BlackRock Inc.’s Chief Executive Officer Laurence D. Fink said the firm is attracting new money from clients in October, after the departure of Pacific Investment Management Co.’s co-founder Bill Gross prompted investors to reallocate cash.
“I can’t speak about the next six to eight weeks, or ten weeks, but in first few weeks we’ve seen flows,” Fink said today in a telephone interview. The New York-based firm has been benefiting from its “team” approach as well as improved performance in its fixed-income funds, Fink said.
BlackRock, the world’s biggest money manager, reported third-quarter profit today that rose 26 percent as investors added cash to its funds, boosting fees. The firm attracted about $28.7 billion in investor money into its long-term funds during the quarter, driven by sales of its iShares exchange-traded funds. The firm’s bond ETFs have also benefited since Sept. 26 as investors reallocated cash from Pimco after Gross’s abrupt exit.
Net income increased to $917 million, or $5.37 a share, from $730 million, or $4.21, a year earlier, the company said in a statement today. Excluding certain items, adjusted earnings of $5.21 a share beat the $4.66 average of 19 analysts surveyed by Bloomberg.
BlackRock should benefit from “higher organic growth outlook resulting from potential Bill Gross related attrition at key peer Pimco,” according to William Katz, a stock analyst focused on brokers and asset managers at Citigroup Inc. who has a neutral rating on the shares.
BlackRock shares fell 0.8 percent to $304.40 at 9:34 a.m. in New York. The shares declined 3.1 percent this year through yesterday, compared with the 5.4 percent decrease in the Standard & Poor’s 18-company index of asset managers and custody banks.
Revenue rose 15 percent from a year earlier to $2.9 billion, as fees for managing investor funds rose along with assets. Assets at BlackRock increased 10 percent from a year earlier to $4.52 trillion. They fell 1.5 percent during the quarter as market declines and foreign-exchange losses eroded more than $108 billion in value.
The firm, co-founded by Fink in 1988, acquired Barclays Global Investors in December 2009 to expand into passive investments such as exchange-traded funds. It also offers actively managed stock and bond funds, hedge funds and portfolios that use mathematical models.
Fink, 61, has reorganized the firm’s leadership to improve performance at its active products and appeal to individual investors. Investors added a net $18.2 billion into the firm’s iShares products, in equities as well as fixed income, as they “look for options to maintain exposure to the broad fixed income market in the current environment,” Fink said in the statement.
BlackRock’s equities products saw an increase of $10.2 billion, fixed income had $11.1 billion in net new money, and multi-asset $7.4 billion.
BlackRock is among money managers lobbying against attempts by regulators to label some nonbank finance companies as “systemically important financial institutions,” or SIFI. BlackRock Vice Chairman Barbara Novick said on Oct. 10 that the lack of a major market disruption from Gross’s departure from Pimco refutes some fears that issues at large asset managers can cause contagion for the broader markets.
Fink reiterated that today in an interview on CNBC, saying he disagreed with the notion that Gross’s exit roiled bond markets.
“The bond market has been able to cope quite well with whatever’s happening with Pimco,” he said in the CNBC interview. “Pimco was a great firm and will remain to be a very good firm,” and Gross a great investor, he said.
Gross, 70, left the bond giant he helped found 43 years earlier without telling its executives, a last act of defiance by a great investor whose strained relationships with his lieutenants had brought him to the verge of getting fired, people familiar with the matter have said. The falling out had been in the making since at least January, when then-CEO and heir apparent Mohamed El-Erian resigned amid disputes over Gross’s management style.
Fink alluded to BlackRock’s “team approach” as being a factor in the firm’s success over its 26-year history.
The firm’s “relentless focus on culture, the one BlackRock, a team approach is being highlighted quite a bit, but we have never changed our business model,” Fink said in the telephone interview. “Our business model, especially in light of the complexities of products, the complexities of investing in the world, requires a much more of a team enterprise.”
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