BlackRock draws $205 billion in client funds as quarterly profit beats estimates

Oct 14 — BlackRock surpassed Wall Street profit expectations and attracted $205 billion in total inflows in the third quarter, sending the world's largest asset manager's shares up as much as 5% in ​trading on Wednesday.

CEO Larry Fink credited the ongoing strength in the benchmark US stock market index, the Standard & Poor's 500, for the company's ability to trounce analysts' expectations for revenue and profit growth during the just-ended third quarter.

As the index extended its gains, ending the period near its all-time highs, BlackRock posted ‌a 38% gain in earnings per share and reported that revenues grew to $7.8 billion, well above consensus forecasts of $7.5 billion.

"Market fundamentals are strong and well supported, with higher margins and earnings momentum catalyzed by new technology," CEO Larry ⁠Fink said in a statement.

When markets opened for trading on Wednesday morning with major ​indexes in negative territory, BlackRock was trading 0.8% higher while shares of rival asset ⁠management companies tumbled. That marks a turnaround for BlackRock, whose shares have failed to keep pace with the broader market this year, amid fears that growing investor caution might curb ‌earnings or revenue growth.

Instead, BlackRock reported that ‌its assets under management — which determine a large chunk of the earnings — rose to $15.49 trillion, from $13.46 trillion a year earlier and $15.34 trillion in ⁠the second quarter.

The growth was driven by a combination of $134.5 billion of new flows into BlackRock's flagship iShares ETFs, ⁠and the rising valuations of its investments in a robust equity market.

The company's adjusted profit of $15.93 per share beat Wall Street expectations of $14.13, according to data compiled by LSEG.

Even as markets have remained resilient, surging bond yields and the expectation that the Federal Reserve's recent interest rate hike marks the beginning of a tightening cycle have dented investor confidence.

During a call to discuss the results, however, BlackRock CFO Martin Small said that the market is evolving.

"I don't believe we can evaluate the investment environment as risk-on or risk-off any longer," he said. Instead, he described it as one characterized by "capital scarcity, higher long-term yields, and a redesign of diversification."

Despite ‌higher yields and falling bond prices, BlackRock reported that net flows into its debt products totaled $78.2 billion in the third ​quarter.

AI FINANCING PUSH

BlackRock is among the most significant financiers of the AI boom, having inked partnerships with the likes of Microsoft and Meta, aiming to capitalize on the mammoth spending commitments undertaken by hyperscalers.

On the post-earnings call with analysts, Fink compared the early stages of the AI buildout to the launch of the mortgage securities market in the 1980s, a market segment now worth trillions of dollars. Ultimately, he said, it will be possible to translate compute capacity into tradable securitized products.

Fink described compute capacity as an "asset class" in its own right. The development of a data series tracking AI metrics will broaden investor demand for new securitized products tied to the fledgling asset class, he added, noting that BlackRock already possesses "data at scale" and plans to be a key player.

Meanwhile, demand for capital to fund the costly AI ​rollout, coupled with ballooning government deficits, has increased the competition for capital, Fink said.

PRIVATE CREDIT FOCUS

BlackRock has accelerated its push into private credit markets in recent years. The asset class typically generates higher fees than its ‌main source of ‌profits, its suite of ETFs.

The company previously ⁠spelled out plans to deliver more than $35 billion in revenue by the end of the decade, with over 30% of that coming from private markets and technology.

Fink said that in the last 12 months, BlackRock has raised a total of $68 billion for investment in private markets broadly, with $25 billion for private credit, which he said investors view as "an increasingly attractive source of yield and portfolio diversification."

He added that he expects investor demand to continue to rise heading into 2027.

The private credit industry has recently come under scrutiny from investors concerned about ‌lenders' exposure to AI-related disruption as well as ​opaque valuations, a wariness that prompted a surge in redemption requests from investors in recent quarters. That ‌pressure, however, seems to be easing, with many ⁠private credit fund managers reporting redemption ​requests are slowing.

While BlackRock does not break out its revenue from private markets, net flows in this category were $15.31 billion in the quarter.

(Reporting by Utkarsh Shetti in Bengaluru and Suzanne McGee in Providence; ​Editing by Sriraj Kalluvila)

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