Blackrock 3Q16 Earnings Call Notes

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BlackRock’s (BLK) CEO Laurence Fink on Q3 2016 Results

Fiscal policy will be necessary to ignite economic growth

“As monetary policy reaches its limits in many regions, expansionary fiscal policy particularly in the form of infrastructure investments will be necessary to ignite economic growth. The lack of clarity around the outcomes of several upcoming political events including the path forward on Brexit, elections in the U.S. and the constitutional referendum in Italy is contributing to growing tail risk and investor caution.”

Retail investors continue to pull back from active equity investments

“retail investors continue to pull back from active equity investments driven by a combination of challenging long-term performance track records and also accelerating regulatory changes. 2016 U.S. active equity mutual funds has experienced more than $240 billion of year-to-date outflows. It’s worth year-on record with more than $110 billion of outflows in the third quarter alone, the same time we’ve seen strong flows from this client segment across our iShares equity ETFs which I’ll speak about in a moment.”

Regulatory changes are having a material impact on the retail ecosystem

“Regulatory changes having a material impact on the retail ecosystem the Department of Labor Fiduciary Rule RDR and MiFID are all impacting the way wealth managers serve their clients. We are likely to see a historical shift on how assets are being managed and invested as our distribution partners are changing both their product preferences and their use of technology to adapt to these rule changes.”

Technology is an essential component of adapting to regulatory changes

“I’ve emphasized the importance of technology many times today. Technology is an essential component of adapting to our regulatory changes and more broadly a changing investor landscape. As advisors take on greater portfolio construction responsibilities in a fee-based account they are increasingly using BlackRock solutions sophisticated tools and risk analytics to build better portfolios.”

DOL going to systematically move assets away from active

“we do believe, as it moves more towards managed portfolios, utilizing more of the centralization of models and corporate and asset allocation, it’s going to move quite a bit of money more towards passive strategies, utilization of ETFs. We do believe it’ll systematically move assets away from active, and so we’re trying to get prepared, but one thing we can say we’re certainty in our conversations though, it leads to greater need of risk management tools. ”

There is a need for more risk tools

“. I do believe one thing will be it’s going to be constant though the need for more risk tools they are going to be imperative to making sure that there is better oversight to protecting the firm making sure they are living under the new DOL rules.”

Gary Shedlin

Clients are facing significant challenges

“Our clients are facing significant challenges driven by increased regulation, market volatility, record low interest rates and disruptive technology and that’s a result the asset management industry is changing rapidly. During these times as we’ve done in the past, we reexamined our strategic priorities and evolved our business model with the goal of better serving the needs of our clients and optimizing organic growth in the most efficient way possible for our shareholders.”

Robert Kapito

There’s a lot of cash on the sidelines

So we have found there is such a significant amount of cash that’s on the sidelines because rates are so low and equities have not returned what people have expected that the money that is potentially in motion is probably the largest. We’ve done studies to show that globally there’s 50 plus trillion that’s sitting in cash. And I don’t think anybody knows how big that can be relative to the size of the markets. So depending upon changes in interest rates and changes in equity volatility, a lot of that money can come into motion.