Blackrock 4Q15 Earnings Call Notes

Laurence D. Fink

The Fed’s action led to the end of a historic period for monetary policy

“The Federal Reserve’s action to raise interest rates for the first time in nearly 10 years marked a end of a historical period of monetary policy, a combination in the U.S and the beginning of an extended gradual tightening cycle. All of these factors are leading to a much more divergent world in 2016, while higher levels of volatility ahead, as already witnessed in the first few weeks of the year. And as the investment landscape changes, our clients need change as well.”

Investors are searching for income and capital appreciation

“In a more fragmented investment landscape impacted by continual low rate, modest beta driven returns, investors will search for income, they will search for capital appreciation, through a combination of both active and alternative investments, factors, smart beta strategies, and hybrid solutions.”

Widening spreads is blessing for insurance clients. Seeing huge demand

“the widening in spreads is a blessing for our insurance clients. That’s first and foremost. Insurance companies are adding to their fixed income exposures now. As I’ve commented in the past, the whole insurance industry or a good part of it is short-term liability duration and are hoping for higher rates. We haven’t seen higher rates; obviously, we are sitting here with a very low 10-year Treasury rate, but we most certainly have seen a widening in credit spreads. And I think as evidence of a few large bond issues that went public this week, we saw huge demand. And so, as spreads widen, we expect to see more demand institutionally.”

Not seeing dramatic outflows as of yet

“some of the widening of spreads are the fears if higher rates are going to produce some selling possibly from retail, but we haven’t seen anything dramatic yet. We haven’t seen really any dramatic outflows on iShares yet. So, I don’t think there is any real massive change yet.

Rebalancing happens in February and March

“And I think one thing you should be aware Craig, at this time, this is when you have the institution sitting down on their net, this year’s asset allocation. You’re going to start seeing behavior changes probably in February and March when they start doing their reallocations maybe. And so most recently one would think, in some cases some pension funds because of the decline in equities they’ll rebalance out of fixed income back in the equities as they, if they want to have consistent asset allocations.”

In volatile years you’re going to see companies lower their dividends

” let me just add one more thing related to our dividend. I think in the volatile years especially if you look at some of the high paying dividend stocks today, I think you’re going to see quite a few companies are going to have to lower their dividends. One of the histories of our platform, we never lowered our dividends ever even in the financial crisis. And so, to me it’s about a discipline, it’s a commitment. ‘

Gary S. Shedlin

We’re not managing to a margin target, but we are committed to delivering operating leverage

“I know you’re tired of hearing me say this, but we really aren’t managing the business to a margin target either quarter-to-quarter or year-to-year. We are absolutely committed as part of our financial framework to growing and delivering operating leverage.”