BlackRock had $9 billion of net deposits by consumers, the strongest quarter in two years, Fink said. BlackRock President Robert Kapito said in February the firm sees an opportunity to grow by selling more funds to individuals since it’s still “underpenetrated” in the U.S. retail market, excluding ETFs.
Higher assets under management helped BlackRock’s revenue increase 8.9% to $2.4 billion. Total operating expenses increased 7.4% compared with a year earlier to $1.5 billion, as the firm spent $33 million to compensate employees who were cut following last month’s announcement.
The firm, which acquired Barclays Global Investors in December 2009 to expand into passive investments, offers actively managed stock and bond funds, the iShares exchange- traded funds, hedge funds and portfolios that use mathematical models.
BlackRock has revamped equity and fixed-income teams in the last two years to revive deposits into active products. Chris Leavy, chief investment officer of BlackRock’s fundamental equity unit in the Americas, has replaced portfolio managers at strategies representing about 40% of the division’s $115 billion. The bond division was also reorganized last year to give unit heads such as Rick Rieder and Kevin Holt greater autonomy and accountability.
Last year, BlackRock made changes to its ETF unit after losing market share to Vanguard Group Inc., the Valley Forge, Pennsylvania-based money manager that boosted assets in its funds with lower-cost products. BlackRock saw its U.S. ETF market share fall 1 percentage point in 2012 to 41.8%, compared with an increase of 2.1 percentage points for Vanguard to 18.3%, according to State Street Global Advisors.
BlackRock in October 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. It had earlier combined the sales teams for its iShares unit, the world’s largest provider of ETFs, and BlackRock’s retail funds.
As part of the agreement with Fidelity, the number of ETFs from iShares that can be traded commission-free by Fidelity clients will more than double to 65 and ETFs from iShares will be used within Fidelity’s managed accounts later this year. BlackRock will also help Fidelity develop ETFs tied to sector strategies.
“In the near-term, we believe BlackRock could continue to outperform on strong ETF inflows and investors playing the ‘retail re-risking’ trade, particularly given ETF share capture from mutual funds,” Morgan Stanley analysts led by Matthew Kelley wrote in an April 4 research note.
ETFs have been the fastest-growing segment of the asset- management business, benefiting money managers such as BlackRock, Vanguard and State Street Corp. In the 12 months ended Feb. 28, ETF assets in the U.S. increased 19% to $1.4 trillion, compared with about 0.5% for mutual funds, which hold $13.5 trillion, according to data from the Washington-based Investment Company Institute.