Blackrock 2Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Markets have been complacent

“The 10-year treasury is back to near 2.5%, the Fed continues to ease their bond buying efforts, and even in light of some of the recent volatility, the VIX is hovering near pre-crisis lows. Markets have been complacent in the face of this risk with down days quickly followed by elevated buying trends.”

gains have been driven by central banks

“Credit standards are loosening, cap rates are falling, and correlations remain very high, following the spring shakeup in the global momentum trade. However, the positive environment and the market gains we’ve seen in the past several years have been driven primarily by accommodative policy decisions and coordinated central bank actions.”

Earnings growth will be needed to sustain valuations

“More of the same won’t be enough to move market forward from here. Corporate results and earnings growth will be needed to become larger drivers of valuation. That’s where our attention has been, and in the past couple of days, we’ve seen second quarter kickoffs with some bellwether names, posting very strong results.”

No insight into regulation of asset managers as strategically important financial institutions

“I wish I had something to tell you that is factual, I don’t. We don’t know anything more than what you’ve been reading in the newspapers. Under Dodd-Frank, banks, anybody related to Dodd-Frank, whether it’s SIFI, or anything. we’re not allowed to have a dialogue, it is called lobbying, and it has to be publicly revealed that we’re lobbying.

So there is not, there is – you don’t have the transparency of the process at all. this is very unusual. Any other type of world creation in Washington, there’s always a process of dialogue and this was explicitly prohibited in the law of Dodd-Frank. And so we don’t know anything more than what we read, and unfortunately, what we read, sometimes we believe there are leaks.

There are 225 Trillion global financial assets

“We calculated BlackRock, there’s $225 trillion in global financial assets. Assets that are being managed by investment firms, managed $62 trillion of the $225 trillion. So over 70% of the financial assets are owned and managed directly by the owners.”

combining the sales force to broaden the distribution

“one of the things that has really been successful for us is that rather than going out with individual sales forces for our ETF channel and for our mutual fund channel, over the last year, we have combined our sales force to have the largest sales force going out and talking to broaden the distribution and treating the FAs more holistically, because they own in their portfolios both mutual funds, active, index and ETF.”

Mutual fund business is growing in Europe

“Let me add one other thing, Luke, which I think is not fully understood by the investment community, and that is the substantial growth in mutual fund sales in Europe. As you know, banks continue to deleverage, more and more activities are going onto the capital markets, greater confidence in Europe and the Europe’s future with a huge amount of savings in Europe. And so we’re seeing much greater penetration across the board in European retail.”

Other people sell products, we sell solutions

“this is something that many of the other issuers of ETFs really don’t think about. they are out selling products. We’re selling a solution. An ETF is a part of that solution.”

Money market funds are an alternative to bank deposits

“money market funds are – in some cases, alternative to bank deposits and the flows of money market funds is a function of what bank rates are. But a lot of people are very mindful of how much exposure they would have with any one single bank. And so I think this is why money market funds are desired by clients and this is one thing that we try to express to regulators, clients like money market funds.”