BLK - Earnings call transcript Q4 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 fourth quarter and full year 2018 earnings teleconference.

Our host for today’s call will be Chairman and Chief Executive Officer, Lawrence 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, period. the and question speakers’ there will a be answer Instructions]. [Operator you. Thank Mr. Meade, you conference. may your begin

Christopher Meade

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

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

SEC. duty The has materially update BlackRock filed not that, the it to With could say reports know, I’ll undertake statements. of you differ over results with Gary. from today. As BlackRock BlackRock and to we what forward-looking turn assumes any no does

Gary Shedlin

my full present quarter Thanks the fourth XXXX. pleasure year for Chris. morning everyone. to happy Good results and and new year It’s to

Before to I his review our to results. performance comments, I’ll offer turn and business over financial Larry it

GAAP be as-adjusted financial release While as-adjusted results, and earnings will I results. discloses our on primarily both focusing

reminder positive effective margin an increased In on XXXX. BlackRock asset and returning for relate current As became our will year-over-year XXXX, mindset financials growth, to shareholders. investment January base standard, full-year and results while to fee year-over-year delivered expanded recognition X, FASB’s referenced and and reflecting maintaining accounting call one revenue, recast comparisons revenue organic all a which adoption this quarter of operating on last time, the financial also cash significant

de-risking continue growth, alternatives, associated volatile these fee X% equity invest X% outflows generated illiquid and and inflows market. to in stability and billion us growth operating model ETFs, billion investments institutional net of The by our was as to and low such of performance retirement, with results our despite of a high opportunities organic $XX allowed asset continuously equity representing base achieved to We indexed client organic factors. the our the sustained have $XXX year, during optimize Our made leverage strategic and positioning. we fee scale long-term

for to to all in industry to negative XX% technology increase simultaneously equity points we execute financial construction, The U.S. cash by both our portfolio crisis, Global during expanding XXXX. and saw headwinds active any almost the for continue and against also posted growth framework continued than since returns. basis product by levels lead XXXX of cash more billion ETF declined leadership margin extend BlackRock’s platform and strength shareholders the our indices while XX% to long-term XX European us over We and enabled despite the every and to operating technology selection an global shift of from the global outflows our of XX.X%. returned approximately in growth, asset year-end. from year, to but to investment year class After asset investing $X.X management our declined funds accelerate diversified full-year for meaningful industry. record mutual

resources results. where BlackRock requires As like in this We our Executing expense and organic global focus of differentiated excluded us challenging greatest has for be move to to primarily appears critical more view opportunities statement $XX of vision, workforce. important our the future. that our of in growth for opportunities or from them. and and environments as the XXX growth previously million been a granted size modifying as impact to employees restructuring approximately to single-line charge we will decisions a the make resulted and accelerated as charge fourth positioning deliver to undertook reallocate in free the to With offense ability workforce. playing we markets. of continue our difficult that up recently decisively our long limited this amortization investment on comprised realize a as quarter have income most create we XXXX for growth has deferred however, discipline to by restructuring historically compensation demonstrated, our severance mind, impacted awards on as-adjusted of capacity item for GAAP This X% shape This

revenue and quarter, and $X.X of year $X.X of generated revenue operating the and from income For billion up billion full billion, year respectively was down XX% of of versus Nonetheless, $XX.X income X% fourth for operating Earnings BlackRock ago. lower versus a XX% $X.X was impact effective XXXX capital per XXXX. a tax seed Non-operating billion up totaled increased $XX.XX million, rate on unhedged $XX reflecting of investments. reflecting lower the expense X%. share the XXXX, quarter X% in marks of

lower $XXX for which with for a and approximately performance products certain result the over year the equity negative AUM fees lower down XX% base approximately consequence base from quarter fourth Full-year organic growth and annualized global in quarter acquisitions, year, entering watermarks also lower below of XX%. tax the positive funds reduced was up approximately quarter tax [ph] fund fees billion of significant liquid year. guidance million year that in annual current rate XXXX quarter fee reasonable $X.X items actual were effects differ alone. the non-recurring the issuance effective during as-adjusted tax projected the the quarterly for year we locking and are and for of XXXX, challenging beta high industry. may hedge $XXX quarter but reflecting were recent a billion estimate a We for securities declines, BlackRock’s than market by discrete XXXX borrowing the as XXXX of quarter. fourth a the base fees additional year last or lending long-only XX% year very despite though FX on performance fee reflecting X% Underperformance of fees over the currently X% run and of impact for and of over is alternatives Fourth entered an as Fourth impact X% base rate as legislation. Our in fourth rate fees rate demand period tax declined will

full-year our represent meaningful services of these significant fees capital from longer alternatives to illiquid revenue until term expanded as performance XXXX, business, XX% grew future in an million are over new Aladdin year, source live in our of we While we’re growth Quarterly institutional not and a driving record technology range of outsized growth. generally number revenue distribution technology services went products wealth clients booked of is year returned seeing clients technologies. and $XXX digital and

of term. mid-teens G&A G&A increased points. spend. and to in Approximately Brexit-related such data, professional G&A quarterly was improved XXX Fourth primarily in Similar the This expense higher and spend. lowered of to as-adjusted target quarter to by sequentially X% expectations non-core the by basis fair costs, marketing services expense acquisitions higher of quarter expense, related of to adjustments. revenue the value third and and value margin expense. also Total continue expense consideration product achieving specified re-measurement targets quarter, items expense of in promotional XX% to on the comprised operating due of reflecting in up over planned primarily approximately as XXXX performance compensation. launch and X% fees, marketing longer driven $XX current million fair adjustments, We was higher primarily XXXX, FX growth increased expense, low volume-related included levels consideration increase technology was year-over-year seasonally contingent XX% G&A contingent prior technology, levels planned deal, tax,

primarily iShares base, would be million higher continually expect level expense G&A average discretionary reflecting While essentially managing our entire focus in we XXXX, core of flat on we currently franchise. was XX% XXXX in spend our result expense fund of or $XXX in Direct our as a expense to to growth AUM XXXX. up

For the expense by full of $XX increased year, higher reflecting million fees. levels performance and income offset higher or X%, compensation primarily headcount operating lower

of are determine full-year relevant committed and points remains XXXX. strategy. key serve to in less with this XX.X% lower areas. see investments, to implementation basis. our The decline compensation We investing comp-to-revenue XXX fees, declined that fourth environment Recall successful ratio growth comparisons Our quarter performance impact associated was of year-over-year versus clients BlackRock opportunities of and expense on better iHub ongoing basis a because full-year in significant of compensation we the technology primarily

to from continued way As evidenced we recent our the margin also used prudently position remain the are our organic most by Away we to success. committed optimizing and for business P&L, aware in sheet efficient possible. the balance restructuring, always growth

products, we XXXX, a our allocated credit of in a portfolio closed Capital During our provider the increase Citibanamex $X.X solutions and full Tennenbaum resulting capabilities. billion to net private of to enhancing be or our total to strategic of co-investment our in Asset new million. goal capital seed We Partners, Management, furthering Mexico, acquisitions $XXX approximately

at financial and a XXXX, share we cash for We stock continued the repurchases. wealth of present, returning advantage stock, micro-investing shares valuation of in subject to opportunities of investments including least almost portfolio would reducing XXXX. anticipate $XXX of app, $X.X intelligent for our price, management systems conditions, attractive worth technology through year combination total our market plans addition, current outstanding to minority we during expand Acorns, in based committed by valuation shares billion shareholders the repurchased We fastest-growing remain country’s environment. relative strategy BlackRock have XXXX, approximately and our the repurchased as Envestnet, capital in in we our capital billion million with of fourth market including and billion provider take the aggregating sought of quarter to leading excess At repurchases relative in and the current $X In our on to our X%. wellness. inception spending to $X.X Since dividends management of share we now

net outflows the deeper equities. fee and over board indexed institutional of our many generated having strategic decisions partially led an inflows cash alternatives focus In areas, offset of organic uncertain dividend long-term organic $X.XX capital than and representing has with AUM quarter per X% are current illiquid by billion declared iShares were level. even for strategies, of the ever predictable BlackRock a X% clients of directors greater into strategic number of including clients of growth representing management, de-risking quarterly flows before, face net fee as growth increase XX% market continued is with an more share, annualized base in year, addition, iShares, landscape. $XX conversations inflows and Global deferring by billion balanced and and consistent a for $XXX lower Fourth investment to the of XXXX. approach from representing multi-asset our

planning, on flow wealth management, of record growth Importantly, back-to-back and Fourth iShares and rate inflow exposure significant XX%. efficient billion by quarter months year-end as we fee-based inflows net record represented into of in for highest our demand November organic generated supported quarter market annualized liquidity seasonal December. saw momentum $XX in tax an and growth net

equity in in twice outside income one number in ETFs share and in were share XXXX, fixed precision fee in share. the generated and and December. core were illiquid flows funds inflows income yield duration and $XX by has outflows indexed the risk-off industry the player, driven billion in had for largest several solutions, and which outflows for capital illiquid liability emerging next despite almost and credit. generated core. the environment the fourth XX% Forty-nine high financial reflected income, to we iShares client BlackRock institutional active the over and business, short record yield year funds million consolidation. XXXX approximately in approximately significant base fee redemptions fourth outflows, alternatives. pressures challenging year and for repatriation, BlackRock with investment large BlackRock’s liquid ETFs. of for exposures significant of the range, and the higher for of led market important, we year, billion equity fixed categories net alternatives, reflecting volatile $XXX In illiquid Strength in industry industry iShares continued BlackRock’s associated by almost as elevated driven in in iShares of opportunity ETF over Unconstrained strength historic U.S., a again alternatives with inflows ETFs, the inflows, active $XXX industry, organic M&A, by fees investors base for net franchise broad and X% sentiment driven $XXX fund, low flows. which variety have a High and outflows impacted by market strategies that a our net during cash income unconstrained flows multi-asset institutional billion fixed shifted active including our once mutual reflecting fee inflows debt instruments were manager fixed now of multi-asset quarter income the time. billion ETF the fund where in fees experienced committed into about growth $X rate clients of of strategies, $XX global, retail net year. for the products billion and Retail outflows almost incremental full-year representing Equally in deploy quarter were our client experienced representing of captured XX% performance European, of mutual

to scale delivering through risk and BlackRock’s cash and continues technology transformative share Finally, management management by platform both distribution and Aladdin. leveraging increase Cachematrix

year and While business operating net by planned almost X%. capital model delivered growth, XXXX differentiated $XX totaling in diversified leverage, full were bas In services again revenue, fees two once redemptions record inflows XXXX. billion, organic impacted large return technology summary, grew significant our

ever believe as in BlackRock’s to value over for I’ll evolving, client to Larry. is committed continuously platform shareholders. needs to long-term needs. well deliver turn With it are and investing meet as benefit and to positioned our platform We disrupting We that, client

Larry Fink

Gary. the in year. are through with partnerships morning and we Good our BlackRock’s reflects you, clients building XXXX Thank new happy everyone solution-based deeper approach. performance

world, We we’re consistently global any today diverse with having management time conversations create more our invested in services more the and and history. than have in strategically and clients asset the most technology firm comprehensive to

net outflows different and despite, ETFs to and markets of differentiates as is Seven worldwide. deep equity backdrop. of BlackRock We are discussed, many different strategies than ability XXXX Institute our our to technology, management clients, global, with inflows dollars against each Gary XX our results. products fee a of to some us billion in low of capital diversity Our generated in institutional inflows. as expertise what BlackRock Investment of the $XX and from billion is platform a clients deliver risk The through industry-leading our indexed reflected and our billion our countries difficult generated portfolio de-risked net over historic market $XXX of more whom helps construction investment alternatives

of are technologies Our now Aladdin of more clouded advisors economic markets. Political, in millions of Digital and in investors. remain was social globally thousands than XXXX which heightened end countries, about future. resulted and wealth periods clients Wealth different XX volatility accessible and by uncertainty the serve in to financial outlooks unclear, including marked the who extreme

only Throughout deepened global For policy, fourth impact concern throughout down budget year over Spain. rising profitability growth markets a nearly quarter, governmental and time bonds European conditions, populism negative years, market in backdrop particularly France, the both XX second changes financial and in and annual Brexit, dragged in by equity concerns equities. regarding the Italy rate the tightening in exacerbated in performance returns the all for the world a and economic weak the were in and U.S. and the was The populism outlook of indexes. on growth corporate deficits,

put and ago, cash, individuals, greater the negative, certainty. will and of as fundamentally more continue but losses. especially investment seeing under this to level once trend investor environment took approach developing to this waiting is of BlackRock, pressure. alpha. equity are XXXX benefit are the only than the to what de-risking prices from and we are were which by taxable the to the many to asset correlations A market did again returns, tensions, opportunities of dollar, industry’s record industry quarter, filing their Sentiment primed to strategies that active and The hit deliver volatility an market for not harvest a continue happen clients fourth on rising stocks or What and we and seeing form to where most going their traditional before, one market risks China, in XXXX continue ever emerging and impacted a outflows portfolios. began an portfolios. and currencies questioning institutions of For shifted suggested shifting clients investors amongst in other impacted trend year year, we composition products trade by the industry believe cautious under-performed Not was in industry we equity with is anxiety behaviors witnessed, the slower a in growth with country-specific stronger and sitting building picking especially

has our client and both This - building and a on all clients’ focus As to approach achieve portfolios industry outcomes along result, outcomes. needs been rapidly. changing a better BlackRock’s help are better clients

in area strength lead our driven this will platform future technology Our diverse and organic BlackRock. by growth our investment portfolio construction to for

illiquid portfolios. has index ETFs manage risk one on the hand. aggressively seeing for hand, on always and We’re other and BlackRock and technology alternatives of resilient an to with portfolios been The been embrace change. has in factors barbelling build demand to more client never acceleration greater willing and

net invested in flows flows investments our alternative business, fourth than business alternatives, of over Flows are in $XX We than ETFs, record our in the of In benefits estate, credit, quarter, in generated equity fundraising record clear. levels in saw and these core more before. technology the private and capital in tenfold commitment world-leading we and business, technology revenues. strength now our alternative strong year our strategically in for reflected in of infrastructure, real services of the $XX illiquid committed and of successful of build clients more deployment our from time inflows have the and to BlackRock record and XXXX, billion across billion platforms iShares, capital. business manage We invested the strategies. increase our a

more strategies. in in pensions particular XXXX, companies institutions Our anticipating institutional and are including client allocating illiquid assets that rebalancing survey insurance suggests to

and reach, our was the leading BlackRock in driven in to end client iShares BlackRock in leveraging differentiated net high December. our an our barbell, growth by the billion class asset $XX generate positioned even in playing November of As scale. benefits is the quarter history of the industry. by records is well this Fourth portfolios, global strongest role other with and the growth and demand are ETFs greater strategic inflows, technology, increases, of At

labeling express industry, risk-on, iShares, We structure continue RBC in faced to and preferred the ETFs relative liquidity iShares and iShares’ their movement efficiency. firsthand to partners tailwinds. vehicles using investing growth quarter, to of of $XX a ETF flows. developed this vehicle to More returns are strategies solutions. delivered are in funds, also mutual long year as of volatility the this lead superior ETFs the see be greater ETFs: believe end year Institutional shorter in Gary the the with going including had The took who funds a more income core factor their quarter. label efficiencies, funds our are their allocation fund; clients towards lead beyond record core net iShares trends as a market client views, defensive because But billion and by investment us factor ETFs a as also factor while fourth transparency to simplicity terms iShares’ we increasing ETFs extends and, in broader were iShares tax equity this accelerating and more secular will to part are negative We duration this assets and into bills demand the in in leader fixed with this Three top with shifted distribution fourth efficient, importantly, extended choosing active doing ETFs for large our as mentioned. tax the portfolios technology Growth towards fund. mutual new January, in core recognizing white greater as clients more with IVV, forward distribution decisions, inflows inflows experienced adoption market in about IEMG, partners our Canada, ETFs opportunities Clients clients for four core. and is We low-cost fund of broadly. year fund asset our in worldwide. our to industry’s with risk-off transparent, tactical exposures, S&P white IEFA, will as continue much posture. term driven more of international in minimum well making emerging of a most

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Operator

from Sachs. Goldman Our first Blostein question the line instructions] of with [Operator Alex comes

Larry Fink

morning. Hi Alex, good

Alex Blostein

good morning Larry, Hi everybody.

hoping was just the around strength late kind particularly the of question in I to in iShares on December. First the and of events zone business,

I there would de-risking guys seen think from say, would considerable customer in what in additional Any the reacted mutual imagine scenario. actually You you I in substantial just base the strength the would a been more have and utilization be of light of--despite, provide to risk-off about of there outflows product could helpful, have color should funds. how

Larry Fink

and off Sure, I’ll conclude let start Rob that answer. it may I

Rob Kapito

and and would - billion HYG. any no done or volatile billion into is larger broad answer was in history, issues This have high do the dramatically, than their So volume billion of into do instances what perform expected. products in to more the is risk we ETFs. inflows saw, questions it $X $XX moved fixed it market because and heard into take say, with highest strong tax even issues precision they and to that quarter as lot fee, as any XX quarter, was I product moved anyone higher $XX Larry efficient fell people wanted should trades, like more off, equities in the multi-asset year they iShares anybody which to iShares and, in income, into will this current out about a liquidity; went obviously and think in products and importantly, and activity flow EEM of made billion we you primarily are short-duration fourth very course bear equity flows in They but move the had looked a of product, a had how ETFs market, sense. of defensive was more that of alternative

to important equity fund, our a of utilize know, So which this mutual with a was clients when, in versus liquidity and this use of market is wrapper late way defensive very the get to especially efficiency lot important quickly was liquidity, tax in an very to as the quickly, a there you feature for December. markets in the the issue

actually that performed inflows in would were some were outflows ETFs we the we such and we as lot features and benefit is capture higher iShares, different as went mentioned expected use of able had and portfolio we of different in though of even in of a best areas The to may those to we they that areas, of have. the products, having and of diversified have So the back the was we them and as the a fee Gary other volatility, have outflows predicted. beneficiary that

Larry Fink

bit is aggravated for I your becoming a identifying nature year, gains had who with recognized, tax taxes also mutual institutions end but the and had truly bigger of quite clients heard they ETF a NAV cases funds structure the many add Let issue. it’s position and little their negative individuals superior clients, Alex. taxable ETF, Navigating an versus taxes which--many term a were NAV. of me negative mutual bigger in becoming believe the control capital paying We’ve the the that they by at think instances more, to more Obviously got your you a long just important. and their this very basis, with for and in many I is tax fund.

was and also towards continually an product. more ETFs. industry and elevated about I are as reallocations believe big into in from you as stocks we quarter, continue and you’re the think to we We are very surprise mutual throughout fourth the done to as very continue the just the management wealth technology, not We out reasons in beginning. being flows seeing because a a of ETF believe movement grow also in will products, and nature. space that navigating ETFs. more a portfolio believe going starting we It XXXX that the something marketplace, We to one models is I is construction, elevated this funds seeing and wasn’t think elevated why and had trend short fund away continue believe industry in maybe negative think suggest, is the to that outflows volatile largely, ’XX, ETFs into was mutual and portfolio people of

key If towards and you good, I convenience. ETFs lot what outweighs The convenience and people really ETFs accelerant. the companies other instruments the instruments, is on do becoming convenience makes of of other a think believe now about ride an far versus the

Operator

Credit Your Suisse. of Siegenthaler next Craig the question from comes with line

Larry Fink

Hi Craig.

Craig Siegenthaler

institutional one see maybe quarter, would looks equity they any I additional like in and also could just good the fourth you a Hey, both redemptions wanted because the morning, can if could it in kind institutional large Larry. included in of if wanted related, I little it share two outflows. large color here, rate Asia the any equity if the outflows to to index, Asia, index you that be share and follow-up or client see as very Also or color fee just on too. helpful on be

Larry Fink

and follow up. that Sure, Gary with I’ll let I’ll begin

Gary Shedlin

activity clearly equity in Craig. been Good have in institutional accelerated redemptions index seeing morning, book. our We

there. our some to a this important quarter really that a securities for scaled of basis our for is the is assets that of rate represents clients, equity and When you only roughly strip effective base institutional offering think on things the of under book couple institutional One index is X% of points. out fees. largest lending, three I are while fee a management, average accounts impact our around it remember

on in almost large the that a basis, primarily of by identify, as correctly quarter institutions, outflows client they as this there at institutional there. we allocation look driven DV outside de-risking, I linked you you had cash really fourth U.S. entirely official net I on As some and were were a primarily broader one plans trends, by basis A-Pac, say think would when asset U.S. the and well in full-year needs to by

strategies year institutional clients general broad-based few, generated year, fee that alternatives, demand than we the generally a the LDI as the business clients, organic which our low really continued rates fee OCIO, fact the growth keeping for to outflows base fee actually name for negative basis saw solutions, we look institutional - the at fee in go from lower business But Given outflows cases into quoted fact from overall are again, three fee in many those the outflows point more perspective, book. in average significant business. rate the broader are I our on scale the on it X% for We the products in notwithstanding institutional and flows overall. higher multi-asset a those net illiquid made

Operator

Robert Your with Lee KBW. next question comes from

Robert Lee

Thanks. Good new and year. happy morning,

Larry Fink

Happy new year.

Robert Lee

a get to mean, out or need you this, Microsoft is the in it’s institutions? access retail through be clients, Is think I’m is have Thank survey landscape end and and obviously part maybe the how there think and you. little changing of directly you partnership develop solutions kind I as you imperative that as you’re products investor Microsoft at able to about that access - distribution you curious some terms of opposed hinted a that you end to do the of bit, Larry, maybe to an that but but how you direct and at example may the about investor of thinking partnership, intermediaries? of this you can some point, this instead

Larry Fink

retention. Our their their employer and better solution have to their the thing employee is to business for providing employees with better employees their not going Where one is believe Microsoft, responsibility corporations It their employees we a of have retirement have have employees. of the find clients confidence level when an an also, DC dominant to defined between at benefit with go X%-ish have and more deeper, separation we greater been more and to to employee, employer with plan, companies trying is is DC serve all. working form with technology between I to companies have to era Historically defined contributions help in become especially unemployment, to going them now to retirement. connections seen, and of has that legal going working whatever us with not is and employees, are provide go there was assist and more the the had model there the as terms it their forward for plans. to clients connectivity are our their retirement needs plan providing connection technology technology have changing business, plans But the our emotional, you is X.X%, the in our believe institutional to in through better - a direct; and better

technology not years. way be us to we going going with advisor. can transformational having connection to next XX opportunities We also can for financial pipes and allow where going a it’s and more going the is to and, say, believe with connect and That we’re are but our deeper be the tech-enable deeper type certainly build direct connections, is to build to the of go more ourselves developing that for relationships for BlackRock Aladdin flows. over us believe I deeper value is It to pipe we I our technology have chain. to should to enhance that what doing have wealth, ultimately It the to clients,

who examples analytics because from secure assignments heard transparency are wealth advisors already their better they’re have able of their have their wealth, to for they We Aladdin those clients portfolio. bigger clients providing where better using their risk for with been portfolio,

is job Our enable to our platforms. distribution

to is to but connected many enable Our and and ourselves come. importantly believe will entail which better will relationships over we better robust years we opportunities with most generate technology, and pipes sustain institutional job deeper our clients that’s flows, better could that how

Operator

Your next question comes of Citi. from the with Katz line Bill

Larry Fink

year. new happy Bill, Hey

Brian Wu

is morning. my you Katz. for Bill on Brian taking Wu question. for This Hi, good Thank

initiatives, in you on geographies, technology you reinvestment or likely areas potential or areas of of saving on? focus Thank reallocation color provide what savings, cost of the could business Regarding lines some those you. would

Rob Kapito

Sure, I’ll take that.

approach, it goal of and where of significant the see to we years when We year, over play offense. continue amount a believe seen billion opportunity for the continue opportunities entry to our revenue of think a assets as beta growth. of restructuring, amazing our market us model really the rate that this in some was we last off that I we a here we’ve took ago have for off $XXX to the is affords similar obviously couple a take

and shape really we to about on in particular; that entirely as desire so of got less some so geographic we’ve greatest, smart ETFs, multi-asset of the but to more doing decisions, When technology. technology, and why Aladdin like about sure marketplace key I to a and steps back on that’s the growth of and targeting, We’ve cut to That terms than a basically are decisively areas the focused talking China the where that to everything we’re areas that those geographic the we limited invest making so really global, obviously invest it’s are recent it’s move in continue in and to size modify that’s global, better for focused technology to In the distribution we’re possible we’re it’s of operational Recall to and the us where that continue organization. to in solutions, leverage nature, in broad-based in some are A-Pac Aladdin resources particular, illiquids, and standpoint. our being drive are efficiency in more investment sure capabilities, really will infrastructure continue to technology in obviously growth that of and that’s help fact areas we Our for forced disciplined as technology all as and we we the focusing the a Wealth. industry technology, number fact we’re the talk be are took firm. takes continue can like, identified to and would and is we’re make challenges. the to take think be advantage participants everything our about impact they to of

Operator

next question the comes Worthington JP Morgan. with from Ken of line Your

Ken Worthington

good Hi, morning.

quarter. Just on so seemed the franchise, sales really this well active to active equity up hold

terrible for you think saw I had what the flow all equity inflows fund a despite we retail industry. even was active quarter

stepped side? institutional distribution retail given equity various other sort challenging resonating both the equity the well? on much income businesses we You’ve that credit challenging than did retail fixed investors made the fixed that on active we of and equities and in and of saw unconstrained same equity side, is the in I Then mentioned both income on least same in high at side. why environment outflows But on so and institutional what environment pricing, saw and up the the active retail did to both why income, up changes terms active up you active equities, product you the think credit active and fixed market so better clearly side, equities, hold for do yield so hold think or and the

Larry Fink

think see core equity let did we many U.S. didn’t to what going see want question, XXXX, of actually Gary platform relative though, created we let the did our certainly that that resonated. don’t and return, but nature in that platform of just returns our U.S. I’m we stability our domestic in actually outflows, European I had We the equity so some and of in of most in We good where had me--I answer a results change. products to--. the

We more are having team to work still where seeing changes have We evidence do. changes. of impact our we made portfolio an

into get the rates go On allocation, profits. go some rally were our outflows I and when We to income high many December, so in the fixed asset XX-year, we income of duration income funds from active in fixed because side, saw low just I predominantly fixed out huge range elevated think some of rates people some think to we saw saw cannibalization. the saw taking ETFs, X.XX the people we X.XX as, as and on

more? fill and see trend side we fixed Gary, in starting we it you picked to don’t other so did, give restructuring Rob do Mark single As share to suggested, our the we we that than our that though, I think client to actually one positive the or U.S. was by response there specifics, had base Wiseman are positive of platform, our equity related up team ETF could income want returns Rob through in

Gary Shedlin

look, on some institutional quarter. outflows active levels I definitely we side saw the the when look systematic, think of lower equities I the on for fundamental and you at side, Yes, think--well both

retail On lower migrate benefit restructuring from months seen we’ve our recognition some model. our side, quantitative part about I advantage fee, of a was our to the of think XX equity which of which ago, business trying was a more series, to

We’ve well. launched feature well. that that’s as us actually think I has very and benefited done recently

capital fourth little the on gains some the there always quarter, we on of mind helps retail think in equities, more reinvestment is that though, bit. the that that keep impact see generally, in seasonal side I quarter a

industry-wide and some shorter both significant to risk-off just product obviously products. migration as industry, income think well share high basically of yield, high unconstrained the about in on side, market duration those the impacted side outflows that have sentiment talked On fixed and in we both we retail very yield entire the I in as the

Larry Fink

say we Gary drive there’s had But situation was, performance, in good continue benefit. risk-off yield, on we we’ll as I’m it again, long but pleased risk as was performance, actually so good just when really to to high said, a I think as

Operator

with from of comes Mike America. Carrier Bank last of Your question the line

Larry Fink

Good Mike. morning,

Mike Carrier

get on and you XXXX environment in kind lower, given throughout Morning. environmental Maybe few was the clarifications restructuring just as Gary, XXXX on that when the the when question how line, side. comp there one just an I G&A, some just you sense you’re - XXXX wanted for an the navigating the a that continues of XXXX, the some investments standpoint, ratio you’re would the comes for try expense some thinking that this to plus think in that. that about in of so of to what mentioned that you keeping of of from you ratio thinking wanted if environment of. base just guys beyond, talking we in making, think about expect update to flat a kind trend you’re Then and just on get off there about comp given are items just

Gary Shedlin

something $XXX have we associated is non-budgetable-slash-manageable consider went I we would some costs forward. on year, have booking We side, are referenced to that the as of million. way in effectively I closed-end view, the organization. of that had and preparations are a some planning and any XX% across tax I particular that then G&A we obviously elevated as going in our sense we gives to in say year-over-year items, so a increase million, when year Brexit that at up it to hopefully don’t $XXX the attribute you sense the million, $XXX year, items, we contingencies tied re-measurement, could About that that extent of professional number--we about what costs tend that the we on related so launch funds last given fact would more know, fees year-over-year. so to that deals, that about--looking the decline is to obviously think about had purchase have again some FX it Sure, you as may have well our M&A would year, non-core that last hopefully revenue nature to price expect would to that have product those half see talk my we that G&A one-time in this we about launch is with

a basis on looking we it’s full-year X% expect what to a of this my down last type is So it if in on area. year core more hopefully basis, at you’re would X% the guess year to more stated of

obviously year year on did part you a compensation, roughly good over comp points continued decline see the mentioned, we’ve question On driven in by to We basis talk our When in we asked about I leverage a iHubs. and to have of compensation. a broadly XXX revenue, that’s know, you we’re and one on as planning strategy have Atlanta. we ramped more in now India, iHubs, to embrace Budapest, more technology getting as up in and

to the in Obviously talked fairly we year the than near I have - about term, that drive tend our say as so do tends rest benefits increased resulting paid in organization with them that, as obviously to We’ve year. of of to a scale as This in and think change expect we in year, the declined upward down. lower hopefully rate we lower term over because a about we bias, performance higher stable I fees. would that employees trend. of markets we run however of associated into on beta the function would the teams our comp have with leverage fees continue that that revenue get continued the that, lumpiness benefit percent to get see business. the margin and comp performance going same, decline some has scale long did the So could a an the and clearly X% and revenue to in Lower of significantly then shape last the which our investment compensation talked

some capital, going make TCP obviously which in around are us over get initiatives to of We’re that human run to trying which require long important off basically recent comp have making sure most things our some investments is obviously could few term like and and to the we’ve make growth LTPC or one-time our next deferred to been in we place, to Tennenbaum our going assets, protect that acquisitions years.

being trend, I could little I but think don’t in said, think term there’s bit any of near with see a we that term. lumpiness long change in our the

Operator

Ladies and gentlemen, we you have have Mr. reached do time Fink, for closing questions. any allotted remarks? the

Larry Fink

with partnerships are deeply are developed our we clients to scale. differentiated Thank through we Thanks solution-based joining to us Results to time. again over our approach, and morning you, XXXX investments deep your I directly believe connected our Operator. interest and the for this and continue going we have globally our leverage to in made continued our linked are results everyone BlackRock. built

clients for good hope XXXX. everyone let’s a okay, our value worldwide, and a deliver capabilities, started It those those with clients our Thanks. to the start has invest technology those investment opportunities to going to in of and good I importantly, shareholders. off continue our - it Have and We’re value but and investments to is just in is technology, investments working going very as continue the to in investments year. believe

Operator

This concludes today’s teleconference.

You may now disconnect.

BlackRock (BLK) 16 Jan 192018 Q4 Earnings call transcript