Blackrock 1Q14 Earnings Call Notes

posted in: Notes | 0

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

9% Revenue growth

“First quarter revenues were $2.7 billion, up $221 million or 9% from a year ago, and were driven by continued growth in base fees, performance fees, and revenues from BlackRock Solutions.’

Larry Fink thinks volatility here to stay

“Volatility continued in early April as valuation concerns and short-term de-risking drove the worst week for domestic equity market since 2012. And I expect this type of volatility is likely to impact markets for the remainder of the year.”

Larry Fink pounding the pavement, single handedly trying to get this economy going

“As a fiduciary it is critical that BlackRock not only provides the investment performance and solutions our clients need but also to take a leadership role in advocating for the best interest and those are the broader markets and the economy. That’s why last month I sent a letter to CEOs of every company in the S&P 500 urging them to focus on the long-term to make investments in their businesses that will create opportunities and drive future growth.”

Not going to comment on PIMCO, but seeing lots of interest

“I don’t ever comment on our competitors. PIMCO is a fabulous investment firm so and Bill Gross has been a friend of mine for over 40 years, not that quite long about 38 years so. We’re in a great position; we’re seeing increasingly more dialogue from institutional clients than we’ve seen before. We began to see accelerated inflows on the retail side but now we are in more dialogue with more consulting firms, advisory firms to pension fund.”

Seeing lots of interest in real estate and infrastructure

“we are now in more dialogues on real estate than we had been in many, many years and infrastructure. Infrastructure we brought along a team over three years ago and we are now starting to see accelerating flows into our infrastructure alternative area. We’re about $2 billion and I expect to see a doubling of flows over the next 12 months to 24 months in our infrastructure area.”

Retail base is still thirsty for alternatives

“the retail base is thirsty for alternatives, and so long/short credit and long/short equity but both global are important for the retail base. And we’ve launched since 2011 six ’40 act alternative products; they continue to raise money.”

Huge change in flows in EM ETF products

“In the first few weeks of January, we had up to $8 billion of outflows in EM, which was pretty disconcerting. Since that we had $4 billion of inflows. But importantly, since quarter-end, which is all public, so I can talk about it, we’ve had $10 billion in net inflows in our iShares products. So year-to-date we’re over $17 billion of net flows. At quarter-end we were approximately $7.5 billion, so huge change in momentum.”

Blackrock has spent a lot of money to make sure HFT isn’t arbitraging them

“we have invested tens and tens of million of dollars for making sure that the high frequency traders did not arbitrage us. We looked at it is a fiduciary responsibility making sure that we always provide our clients best execution. And we only do execution with the reputable counterparties and market venues. So this is something that we’ve been focused on for years.”

If the product makes sense, you can raise money without much track record

“In alternatives you could have no track record and announce a strategy and if the strategy makes sense, we’ve seen this in the marketplace; people are able to raise money.”

A groundswell towards an unconstrained fixed income product

“this is just beginning, this groundswell towards — moving towards an unconstrained type of fixed income product. I think this will accelerate and I think it will become a very large — well it is a very large component of our dialogue with institutions worldwide today. ”

More fixed income trading moving to exchange because dealers have cut back on capital allocation

“There is no question as balance sheets of the dealers are more contained you see wider spreads than fixed income. I don’t think this is a long-term problem, it may be a short-term problem; it will move, it will create more movement towards exchange trading for fixed income. And I do believe this is one of the reasons why more interest in ETFs and fixed income. So you don’t have to focus on a bond, you could focus on ETFs that have maturity or ETFs that are connected to benchmarks. And so this is one of the reason why we think fixed income ETFs will grow dramatically over the course of next two years.”