By Dawn Lim
BlackRock Inc.'s assets surpassed $7 trillion for the first time, putting the spotlight on the world's largest money manager's growing reach.
The investment giant enters 2020 after a record year of net inflows. A flood of investor money into the firm's fixed-income products and rising equity markets helped lift BlackRock's assets to $7.43 trillion, an increase from $5.98 trillion exactly a year ago.
The passing of the $7 trillion-mark follows a dramatic decade of growth fueled by the rise of funds that trade on exchanges and mirror markets. BlackRock today reaches millions of people with funds that are part of retirement savings, financial software that Wall Street banks and wealth managers rely on to monitor risks, and shareholder votes it casts on behalf of fund investors.
The firm's success brings BlackRock and its chief executive, Laurence Fink, new visibility and challenges. The company's expansion as a provider of all kinds of financial products and technology comes at a time of growing public suspicion to big platforms and big business.
BlackRock faces public scrutiny over how it exercises its responsibilities as a shareholder on behalf of investors in funds it runs.
BlackRock this week said it would take a tougher stance on companies that aren't providing a full accounting of environmental risks in line with industry standards. The firm is rolling out several efforts to address the investment risks of climate change.
Chief Executive Laurence Fink said in an interview BlackRock's $7 trillion milestone hasn't changed the sense of responsibility he felt toward clients when the firm was starting out.
"If we become overinflated about the numbers we're managing, we're going to forget our responsibilities and moral objectives."
He also said that public companies now are being held to higher standards.
"Society is putting more demands on public companies," Mr. Fink said. "Purposeful companies have to show their social purpose to clients and to their employees."
The firm's formidable cash engine continued to whir. BlackRock's iShares exchange-traded funds saw $75.2 billion net inflows in the quarter, sealing the firm's dominance as a $2.2 trillion king of the ETF.
In 2019, the firm added $428.7 billion in new investor money across all categories, hitting a record in a year for net inflows.
BlackRock's quarterly net profits rose 40% to $1.3 billion. The company's fourth quarter earnings of $8.29 a share exceeded Wall Street forecasts.
In past quarters, an influx of new money hasn't always translated to higher profits or an increase in revenue, especially when the firm's mix of assets shifted into cheaper products. Intense competition in the asset management industry has pushed fees of the most commonly-offered funds near zero.
To capture the broadest group of investors, BlackRock is continuing its push to diversify its business lines and find new touchpoints into institutions and individuals.
"I need to make sure for 2020 and beyond we're positioning the firm to anticipate client needs," Mr. Fink said.
The movement of money into the firm reflected crosscurrents of investor behavior last year. Investors added $263.6 billion, or 78.5% of the net flows into the firm's asset management products last year, to BlackRock's bond offerings. Investors have increasingly flocked to bond ETFs as a way to hedge their risks or bet on credit markets. BlackRock sees more room to grow in the bond ETF space.
Meanwhile BlackRock attracted $24.8 billion into alternatives to stock and bonds, a growing priority for the firm as it looks to capture more of the world's money shifting from public securities into private markets.
Quarterly revenue from BlackRock's investment advisory, administration fees and securities lending -- these collectively make up the biggest component of BlackRock's revenue -- increased by 11%. Pricing changes to some funds ate into BlackRock's revenue.
Performance fees, the money BlackRock gets for beating markets in actively managed strategies, rose 139% in the quarter.
The firm sells software, including a suite of tools called Aladdin used to evaluate financial risks, to banks and other institutions. The software sales helped increase technology services revenue by 34.9%.
The firm has no channel of its own to directly sell funds to everyday investors. But being a provider of technology gives BlackRock a way to get new visibility and influence into the ecosystem of wealth managers and advisers who oversee the money of individuals.
"We are aggressively embracing change," Mr. Fink told analysts Wednesday morning.
Write to Dawn Lim at email@example.com