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Thursday, July 17, 2014

This is Why BlackRock Will Crush You

Reported by Tommy Fernandez


That's the sound of Larry Fink's BlackRock gobbling more assets.

The New York-based asset giant reported yesterday in its second quarter earnings that its AUM grew 19 percent from last year to $4.59 trillion.

Perusing through the SeekingAlpha transcript of the analyst conference on these earnings, you'll note some important themes on why this firm has gotten so big, and will continue to do so for the near future.

1. BlackRock Is Going Global With a Vengeance
CFO Gary Shedlin had this to say on the subject:

Another element of our strategy is the growth opportunity in global retail. We saw long-term net flows of $13.1 billion during the second quarter; driving 10% annualized organic growth with positive flows across products and regions.

2. BlackRock is Getting Aggressive With Its Variety
The firm has seen flows in wide variety of products, representing a wide spectrum of flavors, including the Strategic Municipal Opportunities fund, the BGF Euro Short Duration bond fund, the Fixed Income Global Opportunities, and the Strategic Income Opportunities fund. The iShares products, including the recently launched Core Series, have also done well.

3. BlackRock's iShares Is Firing All Pistons
This is what Fink had to say on the subject:

As Mark Wiedman discussed at Investor Day, there are three ways our clients are looking at ETFs and iShares specifically. One is core investments, or building blocks to construct the basis of buy-and-hold portfolios; two, precision exposures to express a specific, a targeted investment viewpoint, and three, as a financial instrument to efficiently add beta exposure to a variety of equity and/or fixed income markets in some case, replacing futures with ETFs and iShares. Each of these key product segments globally contributes to iShares’ growth in the quarter, delivering the number one ETF flow market share position for both the quarter and now year-to-date.

4. BlackRock Is Expanding Its Platform Presence
Robert Kapito has this to say on the subject:

Yes. So we have grown significantly from being Merrill Lynch-centric on retail, and in fact broadened the distribution to several others in a very significantly way. And in fact, our market share at some of the larger warehouses beyond Merrill Lynch has more than doubled over the last two years. So we continue to penetrate, because we are bringing products that a lot of them do not offer, and especially, in the ETF side, we’ve seen a lot of growth in that particular area.

There’s other channels that have also been developed beyond just a typical warehouse, which is the RIA channel, of which a lot of financial advisors have moved from the large broker dealers into smaller channels, and we have pretty significant penetration in the RIA channel. We also as you know, have read about our joint venture was fidelity and that has been more successful than we had originally planned. So that broadens out our effort.

5. Fink Continues to Shake Up Management, Particularly in Active Equities
For example, Chris Jones was hired Co-Head of Global Fundamental Equities and is the new CIO of America Equity Teams. Antonio DeSpirito will join the Equity Dividend Team later this year, working with Bob Shearer.

All quotes from the executives above are from the SeekingAlpha transcript

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