Blackrock 4Q14 Earnings Call Notes

posted in: Notes | 0

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

Barbelling continues to be a theme

“Barbelling continues to be a key theme, as institutional clients pair cost effective beta exposure with alternatives and other high conviction alpha solutions, to achieve uncorrelated returns.”

US market likely to continue to outperform foreign peers

“This market divergent is likely to persist in 2015, creating both large challenges and large opportunities for our investors.’

Overdependence on politicians to implement reforms

“Anemic global growth has led to an overdependence on politicians to implement reforms. to rebuild the global economies. But we have seen limited action globally from politicians and as a result, we continue to rely on accommodative Central Bank policies whether we’re talking about Europe, China, Japan, and even at this moment even the United States.”

This is a technology revolution in oil

“The technology revolution that most people always underestimate is so evident in the oil industry, and through this technology the growth and supply of oil is outpacing demand which has led to a period of volatile price discovery in the petroleum markets with greater than a 50% drop in oil prices.”

People are underestimating how much lower oil prices are going to transform the world

“This is leading to a global redistribution of wealth, which people underestimate how this is going to transform the world. With the high cost of energy production the economy is experiencing major headwinds, countries like the U.S., like China, like India, will be seeing huge benefits in stimulus.”

$141 B in net inflows

“for the whole year, BlackRock saw a long-term net inflows of $141 billion and together with the net flows from our cash management business, we generated more than $200 billion in net inflows in 2014.”

way more passive than active flows, more fixed income than equities

“For the year, we saw a $35 billion in active and $146 billion in index flows. We saw $52 billion in equities. We saw $96 billion in fixed income, $29 billion of flows in multi-asset and $4 billion in alternatives where we put the money to use.”

Opportunity for fixed income ETFs to have higher utilization

“fixed income ETF’s utilization is far less than equity utilization and the opportunity for that to converge quite a bit.”

Fink sees rates lower for longer

“We will continue to see clients reaching for yield and high yield whether that’s a good strategy or bad strategy. I specifically believe, rates are going to stay lower longer and I think the activities that you’re seeing in Europe whether the court’s approval of the OMT for the ECB and the greater possibility of QE from ECB but continual easing in Japan and importantly as Chairwoman Yellen has said, she’s going to be very data-dependent related to what the Federal Reserve does.”

A lot of companies closing out pension plans

“why have we seen elevated pension closeouts because you’ve had significant rallies in U.S. equities over the last five years. Companies have been closer to meeting their liabilities and they have a desire to minimize income statement volatility because of the issues related to the pension fund. So, we are in dialogues with many people. Some of the firms have used annuities and working with insurance companies.”

If you believe that the world is diverging, you’d think this would be a good environment for stock picking

“We are committed to this and if you do believe in the world of great divergence, if you believe in a world that one day you will have – whenever that day will be, higher rates, it generally means – historically you would think this is a better environment for stock picking in fundamental equities.”

There’s a lot of focus on PIMCO, but the real changes in the business are because of the low interest rate environment

” There is so much noise about our West Coast friend and competitor. Much of the money in motion is totally unrelated to what’s going on there. I think there is more dialogue going on because of this low rate environment and how should that be played out.”

What do you do for the income oriented investor in these circumstances

“I think that’s the compelling story. How does an income oriented investor whether its an insurance company, a retiree who is struggling to meet the income needs of the – this is where we are in much greater dialogue.”