MutualFundWire.com: BlackRock Feels Fidelity's Quietly Expanded Love

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Wednesday, October 17, 2018

BlackRock Feels Fidelity's Quietly Expanded Love

Even as the Fidelity team pushes free mutual funds, they're also quietly but dramatically expanding their relationship with an ETF titan.

In August, BlackRock's [profile] strategic partnership with Fidelity expanded to include 170 additional iShares ETFs, more than tripling to 240 the number of iShares ETFs available commission-free via Fidelity's platform, BlackRock CEO Larry Fink and his team confirmed yesterday on BlackRock's Q3 2018 earnings call with analysts, as transcribed by Seeking Alpha). That move, BlackRock chief financial officer Gary Shedlin said on the call, "resulted in the strongest August iShares inflows in the five-year history of [this] strategic relationship."

"I don't know if that story really got out that well," Fink said later in the call, in response to a question from Morgan Stanley analyst Michael Cyprys. "What was hidden in the communication was they actually added over 170 new ETFs to their platform commission free ... So our growth on that platform continues."

(Fidelity's August announcement about its new, free mutual funds makes no mention of expanding the commission-free ETF platform, though the attached appendix only makes price comparisons between Fidelity funds and funds from Schwab and Vanguard, not from BlackRock.)

"They've been great partners who had the best August we ever had since the pricing, even in what was consider a very tough market," Fink said.

"We're seeing stronger flows immediately after one month," Fink added later, in response to a question from Goldman Sachs analyst Alex Blostein.

Rob Kapito, president of BlackRock, added that the growth of commission-free ETF platforms is particularly important for making ETFs usable for retirement savers (who make frequent small purchases using payroll deferral, the kind of small transactions that get hit hard by trading commissions)

"We actually believe commission-free ETFs is going to lead to better outcomes for retirement," Kapito said on the call. "It's going to lead more investors to invest in ETFs for retirement, and I believe this is a really important trend for all the ETF industry, but I also believe it's a very important trend for all the ETF industry."

BlackRock reported Q3 2018 adjusted diluted earnings per share of $7.52, beating expectations by $0.65 and rising 27 percent year-over-year. Revenue, which rose two percent year-over-year to $3.576 billion, missed expectations by $60 million. Quarterly net flows fell to $3.105 billion in net outflows, reported BlackRock's first quarterly outflows in three years, thanks to institutional outflows. AUM rose eight percent year-over-year to $6.444 trillion. And Jim Cramer, host of CNBC's "Mad Money", is still a BlackRock fan:

The stock got hit today, down $18. It's at the 52-week low. It's got some of the best people on earth working there. I am certainly not going to countenance selling Larry Fink's stock at a 3 percent yield, so I say hold on.