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BlackRock’s client inflows fell to their lowest level in more than a year during the second quarter as one of the company’s big clients pulled tens of billions of dollars from the world’s largest asset manager.
The New York-based group said it drew in $68bn across the investment funds it manages in the three months to the end of June, more than a fifth below the $87bn Wall Street had predicted.
It was the smallest quarterly addition since the start of 2024; BlackRock’s shares fell 5 per cent in early trading on Tuesday.
BlackRock attributed the lower than expected inflows to a single large institutional client in Asia, which it said withdrew $52bn in lower-fee index investments, primarily in fixed-income products.
The lower than expected inflows were mitigated by a market rally and currency swings that helped propel BlackRock’s assets under management to a record $12.5tn.
BlackRock reported solid inflows to its iShares exchange traded funds business, drawing in $85bn in the quarter and nearly $200bn in the first half of the year.
The firm’s strongest inflows were across its bond ETFs, which counted just under $44bn of additions in the period. BlackRock’s crypto and digital asset ETFs also reported $14bn of inflows, as investors push bitcoin and other cryptocurrencies to record highs.
Overall, BlackRock’s revenues jumped 13 per cent to $5.4bn and net income rose 7 per cent from a year prior to $1.6bn, both roughly matching expectations.
BlackRock is partway through a huge shift of its business as chief executive Larry Fink pushes the company into the private investment industry, going toe to toe with behemoths including Apollo Global Management, Blackstone and KKR.
The company cut nearly $30bn of takeover deals last year as part of that drive, including the buyouts of infrastructure investor Global Infrastructure Partners, private credit investment firm HPS Investment Partners and data provider Preqin.
BlackRock’s chief financial officer Martin Small estimated that the acquisition of HPS, which closed earlier this month, would add $450mn to BlackRock’s revenues in the third quarter. The combination with HPS added $165bn to BlackRock’s assets under management.
Fink also noted that GIP surpassed its fundraising targets for its fifth flagship fund, raising $25.2bn. BlackRock’s chief characterised it as “the largest-ever client capital raise in a private infrastructure fund”.
The company’s leadership team aims to raise $400bn from clients for its private investment strategies over the next five years. Those funds, which charge far-higher fees than traditional ETFs, are key to BlackRock’s 2030 targets.
The company hopes more than 30 per cent of its revenues will be generated by its private markets and technology businesses by then, up from 15 per cent in 2024.
“BlackRock is entering into a new chapter in its growth story,” said Kyle Sanders, an analyst at Edward Jones. “While the past two decades have been marked by the explosive growth in ETFs, the next phase of the firm’s evolution will depend on private markets and technology.”
