Blackrock Investor Day 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. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“BlackRock’s principles, which are critical in running our business and preserving our culture…first and foremost, we are a fiduciary to our clients…Second, we are passionate about performance…Thirdly, we are one BlackRock…And finally, we are innovators.”

“BlackRock has the deepest and broadest product set in the industry, managing $3.9 trillion of investments on behalf of our clients.”

“For our retail relationships, financial advisors need product solutions built around key outcomes, such as income and inflation protection”

“Capacity is a very dear resource in this business, and sometimes that’s about investment capacity, but more often than not, it’s about shelf space. There are incremental costs for each and every strategy we offer, and we have to carefully allocate our resources among them, because we recognize that investment management is in many ways a blockbuster business. And what I mean by that is that our results are really often driven by a very limited number of different products and offerings that we provide.”

“Indexing did take a long time to take off. The surprising thing for me is that most people think of this as a mature business, but most of the innovation has actually occurred in the last 10 years.”

“We’re making active decisions in our index funds every day, every month, every year, and those decisions add up over time. How do we invest cash? How do we think about this index change? What do we think about that corporate action? Decisions every day add up over time, and the delivery of index performance is hundreds of decisions over any given year.”

“When you think about the active equity business, it is an extraordinarily competitive business, and through both regulation and technology, the price of our successes is essentially investing in talent, having processes that back up that talent and making sure that you deliver that performance consistently, robustly, repeatedly over time. And we have 18 teams in the fundamental equities area.”

“The other, I think, theological belief we have is that we really believe in focused accountable teams. We do not subscribe to the theory that central research is an effective tool for a firm of our size… You want the alpha generators to be sitting with our analysts in their teams, discussing the very risks they’re taking, not calling up to somebody on a different floor who serves 17 different teams and who they can’t get hold of on a particular day and who reports to somebody else.”

“or beta, it’s about the performance that we deliver each and every day, again, like that Swiss watch; the client experience and our conversations that we have with our clients allow us to create products, create investment solutions, I should say; and innovation, differentiate BlackRock’s beta business. And for alpha, as you just heard Quintin speak to, it’s about the people, it’s about our products and it’s about our investment process.”

“We also observe the very clear evolution of investor behavior. Barbelling is becoming more common, multi-asset and rethinking traditional style boxes in favor of more of a risk factor approach is clearly where the industry is heading.”

“And what we found is that this themes based dialogue really helps deepen relationships, it helps to build trust with our clients and it’s much better served in terms of providing our clients with more access to the resources and depth of capabilities and solutions that we could provide them.”

“The fixed income markets, we think, are the great unexplored frontier for ETFs. On the left is the global equity market, $53 trillion, but notice, about 3% of all equities globally sit inside of ETF. On the right is the fixed income market, $100 trillion, 0.3%.”

“nd I would suggest that the logic for the fixed income ETF is actually more compelling than it is for the equity ETF. Why? Because the equity markets don’t have the problem of investment banks and their intermediation function shrinking. Basel III, the Volcker Rule and financing costs have all made investment banks’ balance sheets shrink. And the way that the bond market traditionally works is you go through an investment bank and their inventory. Investment bank’s ability to do that is shrinking. Bid/ask spreads are widening. And that is what is driving the liquidity into our fixed income ETFs.”