Blackrock 4Q13 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.

Fink, not surprisingly,pitching being fully invested

“2013 was another year that clearly highlighted the benefits of being fully invested and missed opportunities for more than $10 trillion of cash sitting on the sidelines.”

Have to be properly positioned in addition to fully invested

“Just being invested is not enough. Clients need to be properly positioned. At the core of BlackRock’s value proposition for clients is our ability to constantly challenge ourselves and to evolve in the face of these changing market trends and client needs. The global diversified platform and strong alpha generation track record we built over the past 25 years at BlackRock positions us to provide the investment advice and solutions our clients need to meet their investment goals.”

Industry moving away from style boxes towards outcomes

“the investment landscape is moving away from traditional style boxes as clients focus on achieving outcomes rather than buying products. BlackRock has built a very strong foundation to be the leader in the solution and outcome space.”

Blackrock believes in alpha

“BlackRock’s actively managed business is essential to our future growth as we look to generate alpha for our clients.”

Systemic risk in the products not investment management institutions

“As I’ve said repeatedly, it was not the largest institutions the asset management had that created any of the real problems. With long-term capital in the late 90s, that would not have been a large-scale platform. You had Bear Stearns asset management with a leveraged mortgage fund that created the beginning of the crisis here in the United States. And the money market crisis was created by the #9 largest money market fund that was reaching for yield, which plays into this whole concept. As you look at where risk may lie, risk is going to be lying in products. So we need to make sure that products are going to be analyzed in making sure people understand the systemic risk around products and the leverage associated with those products.”

Society demanding a higher fiduciary standard

“And yet, nevertheless, the new regulations, whether it’s Reg FD, whether it’s working on disclosure items, we are spending more money on compliance. We have to have — I think society is demanding higher fiduciary standards for all of us. And we are committed in doing this, and we are building a robust compliance process”

saw a lot of rebalancing in 3 and 4Q

“in the third and fourth quarter, we did see rotation out of index equities, but I’m not certain that rotation all went back into active equities. It was a — and much of it was rebalancing. Because of the huge gains in U.S. equities, a lot of pension plans did rebalancing into fixed income.”

not managing to margins

“we’re not managing the business on a quarterly basis to a margin. We’re not actually managing the business at all to a margin. We’re trying to balance both growth and profitability to come up with kind of the Goldilocks solution.”

rebalancing going on now, but you’re not going to see a persistence

“you generally see the big rebalancing institutionally in the fourth quarter and some people in the first quarter. In our survey that we’re releasing, we did — we heard that there’s still more rebalancing but not so much. If the Institutional survey that we’ll be releasing today is an indication of what the big macro trend is, more investing in alts, and so I don’t think you’re going to see a persistence of rebalancing out of equities into bonds. I think this is just — as I said, it’s more seasonal, especially in light of the equity run.”

You’re going to see pension plans defease if equities keep rallying

“The one thing that we should be mindful of, if we continue to have an equity rally of some magnitude, there are going to be some corporate plans that are going to defease. We’re aware of 1 or 2 large plans that are above their 100% funding rate. And they are having dialogues right now should they defease and should they just immunize their plan, their DB plan.”