Blackrock 1Q15 Earnings Call Notes

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Bar belling continues to be a key strength

“Bar-belling continues to be a key strength as institutional clients pair cost effective beta exposure with alternative and other high conviction alpha solutions to achieve uncorrelated returns net of approximately $700 million of capital success in return to clients, institutional alternatives generated $1 billion of net new business, led by infrastructure and hedge fund solutions.’

Divergent central bank action leading to currency volatility

“Divergent economic conditions and Central Bank actions have sent currency markets into one of the most volatile periods on record affecting both developed economies such as Japan, and the Eurozone, as well as the emerging markets. The relative value of the US dollar and associated currency volatility is obviously having a rapid and material impact on large multinational companies.”

The desperate search for yield is now the greatest source of risk in the financial system

“This mix of growing assets of shirking supply of low rates is creating a dangerous imbalance and the increasingly desperate search for yields is now the greatest single source of prudential risk in the financial system.”

Seeing significant momentum in our active business

“we are seeing a significant momentum in our active business where we experienced the highest total active flows we’ve seen since 2007 at $32 billion representing a 9% organic – annualized organic growth rate in the first quarter.”

Investors are increasingly focused on outcome-oriented strategies

“Today, investors are increasingly focused on outcome-oriented strategies that target specific goals while they are generating an income stream preserving capital, or growing assets within a certain risk profile and they are moving beyond the balance of traditional fixed income strategies into global, unconstrained or multi-asset strategies to achieve those objectives.”

Evolving as a fiduciary beyond just investment performance

“As a fiduciary, BlackRock thinks seriously our responsibilities not only to provide the investment performance and the solutions our clients need, but we also are taking a leadership role in advocating for the best – for our clients’ best interest and those of the broader market and economy when it comes to long-term investment by the companies we invest on behalf of our clients.”

We are agnostic to alpha vs. beta products

“We are agnostic about beta products versus alpha products. We are trying to help and achieve outcomes”

Going to see more smart beta strategies

“You are seeing more and more in the mutual fund, even in some cases, ETFs more smart beta type of products. And I believe this is going to finally begin a period of substantial momentum in these areas. And so I do believe you are going to see shifts in that area as an industry more towards smart beta factor-based investing.”

We’re going to be making some substantial hires in model based equity

“but I believe we are positioned at BlackRock to benefit from that re-looking at the scientific or model-based equity. We intend to be announcing some very substantial hires in this area.”

Asset managers are small in comparison to asset owners

“We always note importantly that the asset management industry represents less than 20% of the capital markets. Asset owners are principally the largest players. They manage their own money and they play a significant role too. So if you want to effect the ecosystem and making sure the ecosystem is safe and protected for society and for investors as we said publicly and we continue to try to educate it has to be activity-based.”