BlackRock net income rises 24% as ETF deposits boost assets

Performance Fees

S&P Capital IQ upgraded its opinion of BlackRock today to buy from hold on interest in its passive equities and its investment pipeline of $49 billion, wrote analyst Sonia Parechanian.

Performance fees, earned by funds for beating certain benchmarks, also boosted BlackRock’s earnings in the fourth quarter, rising 63% to $239 million. Investment advisory fees increased 12% to $2.1 billion.

BlackRock’s board approved an increase in share repurchases of an additional 7.5 million shares, bringing the firm’s purchasing capacity to 10.2 million shares. The firm bought back 868,500 shares in the quarter, bringing the total to almost 9.1 million shares repurchased in 2012.

In October, BlackRock created the iShares Core Series, which is made up of six ETFs with lowered fees and four new ones, to attract individual and institutional clients looking to invest over the long term. Earlier in the year, it combined the sales teams for iShares and BlackRock’s retail funds to increase market share.

“BlackRock remains a top pick in 2013,” Citigroup Inc. analysts led by William Katz wrote in a Jan. 4 research note. “We are encouraged around the solid organic growth as BlackRock’s iShares pricing strategy begins to build momentum.”

ETF Growth

ETFs have been the fastest-growing segment of the asset- management business, benefiting money managers such as BlackRock, Vanguard and State Street Corp. In the 12 months ended Nov. 30, ETF assets in the U.S. increased 24% to $1.3 trillion, compared with 11% for mutual funds, which hold $12.9 trillion, according to data from the Washington-based Investment Company Institute.

Fink, who co-founded BlackRock in 1988, said in October the U.S. is about a year away from having a more robust economy and has recommended investors put cash into equities as bond yields have shrunk to record lows.

BlackRock, which acquired Barclays Global Investors in December 2009, offers actively managed stock and bond funds, passive strategies, hedge funds and portfolios that use mathematical models. The company’s move into passive strategies came with the purchase of Barclays Plc’s San Francisco-based investment unit, which owned iShares, the world’s biggest provider of ETFs. Last week, BlackRock agreed to buy Credit Suisse Group AG’s ETF unit, which has $17.6 billion of client assets under management and 58 funds.

Bloomberg News

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