BLK - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Jamie and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Incorporated First Quarter 2018 Earnings Teleconference.

Our host for today’s call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Gary S. S. Robert President, Shedlin; Counsel, General Christopher and J. Kapito; Meade. have background noise. lines been placed any prevent to mute on All After remarks, the period. question-and-answer speakers’ there will a be [Operator Instructions] Thank you. Mr. begin may conference. you Meade, your

Christopher Meade

the Good Counsel Chris I morning, Meade, everyone. of BlackRock. am General

I begin, course of BlackRock’s forward-looking actual fact course statements. we during call, call differ your statements. we remind attention you would Before this number a that of from that make these results may We may the to of the like to

the know, SEC and the today. lists of from BlackRock the has any that you BlackRock no materially does with factors reports As to update of which forward-looking filed differ duty BlackRock undertake assumes see some may statements. results not what cause we to

Gary. So I with that, to will over turn it

Gary Shedlin

morning, results everyone. to XXXX. pleasure of quarter Good for first my present It’s Chris. the Thanks,

over release will I results Before be as-adjusted results. Larry I review while both and financial primarily turn on I discloses our adjusted GAAP performance our it his to as information, business offer comments, earnings focusing to financial will and

only the we distribution a as which became financials basis. adoption change were addition recent netted on gross a revenue have FASB’s revenues XXXX X. our to certain are first new reflect January The accounting on as and expense relates of an standard against previously effective presentation recognition which presented of quarter discussed, significant In previously costs, now

a we trade February to to yield our back. The with In new concerns a related $X.X of by Despite and the flattened at made adjusted this order pull drive quarterly assemble comparisons expand results of fee a sequential higher margin. quarter business and X% filed XXXX. to and XXXX, escalating growth. retrospective we the first variety comparisons to in relate annualized and and an again volatility, global value market technology a investors consistent have generated inflows recast and quarter tax net organic reform For year-over-year and BlackRock’s organic strong asset positions up as as impact start in platform. net revenue, global approximately as year to future results base X% environments material current on cause and increased serve strong growth asset All curve to basis in and historical XXXX inflationary organic driven investment representing or simplify on and markets financials. Paced optimism and operating of global of reflected the adjusted economic fee differentiated billion resulted tensions, BlackRock a and to breadth to market the the annualized March new demonstrate growth flows. results, current a the to of $XX of industry’s the referenced leading investments helping retail this once diversification process financial us in clients in no standard quarter adopted by strong billion BlackRock long-term to gross organic growth March full long-term first January, these standard will After income corresponding growth, operating to recapped quarterly call for late reversed results U.S. X-K a

XX% associated call gains. of refinancing. the net a quarter reflected quarter. increased driven higher net per share $XX investment billion $XX with First quarter in results of Non-operating ago $X.XX, quarter by year to first Earnings for debt revenue $X.X XXXX of income effective million lower of premium while compared billion rate XX%. and $X.X in operating a results up rose included the interest of that XX% year-over-year, Recall expense a the tax operating was of expense current million

$XX million We benefit tax now is a first the and reasonable for awards related vested for the stock-based rate rate compensation to tax XX% as-adjusted discrete remainder a was that that the quarter. Our tax estimate included XXXX. XX% projected quarter during approximately of

However, consequence changes of nonrecurring the issuance items guidance to rate the additional on and of or differ enacted actual of reform of may discrete as our tax recently a effective analysis legislation. tax

last driven quarter. quarter fees over base Sequentially day lower compared were fees growth XX% to up $X.X First billion of and base fee of by reflecting organic a X% up were the X% fourth year-over-year appreciation market primarily base months. count the XX

categories expense. year-over-year related risk increased expansion remained Aladdin our by higher driven risk benefit and seasonally Continued compensation taxes expense for year-over-year create and and expense Beginning was income, expense higher benefit G&A compensation X% in additional incentive of primarily higher providing including of and promotional increase G&A incentive a both and and are wealth fees. based and adjustments, investment was XX% planned compensation, associated new lower offset our in an payroll repositioning performance of technologies professional the expense distribution due quarter, expense revenue. stock reflecting range more the both quarterly expense year-over-year lower million value result $XX fees. which momentum Wealth time again in be XX% we platform with FX offset to II, compensation Page by have on reduced a ago. Sequentially, and XXXX lower a in earnings year the growth $XX primarily up $XX we Risk seasonally re-measurement Direct we with of continued primarily $XXX invest Today’s by in costs fair grants. can up costs of of prior to across the versus million franchise. of our variety significant or XX% expenses year X G&A digital active business was headcount future. during related our a operating levels found for Cachematrix related approximately Sequentially, million compensation investments the acquisition volume Demand expense higher which our strong compensation result in higher increased year-over-year XX% product growth in partially fund expense G&A higher Total institutional impacted by including but launch as this accelerated opportunity million revenue management and iShares to associated and associated and AUM down MiFID also year-over-year, technology Aladdin Employee quarter of solutions with management resulting base was period. was and resulted compensation costs driven equity and on up severance is our and full by million from partially to over contributed of and servicing for average fees, in reflecting marketing technology growth distribution expense decreased fourth detail to or higher $XX reflecting release. and part made technology seasonal and and

XXX operating quarter margin platform quarter was up basis expense our XX.X% included active which of points first year equity as the Our adjusted ago repositioning. versus associated with

be and the efficient organic to to growth way optimizing aware continued possible. committed most in remain We margin

quarter. worth of We dividend also in to of remain our flow repurchased announced first an $XXX in million committed XX% per to additional $X.XX previously also returning excess quarterly a stock shares common and the common share We our to cash increase shareholders.

in inflows balance of intend tax Quarterly reform Board active billion consecutive capital inflows active impact of both fifth of As base with Directors coming in of our We were despite we long-term ETFs. review the our we into quarter billion strategies on for the fee the market Global XXXX management net positive index $XX the of BlackRock, finalize achieved by $X including challenging core during greater months. of long-term the and approximately $XX to plans driven inflows growth equity iShares environment. strong for quarterly organic billion net net quarter. X% generated or flows the

driven or rebalanced in were demand single inflow inflows alternative more volume billion the flows were flat the for multi-asset U.S. asset quarter. Index XX% which fixed trading performing trailing into of active than offset platform of our on momentum single of continued increased inflows in paid and the and During mutual liquidity higher the assets $XX current fund inflows institutional positively funds, in related were XX% organic clients billion into $XXX with part products. commitments ever and flows solutions driven continued by in billion driven the impacted to now the of net week flows during alternative February. an during investors, solutions income top into Retail of flows billion, de-risked, our organic the again period. billion saw positive various billion $X income were private once recent fundraising growth, and driven $X Illiquid Institutional X% income fixed performance significant quarter consecutive and infrastructure while continued outflow and and or growth billion and X-year quarters. to LDI XXXX cash annualized ETF offerings. by Equity linked fixed $X secondary elevated U.S. first liquidity from exchange have profit flows five market of by quartile by billion momentum of quarter internationally billion by periods for fund. M&A organic price inflows into income net weekly fee during of trend active repatriation and planning. were alternatives, Despite reflected environment. top of inflows transparency as highest by $X in of outflows $XX drove taking multi-asset activity into activity over the equities $X $X client a annualized U.S., active in in representing resulted European a offered multi-asset to hedge outflows billion $XX Asian by base iShares Inflows net nearly overall equity additional our raised redemption approximately to demonstrated growth active volatility, market exchange in clients Core net of fee

Overall, we first the during cash quarter, cash of we Finally, first have business the seasonal net invest market our in the differentiated made the BlackRock’s despite cash the leverage environments. to a global management for of outflows to as scale and clients. and in drove business industry which typical platform results billion various reflect our inflows $X can model, quarter strength investments build continue perform benefits in

time. With exceed to consistent in by organic remains talent that, turn I to and growth it differentiated optimizing over goal Our and Larry. technology delivering will needs over and investments clients’

Laurence Fink

technology base and any relationships results of clients set with at annualized reflect a history. our a growth January, our with people States, thank everyone the Thanks, net are representing positioned in more Europe, long-term United has a BlackRock a generated organic billion the robust morning, our $XX our having never first investment quarter risk the in been Driven us fee about of clients here than joining global in and robust than platform our of in market BlackRock’s Asia discussions inflows for is in manage and long-term I diverse recently and a the growth to and quality Gary. to ability ever. Meeting analytics call. deepen clients we deeper X% volatile organic annualized conversations Good partnerships and clients you and environment. rate their with by stronger. our more believe are in have with a a holistic broader positions diversity strong These of needs. X% more time The

rising trade historically markets uncertain the the the spike become sentiment pause about March high of volatility market of more sector many investors in tempered XXXX, equity to equity the causing or the experienced a as February investment a first headlines low XXXX, concerns in in pullback clients have technology period it and record volatility future. and war Following month over in in

hit just flattest has XX as XXXX October since shrunk In curve XX X-year addition, basis its the between and to it points. level has spread yield treasuries

is we prospects the rate While duration opportunities long-dated push rising return advantage risk of cash quarter. strategies, management in from which the to funds income, curve investors creating first saw strong fixed clients the and away in relative short of tends flat take

liquidity influenced and range both institutional retail of or index to aggressive a reform large demand for expectations of fixed and short saw clients across strong various quarter, allocation fund number index these diverse in be duration expressed Even remains repurchases. for turn economic with in M&A quarter as future global and activity either behaviors capital corporate rebalanced strategies. the over and impact debt of the and and its including more and we cross-currents strategies, market clients outflows and Clients client ongoing a of U.S. growth the increased funds. prospects inflows and tax saw large to BlackRock unconstrained income While active share total amount earnings return emerging active a

efficient and ETFs We and for also market saw strong taking utilization of both simple exposures. deemphasizing on tools equity as

drove active on equities and demand for strategies. and flows performance risk alternative Finally, assets increasing into

strategy at global risk in help platform, aware achieve investment serves diverse market harness and manage integrated that has been platform to to long-term a For and long-term clients to environments. outcomes. holistic technology clients create this BlackRock construct that portfolios all We in one

partners portfolio technology businesses. on also provide construction intermediary own to risk We their institutions management and better operate and with

in our annual to As on for growth and forms it I clients BlackRock future this in discussed my our letter the drive shareholders. long-term will foundation needs at shareholders focus our client continue of report, to strategy, our

platform those our will in steadily our enhance are of will is for continue the invested time the leader In in today. investing areas capabilities we to client of clear and leverage in our over we establish iShares, strategy we market clients. simple, value to growth market Our business and greatest full leadership the a demand have

market equity equity one market. come iShares share and Demand markets would We a and first globally clients one asset efficient share who utilize since trading $XXX volume beta ETF expect. inflows for U.S. inflows as annualized in we from the we well exposure drove as clients February’s have of have and net flows a liquid year-to-date the performed is once in global European growth captured growing as quarter, billion to secondary number volatile And generated of again the in XX% net ETFs over the the our XXXX. the heightened through or categories. number business organic in acquired smart

U.S. less over to During when create record $X in a was $X $XXX more the that demonstrating stock ETFs time and declines additional billion, U.S. February the listed from very exchanges. than creating redeem February liquidity week X than benefits through distressed iShares market in robust years, traded its on trillion suffered period than of had iShares billion X at of of a funds steepest the creates yet market activity X more markets. same low With secondary

the return alongside and products Our individuals. that innovative ETFs create as use iShares by high increased inflows to increasingly to efficient active. generated ETFs adoption using see are Institutions quarter BlackRock drive and at core core ETFs are engaging They in $XX performing continued in in ways outcomes. solutions of billion portfolios net cost the by with we to their absolute positive

and this example, a liquid to worked seeking For with client fund we exposures beta. in hedge term quarter

closely their of in inflows by optimized including they completed return, strategies technology we While short fund funds. our client’s due strategies our fixed our $XX hedge market portfolio low diligence for unique create of performing client solutions tracking duration range iShares great Capturing funds basket liquidity BlackRock’s rate expertise meet top long-term to allocation, quarter. generated an that emerging a we of is construction our scale, that total diverse will This maximizing were harness debt demand of index, example a minimizing income billion net needs. year. platform our hedge driven how cost replicated inflows and and while designed a a the in environment, rising and unconstrained,

as power of We billion for even seeing and our mediums core platform X-year end above diverse harnessing the has platform technology are science return. our of our or revitalized priority raised platform for risk sources $XXX illiquid to of of diverse powder platform. performance. deliver and billion assets. the period. of of offerings active a the BlackRock products funds growth the to search and XX% clients the early benchmark fundamental as alternative product new currently build of strategic our more out systematic and also our spectrum Illiquid a alternative $X equity both for $XX including segmented investment commitments billion year remained value efficiently equity our to in XX% behalf consistently and in invest our active the quarter, of billion we now $XX of clients peer illiquid since continue across managing our of across total strategies, in we solutions, At return We are also on progress active or effectively quarter We a ago the dry was when alternatives for signs data

Finally, strongly platform our for is growth. cash positioned management future

increased trusted to management manage we management focused to our ahead, to risk. The what globally years in And rule corporations as even maintaining rising in financial start fiduciary of to Last for the Since remain technology to for and to the to technology founding are XX we scale have need ago, additional cash. strong of that organically will our continuing to operations capabilities and better build inorganically outflows wealth U.S. in look despite a are opportunities related always reform. the their in we very developments client’s impacted reach our of continued seasonal are first we some be years $XXX and repatriating own and regulatory has and organic a XX well-positioned generated laid enhance we around We advice with tax of time, industry quarter Today, have movement steadfast as net the invested greater business. to clients and standard fee-based month, risk a in we platform. use high U.S. for many cash managed in Over management uncertainty our seen billion the enhance have growth since rate crisis. crisis. our risk nearly Aladdin advisor during $X in using our the We the our financial analytics cash environment crossed clients have environments prospects this be distribution portfolios. the on we for the cash inflows into technology help their solutions the have clients’ us risk enabled understand our billion in

to will focus view to on products. continue an require managers and trend greater the this as put overall wealth We just not important portfolio

infrastructure in Demand where be center in more scaling portfolios businesses. for Risk their in own a on these regulatory Aladdin launched management advisory to support revenues on growth for growth and XXXX, upgrading repeatable of we the iRetire, focused and In year-over-year growth for FutureAdvisor of saw This recent volatility lab construct will and Europe newly in helped artificial continue Aladdin and which environment. forward. focus artificial to process. a We the changing increased fee-based scalable established management and XX% better for quarter the and there our the intelligence in capabilities drive language for learning, technology improve first to double-digit advance Wealth, Alto. our and for intelligence trend also clients as business, will science, our technology importantly to BlackRock expect there how more in We uses their of risk in our strong such and are advisors disciplines, has many firm. remains BlackRock early especially Palo going clients demand progress be most investment overall investors, our institutional U.S., market for outcomes our associated To natural machine data risk processing

company’s or important area contribute and ESG risk becoming and clients, to Another a United performance. only governance analytics various exposures States technology sustainable BlackRock’s sustainable in financial From increasingly where strategies. the issues is social related business in increasingly not perspective, long-term can to but related more More and Europe, are investments. understand seeking are in their to investing their environmental, in relevant

technology portfolio and we for considerations we that reason, do. process research, these investment For for risk platform increasingly our stewardship this into our and construction are the integrating

our future we in focus billion from in Directors now in new institutions the Board principles In as is the is and growing day. investment retail driven anchored sustainable who a we we It’s markets bring who greatest generating principles Wilson our talented Peggy times areas alike are The begin delivering the forget believing Johnson, Directors key we being knowledge ensure client instilling technology every demand. our going will strategic because of appointed fast that this and $XXX firm for position of are, the join is purpose steadfast we combined our with BlackRock. BlackRock institutional a strategies that on growing Rob and demand our focused and our line on market globe We all next services our shareholders even with addition, forward dramatic and clients around needs. industry with to fresh in culture and XX,XXX serve expertise by growth never a Bill month three employees by areas in generate for constant and I of with to to years. industry of growth living growth changes. and employees financial client’s Last Ford even maintaining our deep generation what our our clients and BlackRock are manages markets, see BlackRock will in culture and sub our experiences XX next and in continued thrive leader over on focus perspectives value our we for technology, XXXX on Mark

invest let’s for our We questions. open our on execute of strategy continue future. long-term focus technology it our our growth in for reinvigorating the With that up culture to benefits our scale, leveraging institutionalizing for and and on

Operator

Instructions] Credit Suisse. first question [Operator Siegenthaler Our is with Craig from

Laurence Fink

Craig. Hi

Craig Siegenthaler

question good morning taking Gary, here. my , for Larry. Hi thanks

pullback in flows also ETF business there this we have equity backdrop given last years a triggered So the more now to backdrop look implementation strong just X benefited mature? vacated equity evolving do is ETF deceleration equity for role am have and the [ph] what’s markets that over trend which now the if of to market ETF from re-risking, wondering also as now and the very flows is how I equity DOL here, the just is the outflows we risk large equity have which you some

Robert Kapito

their in be properly because our are our and should in better everyone to value So be active priced we in going same today, have a we are position performance are that the equity products But we to best else’s much subject class. the Craig flows. cycles

So the that. as should benchmark their of expect move the be we to some into equity see can when see active managers flows including equity beneficiary product towards active outperform the will you cycles the equities we active and index product fees, out of

start advisors changes been ETF like the least those products. to in DOL and lot the index With But using a have an model cycle of more products model financial equities started the the in as the have create more to income they rules expensive with the that active we of portfolios build portfolios change we now fixed and incorporate will active been and to products both active in beneficiary should past. be that the than

Laurence Fink

Craig I big advisory advice. would add, more financial from witnessed firms we also have towards big shift a the

moving whether SEC more I think this. by fiduciary a reviewing is next shift will rule the be week, that guided or we not are rapidly

base, hear – based, are more believe based. believe it’s moved. but that So portfolio and through portfolio more more has products, more witnessed it’s has sell by as MiFID suggested the U.S., do will that we in changed you I much definitely Europe especially portfolio say we from in they of but baseless I much be towards moved Europe changes the in advice product II solution. solutions a confusion with I think will would have also to it’s But SEC. we I they how platforms continue large

we will it be and over reconfirm to we said So strong growth in in is not is believe have continue slowing I I years double trend to will will the have very ETFs not advice next do down. size. towards secular global, ETFs X And years X the think it changed opinions our and I this

Operator

next Glenn Our Evercore of question Schorr ISI. from comes the with line

Laurence Fink

Glenn. Hi

Glenn Schorr

up ask Hi. guys up that? try and in issues OIS, platform future Thanks importantly expectations but and of impact indicative rates just move you rate you your prompts if does some LIBOR can’t very like then any the that curious levels move help, and It it’s fixed how things activity LIBOR technical and income flows to much. if to think credit in

Gary Shedlin

us good market you income fixed Glenn. in as volatility really actually know for So was

in is cash one of are space the amount time. going been more that pull in products players the a creating significant out have stable and largest fixed long We rates period of fairly interest money a of the some to of income higher for quite into

of X%, that you is sitting some in now than big cash So places imbalance negative. accounts trillion $XX there of very earning know where because over volatility bank estimate a right is there we less that’s

So to the products end which as that especially we rises products ETF to short money markets can rates. go directly this flows lot fixed fixed or is getting a the cash of of income into manage in new into fixed in going attract that the from which income a of into normal be up rates income rather seem lot the

Laurence Fink

a credit the anything don’t to believe rise an as I are some of equity going of credit any think have positioning have witness am witness more it’s in the believe – by firm too I this poor going else. yield directional to than some industry, fears over an markets of think the a of also in change, I your I and a way think to a systemic add on and but yes professionals, Glenn, some is are possible high it’s widening did we reflection of time. indicator markets tightened it’s the outflows LIBOR as so do I statement related more spreads much anything but of LIBOR, don’t significance I there some at

Operator

question Our from with next Citi. Bill comes Katz

Laurence Fink

Bill. Hey

Bill Katz

the Okay. Good Thank thank you very and question. everyone taking for morning you much.

the much thank added that expenses, helpful. is to for disclosure, back you coming very Just so

look that know basically get of affected going change, mentioned the you few maybe million at sort base or the that forward, the in to through XXX, As spending here G&A there we income the are half year-to-year heard a things Gary a the is you good changed $XX this as how pressures in the line, to to about of I there bit, that of commentary run-off particularly well, up the should think we second seasonal more are a but year? that I

Gary Shedlin

your Good morning, Bill. for Thanks questions.

will continue we tried it to again. to last think quarter, I answer try we and answer that question

continually those is of there of across continue and items base. costs think are as to our able we between I looking occupancy, like to more definitely discretionary are the employee line II composition expense base. our we change focus we line also the need platform on invest as But obviously the entirety well. will do that that hit we we like an as and compensation data, There interplay technology, the at MiFID to hit like our G&A of G&A some

to as we G&A for historical think investment decline we increase are a primarily a as to compensation in as as markets, I in business. stable So, of and scale said also functional before expense would we looking our percent expect revenue

to So, moving the being the of this basically little is a XXXX there, we stable think I them as and look continued I upward there. at you moment fairly mean, tried we of most on will got that we invest markets business as our in you have intend environment. planning to margin in we to two basically assuming offense result playing continue I into we have And in and the much when years. in our bios the was We out obviously is of again in think changing that for some have it our call up view are That really bit. nothing cue, the see disclosures said, went

We have added a few lines.

a call to insight hopefully investment disclosure item G&A that make better have what through lot it what you will have calling out we around that more have bump as we We and non-core episodic, incremental is. recurring with that category lines some called been the line the let’s think

Operator

Morgan from Stanley. next Our is line the of Michael with question Cyprys

Michael Cyprys

question. Hi, good morning. Thanks for the taking

key ask metrics you growing are and to this measuring overall headcount about are focused wanted success and this see maybe on sort the what curious stats on you the organization share next the about how intelligence, for are thinking the in sort any of of of us over artificial and lab you objectives couple lab lab the within how how it for you betting the you years? just Just BlackRock of with can that

Laurence Fink

Investment portfolios BlackRock assist it together getting Institute this portfolio and with was area portfolio us of and about all and is a talk really significant meet can dovetails that group and to use. built with produce that people is people which managers, have we of better. and for pretty weekly important the to some X and the how a is together the really that have internal this commentaries So, teams we times quite Once we econometrics to best structure of our this first year that’s

take people, is With because of further, create machine to or to of we man and intelligence result going we wanted that this so a the utilizing success artificial and man machine. better believe that,

and to number have a up are we someone And so someone hired to we can doing And together people, technology-oriented find out-west. the NASA, see hired group use we in the we that have we staffing we from of technology are putting what what we built technology hired to have a forward are some how significance doing we start are performance. already is from area we is that

is more in using just it not So, than is been pull the the fin-tech. what pull data only do. there to data it, most and it the significance there analyzing to which getting to in about. try seeing that been This then is it to our this has the any to portfolios is performance. is everyone data years around for to beginning easy of if the the writing testing Yes, first in which technology It’s in, has X of pulling data, access last of

into eventually internal throughput that’s capability dovetail So, technology. be our a investment investing into this research effort the this on the real institute, is are a we able portfolio and and our important all Aladdin other and will the going do, to be and through we manager’s lot quite that it

Robert Kapito

thing more Michael. one add me Let

us my a said the operational give for I to this is of have why is better As entire key, is just be improve in to improved the investment scale, and performance Clearly, technology just be insights the historically focus discussed important many across investment think areas margins focuses last going used have over updates Technology letter years. And this of most that firm. is released, Chairman’s that our I technology in X quarterly Friday, I firm. to have already. our we our but the to one reasons have using focus I of guess, continues it one have a not for I Monday, as

And analytics. enhance technology to historically technology using our we are enhance clients our technology. have our We viewed with to risk connectivity obviously better in distribution creating

to and So our to pretty reach investment to our our invest is the significantly step for scale, for our is I and performance is and shareholders drive future this us The allowing and clients to our think invest scale labs better connectivity our key global to is better operational efficiencies. investment. But continue in another our just continue us behalf of on our client. there

if So how as we efficiencies hiring we investments and the expand create better longer. to to the significant – about scale, by find analytics overall whether needs our operating in and many the more by question going operational more people is investing have better be risk that business, driving to over globally is are past that you is globally going as as the are drive as are how we they expectation these believe number efficiencies, and more more that’s And creating continue creating we our I we worldwide. that’s especially for this

it insight related So pretty whole Rob on as are investing get special the this going investment, to deeper suggested. technology. one just with a we better, we part this strategy AI component, it’s believe but is is of of specifically And to

Operator

Bank. from next of Brian Our Bedell is the Deutsche question line with

Laurence Fink

Brian. Hi

Brian Bedell

talk the bit the can of more obviously active years regime so, also last back with are on beta Maybe the especially been Thanks could ETF little a versus markets? for you just potential greater the more beta And taking the in to Aladdin you beta printing sort last financial versus that maybe that products my your you with ETF if advisors the and up have how do advisors. renewed a for sales franchise been demand with to franchise mention shift guys obviously few Wealth, over you flows really to year rally you Hi. the a your positioning have smart about we or revisiting see strategies, for the in question. a beta, advisor active volatility smart certain effort for new and with

Laurence Fink

in really backwards, XXX we so are quarter, so we number about XXX demand. ETFs player. smart beta product. annualized beta we differentiating And are have smart that know are which lineup created representing working huge that has including managed rates. now growth you were global of growth of factor the saw for demand $X XXXX we the At iShares So did products in ETFs, our based a the smart area. smart X% ourselves inflows far particular of that as we beta based billion see about this we about in seeing and a XX% in organic first $XXX of We the one quarter, beta organic seeing billion end factor

fact investing continue the that the believe strategies in going and states. are to we are we to grow So in people and technology

of have good a set of factors, leadership. We pretty unique in advantages innovation a thought rich history and

our and analysis to Ang, have they heads necessary help be lastly, of to and perform factors beta it As and multifactor, us clients. The the we long yield to bring a isolate Aladdin in enable model, capabilities beta spectrum created factor-based we model-based we team technology our our and monitor have call for to I construct that our our only full single skills what for we believe help and by create solutions. we Andrew people which process group whether from first enhance investment significant that analytics who that XXXX, experience construction the clients and really we and equity smart powered min construction strategies fund valve portfolio the factor aware to have strategies clients investment factors factor which in actually smart the included have risk

portfolios. asked advisors, and to are lot or not be have that need to comes coming need picking Now, to be advisors of able the portfolios the they risk stock it technology. understand more, tools to being it’s in to they behind they environment. a What financial when need they modeling through do to is picking is have, going the do financial a this to ETFs help individual bond And

the and clients also for portfolios large of that or recently and only match we the for where technology them client not it most the and they all So, ability technology returns gives in many, to them much to the individual years That the bring now do to and building advisor, better institutional had have at to risk but the only ability understand portfolios the and be gives more needs they many, it they use that many but have efficient liabilities are handle spent could to look have to outcome not many the they have clients. financial that individual, could a that aggregate it they ability information, in more it can overseeing. the

they So, to by their need their working what to they clients, need grow for understand business.

lowest We that advisors, are have priced to for based modeling that upon changes the and they have. for and this they in and have, ways returns alpha compensation taken products to of get capability. could passive And when portfolio in place portfolios of part is seeing the are the the a need the you course demand create driven And financial a products huge need they movement that precision business. ETF seeking express have to describes business ETF of and between by some the strategies to that

you analytics, have specifically it experience the So, in. in capability, tools these to the products his and And what you the it modeling then technology, all now session, portfolio think described dovetails developing about if was the if business service for the that in need Larry advisors the achieve put opening think the what’s financial for driving to and BlackRock, that more work and can they want desired with for who I going their provide client. their forward that’s and been construction full mission that’s we result because our

Operator

with line the Bank Carrier from of comes of Michael question next Your America.

Laurence Fink

Michael. Hi,

Michael Carrier

Hi, Larry. Thanks lot. a

do in there. channel are parts the two on the guys outflows the illiquids, of to lot the it’s inflows highlighted have LPs in you of plus down platform. expect So I of XXX, you you that mostly important are alternative the around question more and just some players scale the industry, definitely the institutional on some but mentioned more kind died relationships and and is XXX relative at the just you question most out And $XX with specifically the the billion, think things has quarter, lumpy a or of

backdrops alts next you where to get over couple ambitions illiquid for all and you if be on guys’ fund-raising just that the the your create, can wanted strategy, So, maybe think an years? of update

Laurence Fink

I are good quarter. had in a we think correct you saying

significant We alts the drivers expect or us illiquid years. be delta more next for of few the one could net in

in long we fund. our are now another a have now infrastructure alternative to up building foundation out for fund-raising energy since spent XXXX billion We global business is $XX

capital of are the private process raising long-term We fund. in

related very about so that though would I also in to going to the over platform. our we the illiquid good in I suggest talk think have the our next we alts to a quarters illiquid lot I area has few And think position are are opportunities BlackRock too. position and across

are net we organic and areas net I to will flows So, believe do be a we And fee area into these continuing beginning for important growth last waiver been this purposely We believe look just the at have a strategies. X the this column. positive years see for in investing as firm. our now the these we in base

Gary Shedlin

just on Michael, a people of alts things couple that the illiquid I remind business. would

about for that you First of and pipeline is got board and in time the together another of outstanding. Larry talk we infrastructure mentioned are solutions fact solutions equity have committed, private commitments credit, an effort all, both terms across frankly the $XX both which oriented focus are when firm we fairly so-called billion billion big a that alternatives, is there we number but virtue billion that a significant that mentioned, that for which about private estate by real solutions the incremental is capital of has of $XX and actually un-invested couple of a us. obviously which

we earn new performance put fee way know gets as ground new some we that a And the creates us basically for net into now capital because committed for that remember, on it not gets the of call and fees forward. us, and Secondly don’t then if because pure-plays as also in future performance don’t capital going just those so do. the and a of then you bank not line because business committed illiquids secondarily for we same attention that of account capital, our lot committed fees business, it’s becomes net the

basically of we is filings I market on We are incremental returned that, marking are the waiting for once you it, about bullish that future so prospects and until our the We the cycle not those no there the funds some provide longer disclosure to subject in across and to the capital claw-back we built-in end of annual try have to that do think is. think But of what the we sector. as some growth very you on of idea bank an of board. are

Operator

Fargo. the Harris with of Our Chris comes next Wells from question line

Chris Harris

guys on you opportunities Thanks. the you you biggest incremental the most helping the update about can optimistic U.S.? you U.S. what on Hey, the see guys. business just color maybe if really give give little and are outside bit an us outside actives where could us a Wondering

Laurence Fink

and those get in hearing for now interest excellent that large to seeing people some exposure out lot we expect the there where So, are figure most area to Those performance. areas. we and we as have very equity the lucky we and trying that of inflows are continue are of saw more exposure more right for this some that looking to quarter people how are have products into A the franchise. us is Asian

primarily U.S. have right with Asian good us price large really find area and the outside here saying. and the two the is track good When and cycle products equities, in we you out invest European across European people the been and performance we record find long-term second equity of significant for what equity equities have, are to stack. want of their of because growth but areas the think I the have primarily both have you hedge performance, cap demand at that The side fund and the European

Operator

the Research. Davitt Our question Patrick Autonomous of last from with comes line

Laurence Fink

Hi, Pat.

Patrick Davitt

morning. good Hey,

and that UK anti-competition pension to along. we review So, consult or press see we and accelerate would you push expect if starting upcoming are mandate consolidation the to enough

pension the through theme. be could imagine one I this managers there, As largest you of consolidator a

fee speak out? to how out net it that’s a winner flow a see BlackRock how a loser playing and as you and positioned perspective from or could So, plays as you

Laurence Fink

of say are movement the will now, out because in I of things a the beneficiary the right and Well, to that motion, be be changes going would of we pension regulation money plans. on we some working in of the that’s considering money of

good So that’s side. the on

you wants of increased to On that, that. the side nobody pay is that can assure fees, I negative there

So to size be are And advantage them fee the scale of that and manager for to and are to added the at able this key size pay. a what large have advantage. going us is is efficiency context where put willing that’s to and levels is that a what take within really they in go the

going going lot might So I one be it’s think to to the we large as are will beneficiary, of be be but think. a opportunities a work as and not revenue

Laurence Fink

been going to add just remarks. some my a businesses. will suggested before of community you consultant OCIO point to that I the The one has heavy closing in winner more because

us and are let our where to do achieve for investment that, I capabilities, in apparent that quarter are be believe we be BlackRock. just and what UK and continued our don’t having joining reflect are interest trying long-term our being the opportunities lower me value this you community. clients invest risk goals. us have that’s to I provide pension to consolidator any can platform, conflicts fee But Rob investigated all made, think for businesses. we technology as there as suggested our the morning With we thank results a management diverse first in investments will that the the they we BlackRock’s those their

for our a clients positioned. and have platform changing are backdrop deliver through outcomes to better we We our market evolved the continuously today

deeper We are having dialogues.

with BlackRock is quite done In well-positioned in – when this and world, issues over, we more this low believe our The of than these are clients to different XXXX higher now having BlackRock I moments inputs, over consistent before. historically ourselves. are We differentiated well for is have ever XX meetings and volatility anomaly that. years where different we volatile has are is is more back volatility

good to our that We are expect in a our focused advantages And a and the throughout scale both was first and on shareholders clients XXXX. delivering growth I that start think continuation XXXX. of quarter I to and

So And in have a everybody July. will we quarter. sometimes good talk to

Operator

today’s Ladies concludes and teleconference. gentlemen, this

may now You disconnect.

BlackRock (BLK) 12 Apr 182018 Q1 Earnings call transcript