue to be approximately $1 billion with a corresponding gross up to annual expense. Consequently, the Company expects its GAAP operating margin to decline upon adoption of the new guidance due to the gross up of revenue. However, it currently does not expect any material impact to its as adjusted operating margin. The Company is currently evaluating which transition method it will apply when it adopts the new revenue recognition guidance in the first quarter of 2018.

For accounting pronouncements that the Company adopted during the nine months ended September 30, 2017 and for additional recent accounting pronouncements not yet adopted, see Note 2, Significant Accounting Policies, in the condensed consolidated financial statements contained in Part I, Items 1 of this filing.


 

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

AUM Market Price Risk.BlackRock’s investment advisory and administration fees (collectively “base fees”) are primarily comprised of fees based on a percentage of the value of AUMassets under management (“AUM”) and, in some cases, performance fees expressed as a percentage of the returns realized on AUM. At SeptemberJune 30, 2017,2021, the majority of the Company’s investment advisory and administrationbase fees were based on average or period end AUM of the applicable investment funds or separate accounts. Movements in equity market prices, interest rates/credit spreads, foreign exchange rates or all three could cause the value of AUM to decline, which would result in lower investment advisory and administrationbase fees.

Corporate Investments Portfolio Risks.    As a leading investment management firm, BlackRock devotes significant resources across all of its operations to identifying, measuring, monitoring, managing and analyzing market and operating risks, including the management and oversight of its own investment portfolio. The Board of Directors of the Company has adopted guidelines for the review of investments to be made by the Company, requiring, among other things, that investments be reviewed by certain senior officers of the Company, and that certain investments may be referred to the Audit Committee or the Board of Directors, depending on the circumstances, for approval.

In the normal course of its business, BlackRock is exposed to equity market price risk, interest rate/credit spread risk and foreign exchange rate risk associated with its corporate investments.

65


BlackRock has investments primarily in sponsored investment products that invest in a variety of asset classes, including real assets, private equity and hedge funds. Investments generally are made for co-investment purposes, to establish a performance track record to hedge exposure to certain deferred compensation plans or for regulatory purposes. Currently, the Company has a seed capital hedging program in which it enters into swaps to hedge market and interest rate exposure to certain investments. At SeptemberJune 30, 2017,2021, the Company had outstanding total return swaps with an aggregate notional value of approximately $538$863 million.  At September 30, 2017, there were no outstanding interest rate swaps.

At SeptemberJune 30, 2017,2021, approximately $1.8$5.3 billion of BlackRock’s Total Investmentsinvestments were maintained in consolidated sponsored investment fundsproducts accounted for as VREsvariable interest entities and VIEs.voting rights entities. Excluding the impact of the Federal Reserve Bank stock, carried interest investments made to hedge exposure to certain deferred compensation plans and certain investments that are hedged via the seed capital hedging program, the Company’s economic exposure to its investment portfolio is $1,982 million.$3.1 billion. See Balance Sheet Overview- Investments and InvestmentsStatement of Consolidated VIEs Financial Condition Overview-Investments in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information on the Company’s Total Investments.investments.

Equity Market Price Risk.At SeptemberJune 30, 2017,2021, the Company’s net exposure to equity market price risk in its investment portfolio was approximately $816$1,276 million of the Company’s total economic investment exposure. Investments subject to market price risk include private equity and real assets investments, hedge funds and funds of funds as well as mutual funds. The Company estimates that a hypothetical 10% adverse change in market prices would result in a decrease of approximately $81.6$128 million in the carrying value of such investments.

Interest Rate/Credit Spread Risk.   At SeptemberJune 30, 2017,2021, the Company was exposed to interest-rate risk and credit spread risk as a result of approximately $1,166$1,840 million of Total Investmentsinvestments in debt securities and sponsored investment products that invest primarily in debt securities. Management considered a hypothetical 100 basis point fluctuation in interest rates or credit spreads and estimates that the impact of such a fluctuation on these investments, in the aggregate, would result in a decrease, or increase, of approximately $20.3$30 million in the carrying value of such investments.

Foreign Exchange Rate Risk.As discussed above, the Company invests in sponsored investment products that invest in a variety of asset classes. The carrying value of the total economic investment exposure denominated in foreign currencies, primarily the British pound and Euro, was $404$959 million at SeptemberJune 30, 2017.2021. A 10% adverse change in the applicable foreign exchange rates would result in approximately a $40.4$96 million decline in the carrying value of such investments.

Other Market Risks.   The Company executes forward foreign currency exchange contracts to mitigate the risk of certain foreign exchange risk movements. At SeptemberJune 30, 2017,2021, the Company had outstanding forward foreign currency exchange contracts with an aggregate notional value of approximately $1.3$2 billion.

 

 


Item 4.    Controls and Procedures

Disclosure Controls and Procedures.    Under the direction of BlackRock’s Chief Executive Officer and Chief Financial Officer, BlackRock evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, BlackRock’s Chief Executive Officer and Chief Financial Officer have concluded that BlackRock’s disclosure controls and procedures were effective.

Internal Control over Financial Reporting.    There were no changes in our internal control over financial reporting that occurred during the quarter ended SeptemberJune 30, 20172021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. In addition, there was no material impact to our internal control over financial reporting while a majority of our employees are working remotely due to the COVID-19 pandemic.  The Company is continually monitoring and assessing the COVID-19 situation to determine any potential impact on the design and operating effectiveness of our internal control over financial reporting.

 

 


 

66


PART II – OTHER INFORMATION

 

For a discussion of the Company’s legal proceedings, see Note 15, Commitments and Contingencies, in the notes to the condensed consolidated financial statements of this Form 10-Q.


Item 1A.  Risk Factors

 

From timeThe following discussion supplements the discussion of risk factors previously disclosed in BlackRock’s Annual Report on Form 10-K for the year ended December 31, 2020:

RISKS RELATED TO THE COVID-19 Pandemic

The COVID-19 pandemic may adversely affect BlackRock’s business, operations and financial condition which may cause its AUM, revenue and earnings to time, BlackRock receives subpoenas or other requests for information from various U.S. federal, state governmental and domestic and international regulatory authorities in connection with certain industry-wide or other investigations or proceedings. It is BlackRock’s policy to cooperate fully with such inquiries. The Company and certain of its subsidiaries have been named as defendants in various legal actions, including arbitrations and other litigation arising in connection with BlackRock’s activities. Additionally, BlackRock advised investment portfolios may be subject to lawsuits, any of which potentially could harmdecline.

Towards the investment returnsend of the applicable portfolio or result infirst quarter of 2020 the Company being liablepandemic began to impact BlackRock’s business. While global markets have significantly recovered since then, the portfolios for any resulting damages.

On May 27, 2014, certain purported investors in the BlackRock Global Allocation Fund, Inc. and the BlackRock Equity Dividend Fund (collectively, the “Funds”) filed a consolidated complaint (the “Consolidated Complaint”) in the U.S. District Court for the District of New Jersey against BlackRock Advisors, LLC, BlackRock Investment Management, LLC and BlackRock International Limited under the caption In re BlackRock Mutual Funds Advisory Fee Litigation. The Consolidated Complaint, which purports to be brought derivatively on behalfeffects of the Funds, alleges that the defendants violated Section 36(b) of the Investment Company Act by receiving allegedly excessive investment advisory fees from the Funds. On February 24, 2015, the same plaintiffs filed another complaint in the same court against BlackRock Investment Management, LLCpandemic are ongoing and BlackRock Advisors, LLC. The allegationscould be prolonged or worsen and legal claims in both complaints are substantially similar, with the new complaint purporting to challenge fees received by defendants after the plaintiffs filed their prior complaint. Both complaints seek, among other things, to recoverhave an ongoing adverse impact on behalf of the Funds all allegedly excessive advisory fees received by defendants in the twelve month period preceding the start of each lawsuit, along with purported lost investment returns on those amounts, plus interest. The defendants believe the claims in both lawsuits are without meritBlackRock’s business, including its operations and intend to vigorously defend the actions.  On September 25, 2017, the defendants filed a motion for summary judgment to dismiss the lawsuit.

Between November 12, 2015 and November 16, 2015, BlackRock, Inc., BlackRock Realty Advisors, Inc. (“BRA”), BlackRock US Core Property Fund, Inc. (formerly known as BlackRock Granite Property Fund, Inc.) (“Granite Fund”), and certain other Granite Fund related entities (collectively, the “BlackRock Parties”) were named as defendants in thirteen lawsuits filed in the Superior Court of the State of California for the County of Alameda arising out of the June 16, 2015 collapse of a balcony at the Library Gardens apartment complex in Berkeley, California (the “Property”). The Property is indirectly owned by the Granite Fund, which is managed by BRA. The plaintiffs also named as defendants in the lawsuits Greystar, which manages the Property, and certain other non-BlackRock related entities, including the developer of the Property, building contractors and building materials suppliers. The plaintiffs allege, among other things, that the BlackRock Parties were negligent in their ownership, control and maintenance of the Property’s balcony, and seek monetary, including punitive, damages. Additionally, on March 16, 2016, three former tenants of the Library Gardens apartment unit that experienced the balcony collapse sued the BlackRock Parties. The former tenants, who witnessed (but were not physically injured in) the accident make allegations virtually identical to those in the other previously filed actions and claim that,financial condition, as a result of, the collapse, they suffered unspecified emotional damage. Several defendants also filed cross-complaints alleging a variety of claims, including claims against the BlackRock Parties for contribution, negligence, and declaratory relief. BlackRock, Inc. believes the claims against it are without merit and intendsamong other things:

reduced AUM, resulting in lower base fees, as well as a reduction in the value of BlackRock’s investment portfolio, including its coinvestments and seed investments in sponsored investment funds;

lower alpha generation which may adversely affect future organic growth and BlackRock’s ability to generate performance fees;

reduced client and prospective client demand for BlackRock products and services and/or changing client risk preferences which may adversely affect future organic growth;

a decline in technology revenue growth as a result of extended sales cycles and longer implementation periods as clients work remotely;

negative impact of the pandemic on BlackRock’s clients, and key vendors (such as pricing providers), market participants and other third-parties with whom it does business;

the negative operational effects of an extended remote working environment, including strain on Aladdin and/or BlackRock’s other internal and external technology resources leveraged at the firm, as well as the potential for heightened operational risks, such as cybersecurity and fraud risks;

the possibility that prolonged periods away from physical office locations and daily in-person interactions with colleagues may cause members of BlackRock’s workforce to become disconnected with corporate culture and policies, which may increase operational issues arising from human error and/or individual attempts to circumvent controls due to distractions, fatigue or a lack of oversight; and

the disruption to BlackRock’s workforce due to illness and health concerns, potential limitations of its remote work environment (including any complications associated with hiring and onboarding new employees remotely), and government-imposed restrictions, laws and regulations.

The aggregate extent to vigorously defend the actions. A trial on all claims is scheduled to begin on February 5, 2018.  

On June 16, 2016, iShares Trust, BlackRock, Inc. and certain of its advisory affiliates,which COVID-19, and the directors and certain officers of the iShares ETFs were named as defendants in a purported class action lawsuit filed in California state court.  The lawsuit was filed by investors in certain iShares ETFs (the "ETFs"), and alleges the defendants violated the federal securities laws, purportedly by failing to adequately disclose in prospectuses issued by the ETFs the risks to the ETFs’ shareholders in the event of a "flash crash."  Plaintiffs seek unspecified monetary damages. The Plaintiffs’ complaint was dismissed in December 2016 and on January 6, 2017, plaintiffs filed an amended complaint. The defendants filed a motion for judgmentrelated impact on the pleadings dismissing that complaint. On September 18, 2017, the court dismissed the lawsuit.

On April 5, 2017, BlackRock, Inc., BlackRock Institutional Trust Company, N.A. (“BTC”), the BlackRock, Inc. Retirement Committee and various sub-committees, and a BlackRock employee were named as defendants in a purported class action lawsuit brought in the U.S. District Court for the Northern District of California by a former employee on behalf of all BlackRock employee 401(k) Plan (the “Plan”) participants and beneficiaries in the Plan from

67


April 5, 2011, to the present.  The lawsuit generally alleges that the defendants breached their duties towards Plan participants in violation of the Employee Retirement Income Security Act of 1974 by, among other things, offering investment options that were overly expensive, underperformed peer funds, focused disproportionately on active versus passive strategies, and were unduly concentrated with investment options managed by BlackRock.  While the complaint does not contain any specific amount in alleged damages, it claims that the purported underperformance and hidden fees cost Plan participants more than $60 million. On October 10, 2017, the plaintiffs filed an Amended Complaint, which, among other things, adds as defendants certain current and former members of the BlackRock Retirement and Investment Committees.  The Amended Complaint also includes a new purported class claim on behalf of investors in certain Collective Trust Funds (“CTFs”) managed by BTC.  Specifically, the plaintiffs allege that BTC exercised fiduciary authority over its compensation for securities lending services to the CTFs.  The defendants believe the claims in this lawsuit are without merit and intend to vigorously defend the action.

Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability arising out of regulatory matters or lawsuits will have a material effect onglobal economy, affect BlackRock’s business, results of operations and financial position, condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any recovery period, the emergence and spread of variants of the COVID-19 virus, the continuing prevalence of severe, unconstrained and/or cash flows. However, there is no assurance asescalating rates of infection in certain countries and regions, the availability, adoption and efficacy of treatments and vaccines, future actions taken by governmental authorities, central banks and other third parties (including new financial regulation and other regulatory reform) in response to whether any such pending or threatened matters will have a material effectthe pandemic, and the effects of the COVID-19 pandemic on BlackRock’s resultsproducts, clients, vendors and employees. Moreover, the effects of operations, financial position or cash flowsthe COVID-19 pandemic may heighten the other risks described in the section entitled “Risk Factors” in BlackRock’s most recent Annual Report on Form 10-K and any future reporting period. Due to uncertainties surroundingsubsequent reports filed with the outcome of these matters, management cannot reasonably estimate the possible loss or range of loss that may arise from these matters.  Securities and Exchange Commission.



68


Item 2.    Unregistered Sales of EquityEquity Securities and Use of Proceeds

During the three months ended SeptemberJune 30, 2017,2021, the Company made the following purchases of its common stock, which is registered pursuant to Section 12(b) of the Exchange Act.

 

 

 

Total Number

of Shares

Purchased

 

 

 

Average

Price Paid

per Share

 

 

Total Number of

Shares

Purchased as

Part of Publicly

Announced Plans

or Programs

 

 

Maximum

Number of

Shares that May

Yet Be

Purchased Under

the Plans or

Programs(1)

 

July 1, 2017 through July 31, 2017

 

 

198,234

 

(2)

 

$

427.31

 

 

 

183,716

 

 

 

7,407,531

 

August 1, 2017 through August 31, 2017

 

 

439,530

 

(2)

 

$

422.69

 

 

 

427,122

 

 

 

6,980,409

 

September 1, 2017 through September 30, 2017

 

 

39,343

 

(2)

 

$

419.40

 

 

 

37,753

 

 

 

6,942,656

 

Total

 

 

677,107

 

 

 

$

423.85

 

 

 

648,591

 

 

 

 

 

 

 

Total Number

of Shares

Purchased(1)

 

 

 

Average

Price Paid

per Share

 

 

Total Number of

Shares

Purchased as

Part of Publicly

Announced Plans

or Programs

 

 

Maximum

Number of

Shares that May

Yet Be

Purchased Under

the Plans or

Programs

 

April 1, 2021 through April 30, 2021

 

 

125,416

 

 

 

$

812.00

 

 

 

122,955

 

 

 

4,507,322

 

May 1, 2021 through May 31, 2021

 

 

213,765

 

 

 

$

854.22

 

 

 

212,801

 

 

 

4,294,521

 

June 1, 2021 through June 30, 2021

 

 

23,280

 

 

 

$

881.27

 

 

 

20,610

 

 

 

4,273,911

 

Total

 

 

362,461

 

 

 

$

841.35

 

 

 

356,366

 

 

 

 

 

_______________________

(1)

In January 2017, the BoardConsists of Directors authorized the repurchase of an additional 6 million shares under the Company’s existing share repurchase program for a total of up to 9 million shares of BlackRock common stock.

(2)

Includes purchases made by the Company primarily to satisfy income tax withholding obligations of employees and members of the Company’s Board of Directors related to the vesting of certain restricted stock or restricted stock unit awards and purchases made by the Company as part of the publicly announced share repurchase program.

 

 

69



Item 6.    Exhibits

 

Exhibit No.

 

Description

 

 

 

 12.13.1(1)

 

ComputationAmended and Restated Certificate of RatioIncorporation of Earnings to Fixed ChargesBlackRock

 

 

 

 31.13.2(2)

 

Section 302 CertificationCertificate of Chief Executive OfficerChange of Registered Agent and/or Registered Office

 

 

 

 31.23.3(2)

 

Section 302 CertificationAmended and Restated Bylaws of Chief Financial OfficerBlackRock

 

 

 

31.1

Section 302 Certification of Chief Executive Officer

31.2

Section 302 Certification of Chief Financial Officer

32.1

 

Section 906 Certification of Chief Executive Officer and Chief Financial Officer

 

 

 

101.INS

 

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

70


EXHIBIT INDEX

Exhibit No.

Description

 12.1

Computation of Ratio of Earnings to Fixed Charges

 31.1

Section 302 Certification of Chief Executive Officer

 31.2

Section 302 Certification of Chief Financial Officer

 32.1

Section 906 Certification of Chief Executive Officer and Chief Financial Officer

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF104

 

Cover Page Interactive Data File (formatted as Inline XBRL Taxonomy Extension Definition Linkbase Documentand contained in Exhibit 101)

(1)

Incorporated by reference to BlackRock’s Current Report on Form 8-K filed on May 28, 2021.

(2)

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase DocumentIncorporated by reference to BlackRock’s Current Report on Form 8-K filed on July 23, 2021.

 

 

 

 

71



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

BLACKROCK, INC.

 

 

(Registrant)

 

 

 

 

 

 

By:

   /s/ Gary S. Shedlin

Date: November 8, 2017August 5, 2021

 

 

   Gary S. Shedlin

 

 

 

   Senior Managing Director &

   Chief Financial Officer

   (Principal Financial Officer)

 

 

7279