BlackRock Profit Increases 22% As Assets Rise
Large money managers such as BlackRock are among nonbank financial companies that the U.S. Financial Stability Oversight Council is evaluating to determine whether they require Federal Reserve oversight. FSOC discussed and agreed to review BlackRock and Fidelity Investments, two people with knowledge of the matter said in November.
Fink said large firms such as BlackRock weren't responsible for the 2008 financial crisis. Risks lie with certain products, potentially those that use leverage, Fink said.
BlackRock acquired Barclays Global Investors in December 2009 to expand into passive investments. It offers actively managed stock and bond funds; the iShares unit, which is the world's largest provider of ETFs; hedge funds; and portfolios that use mathematical models.
Money managers, which earn fees based on the assets they manage for clients, traditionally benefit from rising stock markets and investor deposits into higher-fee active funds. The Standard & Poor's 500 Index increased 9.9 percent during the fourth quarter as the MSCI All Country World Index of global stocks rose 6.9 percent.
U.S. stocks may rise 8 percent to 10 percent this year, Fink said during the telephone interview. Despite the rally, investors aren't going all into stocks, Fink said, adding deposits during the fourth quarter illustrate that.
BlackRock's revenue rose 9.4 percent from a year earlier to $2.8 billion, driven by an increase in advisory fees earned for managing client money and the performance fees the firm earns for beating certain benchmarks. Expenses rose 7.2 percent to $1.6 billion on higher headcount and incentive compensation, and fund expenses.
The firm has revamped equity and fixed-income teams to revive deposits into active products. Chris Leavy, chief investment officer of BlackRock's fundamental equity unit in the Americas, replaced portfolio managers at strategies that represented about 40 percent of the division's $115 billion at the time. Leavy is currently on medical leave.
BlackRock also reorganized its bond division to give unit heads Rick Rieder and Kevin Holt greater autonomy and accountability. During the third quarter, BlackRock's active bonds attracted $7.2 billion, the most in almost four years.
The firm is forming a new U.S. retirement group as it continues to push for retirement assets, Fink said during the conference call. Chip Castille, head of BlackRock's U.S. and Canada defined-contribution business, will lead the new unit, Fink said. BlackRock attracted a net $30 billion in 401(k)-type plan assets in 2013, to reach $526 billion, according to Fink.
In March, BlackRock enhanced its partnership with Boston-based Fidelity to sell more ETFs directly to individual investors.