BLACKROCK, INC. FORWARD-LOOKING STATEMENTS
This report, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock's future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as "trend," "potential," "opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate," "current," "intention," "estimate," "position," "assume," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" and similar expressions. BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance. BlackRock has previously disclosed risk factors in itsSecurities and Exchange Commission ("SEC") reports. These risk factors and those identified elsewhere in this report, among others, could cause actual results to differ materially from forward-looking statements or historical performance and include: (1) a pandemic or health crisis, including the COVID-19 pandemic, and its impact on financial institutions, the global economy or capital markets, as well as BlackRock's products, clients, vendors and employees, and BlackRock's results of operations, the full extent of which may be unknown; (2) the introduction, withdrawal, success and timing of business initiatives and strategies; (3) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management ("AUM"); (4) the relative and absolute investment performance of BlackRock's investment products; (5) BlackRock's ability to develop new products and services that address client preferences; (6) the impact of increased competition; (7) the impact of future acquisitions or divestitures; (8) BlackRock's ability to integrate acquired businesses successfully; (9) the unfavorable resolution of legal proceedings; (10) the extent and timing of any share repurchases; (11) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (12) attempts to circumvent BlackRock's operational control environment or the potential for human error in connection with BlackRock's operational systems; (13) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock; (14) changes in law and policy and uncertainty pending any such changes; (15) terrorist activities, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (16) the ability to attract and retain highly talented professionals; (17) fluctuations in the carrying value of BlackRock's economic investments; (18) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (19) BlackRock's success in negotiating distribution arrangements and maintaining distribution channels for its products; (20) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (21) any disruption to the operations of third parties whose functions are integral to BlackRock's exchange-traded funds ("ETF") platform; (22) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (23) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions. 39 --------------------------------------------------------------------------------
OVERVIEW
BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, "BlackRock" or the "Company") is a leading publicly traded investment management firm with$7.32 trillion of AUM atJune 30, 2020 . With approximately 16,300 employees in more than 30 countries, BlackRock provides a broad range of investment management and technology services to institutional and retail clients worldwide. BlackRock's diverse platform of alpha-seeking active, index and cash management investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares® ETFs, separate accounts, collective trust funds ("CTFs") and other pooled investment vehicles. BlackRock also offers technology services, including the investment and risk management technology platform, Aladdin®, Aladdin Wealth, eFront,Cachematrix and FutureAdvisor, as well as advisory services and solutions to a broad base of institutional and wealth management clients. BlackRock serves a diverse mix of institutional and retail clients across the globe. Clients include tax-exempt institutions, such as defined benefit and defined contribution pension plans, charities, foundations and endowments; official institutions, such as central banks, sovereign wealth funds, supranationals and other government entities; taxable institutions, including insurance companies, financial institutions, corporations and third-party fund sponsors; and retail investors. BlackRock maintains a significant global sales and marketing presence that is focused on establishing and maintaining retail and institutional investment management and technology service relationships by marketing its services to investors directly and through third-party distribution relationships, including financial professionals and pension consultants. OnMay 15, 2020 , a subsidiary of The PNC Financial Services Group, Inc. ("PNC") completed the secondary offering of 31,628,573 shares of the Company's common stock at a price of$420 per share, which included 823,188 shares of common stock issued upon the conversion of the Company's Series B Convertible Participating Preferred Stock and 2,875,325 shares of common stock under the fully exercised underwriters' option to purchase additional shares. Also onMay 15, 2020 , PNC completed the sale of 2,650,857 shares to the Company at a price of$414.96 per share. The shares repurchased by the Company were in addition to the share repurchase authorization under the Company's existing share repurchase program. The secondary offering and the Company's share repurchase resulted in PNC's exit of its entire ownership position in the Company, other than 500,000 shares that PNC contributed toThe PNC Foundation .
Certain prior period presentations and disclosures, while not required to be recast, were reclassified to ensure comparability with current period classifications.
COVID-19 Impact
The COVID-19 pandemic continues to result in authorities implementing numerous
measures attempting to contain the spread and impact of COVID-19, such as travel
bans and restrictions, quarantines, shelter in place orders, and limitations on
business activity, including closures. These measures may continue to, among
other things, severely restrict global economic activity, which can disrupt
supply chains, lower asset valuations, significantly increase unemployment and
underemployment levels, decrease liquidity in markets for certain securities and
cause significant volatility and disruption in the financial markets.
40
--------------------------------------------------------------------------------
Towards the end of the first quarter of 2020 the pandemic began to impact our
business. While global markets have recovered to varying degrees since then, the
effects of the pandemic are ongoing, and such impact may continue in future
quarters if conditions persist or worsen. Should current economic conditions
persist or deteriorate, there may be an ongoing adverse effect on our business,
including our operations and financial condition, as a result of, among other
things:
• reduced AUM, resulting in lower base fees, as well as a reduction in the value
of our investment portfolio, including our coinvestments and seed investments
in sponsored investment funds;
• lower alpha generation which may adversely affect future organic growth and
our ability to generate performance fees; • reduced client and prospective client demand for BlackRock products and
services and/or changing client risk preferences which may adversely affect
future organic growth;
• a decline in technology revenue growth as a result of extended sales cycles
and longer implementation periods as clients work remotely;
• negative impact of the pandemic on our clients and key vendors, market
participants and other third-parties with whom we do business;
• the negative operational effects of an extended remote working environment,
including strain on Aladdin and/or our other internal and external technology
resources leveraged at the firm, as well as the potential for heightened operational risks, such as cybersecurity risks; and
• the disruption to our workforce due to illness and health concerns, potential
limitations on our remote work environment, and government-imposed restrictions, laws and regulations. The extent to which COVID-19, and the related global economic crisis, affect our business, results of operations and financial condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any recovery period, future actions taken by governmental authorities, central banks and other third parties (including new financial regulation and other regulatory reform) in response to the pandemic, and the effects on our products, clients, vendors and employees. BlackRock continues to service clients amid uncertainty and disruption linked to COVID-19 and is actively managing its business to respond to the impact.
United Kingdom Exit from
Following theJune 2016 vote to exit theEuropean Union ("EU"), commonly referred to as Brexit, theUnited Kingdom ("UK") left the EU onJanuary 31, 2020 and entered an eleven-month transition period during which theUK , andUK -based entities, will retain the rights and obligations of EU membership. Substantial uncertainty remains surrounding the future relationship between theUK and the EU, but theUK government has indicated its preference for negotiating a trade deal with the EU before the end of the transition period rather than continuing Single Market orCustoms Union membership. BlackRock is implementing a number of steps to prepare for various outcomes, including the potential failure of theUK and the EU to negotiate an agreement before the transition period expires. These steps, many of which are time consuming and costly, include effecting organizational, governance and operational changes, applying for and receiving licenses and permissions in the EU, and engaging in client communications, and are expected to add complexity to BlackRock's European operations. In addition, depending on the terms of the future relationship between theUK and the EU, BlackRock may experience further organizational and operational challenges and incur additional costs in connection with its European operations during the transition period and post-Brexit, which may impede the Company's growth or impact its financial performance. 41
--------------------------------------------------------------------------------
Other Development
OnFebruary 13, 2020 , BlackRock announced the establishment ofThe BlackRock Foundation (the "Foundation") and the contribution of its remaining 20% stake in PennyMac Financial Services, Inc. ("PennyMac") to the Foundation and theBlackRock Charitable Fund , which BlackRock established in 2013 (together, the "Charitable Contribution"). The Charitable Contribution resulted in an operating expense of$589 million , which was offset by a$122 million noncash, nonoperating pre-tax gain on the contributed shares and a tax benefit of$241 million in the condensed consolidated statement of income for the six months endedJune 30, 2020 . The Charitable Contribution provides long-term funding for BlackRock's philanthropic investments and partnerships. The general and administration expense, nonoperating gain and associated tax benefit related to the Charitable Contribution have been excluded from as adjusted results. EXECUTIVE SUMMARY Three Months Ended Six Months Ended June 30, June 30, (in millions, except shares and per share data) 2020 2019 2020 2019 GAAP basis: Total revenue$ 3,648 $ 3,524 $ 7,358 $ 6,870 Total expense 2,242 2,246 5,268 4,359 Operating income$ 1,406 $ 1,278 $ 2,090 $ 2,511 Operating margin 38.5 % 36.3 % 28.4 % 36.6 % Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests 169 47 277 165 Income tax benefit (expense) (361 ) (322 ) (347 ) (620 )
Net income attributable to BlackRock
$ 2,020 $ 2,056 Diluted earnings per common share$ 7.85 $ 6.41 $ 12.99 $ 13.02 Effective tax rate 22.9 % 24.3 % 14.7 % 23.2 % As adjusted(1): Operating income$ 1,406 $ 1,278 $ 2,679 $ 2,511 Operating margin 43.7 % 43.1 % 42.7 % 42.5 % Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests $ 169 $ 47 $ 155 $ 165 Net income attributable to BlackRock$ 1,214 $ 1,003 $ 2,246 $ 2,056 Diluted earnings per common share$ 7.85 $ 6.41 $ 14.44 $ 13.02 Effective tax rate 22.9 % 24.3 % 20.7 % 23.2 %
Other:
Assets under management (end of period)
$ 7,317,949 $ 6,842,482 Diluted weighted-average common shares outstanding(2) 154,712,032 156,360,741 155,556,187 157,853,711 Shares outstanding (end of period) 152,460,239 155,366,861 152,460,239 155,366,861 Book value per share(3)$ 214.68 $ 205.28 $ 214.68 $ 205.28 Cash dividends declared and paid per share$ 3.63 $ 3.30 $ 7.26 $ 6.60 (1) As adjusted items are described in more detail in Non-GAAP Financial Measures.
(2) Nonvoting participating preferred shares are considered to be common stock
equivalents for purposes of determining basic and diluted earnings per share
calculations.
(3) Total BlackRock stockholders' equity divided by total shares outstanding at
June 30 of the respective period-end. 42
--------------------------------------------------------------------------------
THREE MONTHS ENDED
GAAP. Operating income of$1,406 million and operating margin of 38.5% increased$128 million and 220 bps, respectively, from the second quarter of 2019. Operating income and operating margin reflected higher base fees, driven by organic growth and higher securities lending revenue, higher performance fees and 17% growth in technology services revenue. The increase in operating income also reflected lower general and administration expense, including the impact of$59 million of product launch costs in the second quarter of 2019. Nonoperating income (expense) less net income (loss) attributable to noncontrolling interests ("NCI") increased$122 million from the second quarter of 2019, primarily driven by mark-to-market gains onun -hedged seed capital investments and revaluation of a corporate minority investment.
Earnings per diluted common share increased
As Adjusted. Operating margin of 43.7% increased 60 bps from the second quarter of 2019.
SIX MONTHS ENDED
GAAP. Operating income of$2,090 million decreased$421 million and operating margin of 28.4% decreased 820 bps from the six months endedJune 30, 2019 . Operating income and operating margin reflected higher base fees, technology services revenue and performance fees, which were more than offset by higher expense, primarily driven by the impact of$589 million related to the Charitable Contribution. Nonoperating income (expense) less net income (loss) attributable to NCI increased$112 million from the six months endedJune 30, 2019 , driven by the impact of a pre-tax gain of approximately$240 million in connection with a recapitalization of iCapitalNetwork, Inc. ("iCapital") and$122 million pre-tax gain related to the Charitable Contribution, partially offset by mark-to-market losses onun -hedged seed capital investments. Income tax expense for the six months endedJune 30, 2020 and 2019 included$66 million and$14 million , respectively, of discrete tax benefits, including benefits related to stock-based compensation awards that vested in the first quarter of each year. Income tax benefit (expense) for the six months endedJune 30, 2020 included a discrete tax benefit of$241 million recognized in connection with the Charitable Contribution. See Income Tax Expense within Discussion of Financial Results for more information. Earnings per diluted common share decreased$0.03 from the six months endedJune 30, 2019 , reflecting the impact of the Charitable Contribution, partially offset by higher revenue, higher nonoperating income, a lower effective tax rate and a lower diluted share count for the six months endedJune 30, 2020 . As Adjusted. Operating income of$2,679 million increased$168 million and operating margin of 42.7% increased 20 bps from the six months endedJune 30, 2019 . Earnings per diluted common share increased$1.42 , or 11%, from the six months endedJune 30, 2019 , primarily due to higher operating income, a lower effective tax rate and a lower diluted share count in the six months endedJune 30, 2020 . The financial impact related to the Charitable Contribution has been excluded from as adjusted results. See Non-GAAP Financial Measures for further information on as adjusted items and the reconciliation to accounting principles generally accepted inthe United States ("GAAP").
For further discussion of BlackRock's revenue, expense, nonoperating results and income tax expense, see Discussion of Financial Results herein.
43
--------------------------------------------------------------------------------NON-GAAP FINANCIAL MEASURES
BlackRock reports its financial results in accordance with GAAP; however, management believes evaluating the Company's ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be helpful, for both management and investors, in evaluating BlackRock's financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include all of BlackRock's revenue and expense. BlackRock's management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP measures may not be comparable to other similarly titled measures of other companies.
Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock's financial performance. Adjustments to GAAP financial measures ("non-GAAP adjustments") include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock's book value or certain tax items that do not impact cash flow.
Computations for all periods are derived from the condensed consolidated statements of income as follows:
(1)_Operating income, as adjusted, and operating margin, as adjusted:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2020 2019 2020 2019
Operating income, GAAP basis $ 1,406 $ 1,278 $ 2,090 $ 2,511
Non-GAAP expense adjustment:
Charitable Contribution - - 589 -
Operating income, as adjusted 1,406 1,278 2,679 2,511
Product launch costs and
commissions - 61 87 61
Operating income used for operating
margin
measurement $ 1,406 $ 1,339 $ 2,766 $ 2,572
Revenue, GAAP basis $ 3,648 $ 3,524 $ 7,358 $ 6,870
Non-GAAP adjustments:
Distribution fees (253 ) (267 ) (529 ) (529 )
Investment advisory fees (176 ) (149 ) (345 ) (291 )
Revenue used for operating margin
measurement $ 3,219 $ 3,108 $ 6,484 $ 6,050
Operating margin, GAAP basis 38.5 % 36.3 % 28.4 % 36.6 %
Operating margin, as adjusted 43.7 % 43.1 % 42.7 % 42.5 %
Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock's financial performance over time, and, therefore, provide useful disclosure to investors. Management believes that operating margin, as adjusted, reflects the Company's long-term ability to manage ongoing costs in relation to its revenues. The Company uses operating margin, as adjusted, to assess the Company's financial performance and to determine the long-term and annual compensation of the Company's senior-level employees. Furthermore, this metric is used to evaluate the Company's relative performance against industry peers, as it eliminates margin variability arising from the accounting of revenues and expenses related to distributing different product structures in multiple distribution channels utilized by asset managers.
• Operating income, as adjusted, included a non-GAAP expense adjustment
during the six months ended
expense of $589 million has been excluded from operating income, as
adjusted, due to its nonrecurring nature.
• Operating income used for measuring operating margin, as adjusted, is
equal to operating income, as adjusted, excluding the impact of product
launch costs (e.g. closed-end fund launch costs) and related commissions.
Management believes the exclusion of such costs and related commissions is
useful because these costs can fluctuate considerably and revenue
associated with the expenditure of these costs will not fully impact
BlackRock's results until future periods.
• Revenue used for calculating operating margin, as adjusted, is reduced to
exclude all of the Company's distribution fees, which are recorded as a
separate line item on the condensed consolidated statements of income, as
well as a portion of investment advisory fees received that is used to pay
distribution and servicing costs. For certain products, based on distinct
arrangements, distribution fees are collected by the
44
--------------------------------------------------------------------------------
Company and then passed-through to third-party client intermediaries. For
other products, investment advisory fees are collected by the Company and
a portion is passed-through to third-party client intermediaries. However,
in both structures, the third-party client intermediary similarly owns the
relationship with the retail client and is responsible for distributing
the product and servicing the client. The amount of distribution and
investment advisory fees fluctuates each period primarily based on apredetermined percentage of the value of AUM during the period. These fees
also vary based on the type of investment product sold and the geographic
location where it is sold. In addition, the Company may waive fees on
certain products that could result in the reduction of payments to the
third-party intermediaries.
(2) Nonoperating income (expense), less net income (loss) attributable to NCI,
as adjusted:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2020 2019 2020 2019
Nonoperating income (expense), GAAP
basis $ 357 $ 57 $ 286 $ 182
Less: Net income (loss) attributable to
NCI 188 10 9 17
Nonoperating income (expense), net of
NCI 169 47 277 165
Less: Gain related to the Charitable
Contribution - - 122 -
Nonoperating income (expense), less net
income (loss)
attributable to NCI, as adjusted $ 169 $ 47 $ 155 $ 165
Management believes nonoperating income (expense), less net income (loss)
attributable to NCI, as adjusted, is an effective measure for reviewing
BlackRock's nonoperating contribution to its results and provides comparability
of this information among reporting periods. Management believes nonoperating
income (expense), less net income (loss) attributable to NCI, as adjusted,
provides a useful measure, for both management and investors, of BlackRock's
nonoperating results, which ultimately impact BlackRock's book value. During the
six months ended June 30, 2020 , the noncash, nonoperating pre-tax gain of $122
million related to the Charitable Contribution has been excluded from
nonoperating income (expense), less net income (loss) attributable to NCI, as
adjusted, due to its nonrecurring nature.
(3) Net income attributable to
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except per share data) 2020 2019 2020 2019
Net income attributable to BlackRock,
Inc., GAAP basis $ 1,214 $ 1,003 $ 2,020 $ 2,056
Non-GAAP adjustment:
Charitable Contribution, net of tax - - 226 -
Net income attributable to BlackRock,
Inc., as adjusted $ 1,214 $ 1,003 $ 2,246 $ 2,056
Diluted weighted-average common shares
outstanding (4) 154.7 156.4 155.6 157.9
Diluted earnings per common share, GAAP
basis (4) $ 7.85 $ 6.41 $ 12.99 $ 13.02
Diluted earnings per common share, as
adjusted (4) $ 7.85 $ 6.41 $
14.44
Management believes net income attributable toBlackRock, Inc. , as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock's profitability and financial performance. Net income attributable toBlackRock, Inc. , as adjusted, equals net income attributable toBlackRock, Inc. , GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock's book value or certain tax items that do not impact cash flow. See aforementioned discussion regarding operating income, as adjusted, operating margin, as adjusted, and nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, for information on the Charitable Contribution. The six months endedJune 30, 2020 included a discrete tax benefit of$241 million recognized in connection with the Charitable Contribution. The discrete tax benefit has been excluded from as adjusted results due to the non-recurring nature of the Charitable Contribution.
Per share amounts reflect net income attributable to
(4) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.
45
--------------------------------------------------------------------------------ASSETS UNDER MANAGEMENT
AUM for reporting purposes generally is based upon how investment advisory and administration fees are calculated for each portfolio. Net asset values, total assets, committed assets or other measures may be used to determine portfolio AUM.
AUM and Net Inflows (Outflows) by Client Type and Product Type
AUM Net inflows (outflows)
Three Months Six Months Twelve Months
Ended Ended Ended
June 30, March 31, December 31, June 30, June 30, June 30, June 30,
(in millions) 2020 2020 2019 2019 2020 2020 2020
Retail $ 695,154 $ 608,824 $ 703,297 $ 664,906 $ 16,210 $ 14,684 $ 29,393
iShares ETFs 2,162,597 1,852,190 2,240,065 2,008,867 50,970 64,802 181,509
Institutional:
Active 1,341,610 1,230,092 1,338,670 1,272,532 2,513 651 11,567
Index 2,482,336 2,178,499 2,599,882 2,413,191 (7,486 ) (36,589 ) (27,626 )
Institutional
subtotal 3,823,946 3,408,591 3,938,552 3,685,723 (4,973 ) (35,938 ) (16,059 )
Long-term 6,681,697 5,869,605 6,881,914 6,359,496 62,207 43,548 194,843
Cash management 619,351 594,089 545,949 481,208 24,198 76,639 138,426
Advisory(1) 16,901 2,974 1,770 1,778 13,812 15,019 15,021
Total $ 7,317,949 $ 6,466,668 $ 7,429,633 $ 6,842,482 $ 100,217 $ 135,206 $ 348,290 AUM and Net Inflows (Outflows) by Investment Style and Product Type
AUM Net inflows (outflows)
Three Months Six Months Twelve Months
Ended Ended Ended
June 30, March 31, December 31, June 30, June 30, June 30, June 30,
(in millions) 2020 2020 2019 2019 2020 2020 2020
Active $ 1,943,828 $ 1,758,548 $ 1,947,222 $ 1,853,393 $ 18,563 $ 9,618 $ 30,924
Index and iShares
ETFs 4,737,869 4,111,057 4,934,692 4,506,103 43,644 33,930 163,919
Long-term 6,681,697 5,869,605 6,881,914 6,359,496 62,207 43,548 194,843
Cash management 619,351 594,089 545,949 481,208 24,198 76,639 138,426
Advisory(1) 16,901 2,974 1,770 1,778 13,812 15,019 15,021
Total $ 7,317,949 $ 6,466,668 $ 7,429,633 $ 6,842,482 $ 100,217 $ 135,206 $ 348,290 AUM and Net Inflows (Outflows) by Product Type
AUM Net inflows (outflows)
Three Months Six Months Twelve Months
Ended Ended Ended
June 30, March 31, December 31, June 30, June 30, June 30, June 30,
(in millions) 2020 2020 2019 2019 2020 2020 2020
Equity $ 3,519,225 $ 2,959,662 $ 3,820,329 $ 3,485,869 $ (4,414 ) $ (1,252 ) $ 47,264
Fixed income 2,411,092 2,235,815 2,315,392 2,191,130 60,266 24,894 98,158
Multi-asset 551,362 494,177 568,121 523,728 (4,754 ) (363 ) 13,988
Alternatives:
Illiquid alternatives 76,607 75,101 75,349 67,910 1,585 4,152 11,335
Liquid alternatives 63,120 58,127 59,048 55,514 1,395 2,956 5,634
Currency and
commodities(2) 60,291 46,723 43,675 35,345 8,129 13,161 18,464
Alternatives subtotal 200,018 179,951 178,072 158,769 11,109 20,269 35,433
Long-term 6,681,697 5,869,605 6,881,914 6,359,496 62,207 43,548 194,843
Cash management 619,351 594,089 545,949 481,208 24,198 76,639 138,426
Advisory(1) 16,901 2,974 1,770 1,778 13,812 15,019 15,021
Total $ 7,317,949 $ 6,466,668 $ 7,429,633 $ 6,842,482 $ 100,217 $ 135,206 $ 348,290 (1) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the
York ("FRBNY") assignment as of
as of
above. These holdings are excluded from Advisory AUM.
(2) Amounts include commodity iShares ETFs.
46
--------------------------------------------------------------------------------
Component Changes in AUM for the Three Months Ended
The following table presents the component changes in AUM by client type and
product type for the three months ended
Net
March 31, inflows Market FX June 30, Average(in millions) 2020 (outflows) change impact(1) 2020 AUM(2) Retail: Equity$ 204,742 $ 7,134 $ 41,803 $ 425 $ 254,104 $ 234,908 Fixed income 278,057 8,656 13,721 726 301,160 290,404 Multi-asset 101,032 (1,345 ) 12,127 120 111,934 107,444 Alternatives 24,993 1,765 1,158 40 27,956 26,315 Retail subtotal 608,824 16,210 68,809 1,311 695,154 659,071 iShares ETFs: Equity 1,253,690 (14,249 ) 226,848 4,025 1,470,314 1,384,781 Fixed income 554,009 57,306 20,451 2,332 634,098 594,631 Multi-asset 4,499 52 503 20 5,074 4,850 Alternatives 39,992 7,861 5,205 53 53,111 46,967 iShares ETFs subtotal 1,852,190 50,970 253,007 6,430 2,162,597 2,031,229 Institutional: Active: Equity 112,440 (316 ) 20,937 871 133,932 124,521 Fixed income 625,345 4,978 33,808 2,562 666,693 646,344 Multi-asset 381,416 (3,337 ) 45,012 3,462 426,553 406,737 Alternatives 110,891 1,188 1,787 566 114,432 112,512 Active subtotal 1,230,092 2,513 101,544 7,461 1,341,610 1,290,114 Index: Equity 1,388,790 3,017 261,528 7,540 1,660,875 1,555,131 Fixed income 778,404 (10,674 ) 38,702 2,709 809,141 795,846 Multi-asset 7,230 (124 ) 682 13 7,801 7,628 Alternatives 4,075 295 153 (4 ) 4,519 4,229 Index subtotal 2,178,499 (7,486 ) 301,065 10,258 2,482,336 2,362,834 Institutional subtotal 3,408,591 (4,973 ) 402,609 17,719 3,823,946 3,652,948 Long-term 5,869,605 62,207 724,425 25,460 6,681,697 6,343,248 Cash management 594,089 24,198 143 921 619,351 621,985 Advisory(3) 2,974 13,812 94 21 16,901 10,546 Total$ 6,466,668 $ 100,217 $ 724,662 $ 26,402 $ 7,317,949 $ 6,975,779
(1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing four months.
(3) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the FRBNY assignment as of June
30, 2020 (disclosed via FRBNY reporting as of
within Fixed Income iShares ETFs AUM above. These holdings are excluded from
Advisory AUM.
47
--------------------------------------------------------------------------------
The following table presents the component changes in AUM by investment style
and product type for the three months ended
March 31, Net inflows Market FX
AUM(2)
Active:
Equity$ 252,758 $ 7,647 $ 51,204 $ 1,200 $ 312,809 $ 287,991 Fixed income 887,458 12,645 46,761 3,279 950,143 919,877 Multi-asset 482,450 (4,682 ) 57,139 3,582 538,489 514,181 Alternatives 135,882 2,953 2,946 606 142,387 138,826 Active subtotal 1,758,548 18,563 158,050 8,667 1,943,828 1,860,875 Index and iShares ETFs: iShares ETFs: Equity 1,253,690 (14,249 ) 226,848 4,025 1,470,314 1,384,781 Fixed income 554,009 57,306 20,451 2,332 634,098 594,631 Multi-asset 4,499 52 503 20 5,074 4,850 Alternatives 39,992 7,861 5,205 53 53,111 46,967 iShares ETFs 1,852,190 50,970 253,007 6,430 2,162,597 2,031,229 subtotal Non-ETF Index: Equity 1,453,214 2,188 273,064 7,636 1,736,102 1,626,569 Fixed income 794,348 (9,685 ) 39,470 2,718 826,851 812,717 Multi-asset 7,228 (124 ) 682 13 7,799 7,628 Alternatives 4,077 295 152 (4 ) 4,520 4,230 Non-ETF Index 2,258,867 (7,326 ) 313,368 10,363 2,575,272 2,451,144 subtotal Index & iShares ETFs subtotal 4,111,057 43,644 566,375 16,793 4,737,869 4,482,373 Long-term 5,869,605 62,207 724,425 25,460 6,681,697 6,343,248 Cash management 594,089 24,198 143 921 619,351 621,985 Advisory(3) 2,974 13,812 94 21 16,901 10,546 Total$ 6,466,668 $ 100,217 $ 724,662 $ 26,402 $ 7,317,949 $ 6,975,779
The following table presents the component changes in AUM by product type for
the three months ended
March 31, Net inflows Market FX June 30, Average
(in millions) 2020 (outflows) change impact(1) 2020 AUM(2)
Equity $ 2,959,662 $ (4,414 ) $ 551,116 $ 12,861 $ 3,519,225 $ 3,299,341
Fixed income 2,235,815 60,266 106,682 8,329 2,411,092 2,327,225
Multi-asset 494,177 (4,754 ) 58,324 3,615 551,362 526,659
Alternatives:
Illiquid 75,101 1,585 (365 ) 286 76,607 75,954
alternatives
Liquid alternatives 58,127 1,395 3,280 318 63,120 60,226
Currency and 46,723 8,129 5,388 51 60,291 53,843
commodities(4)
Alternatives 179,951 11,109 8,303 655 200,018 190,023
subtotal
Long-term 5,869,605 62,207 724,425 25,460 6,681,697 6,343,248
Cash management 594,089 24,198 143 921 619,351 621,985
Advisory(3) 2,974 13,812 94 21 16,901 10,546
Total $ 6,466,668 $ 100,217 $ 724,662 $ 26,402 $ 7,317,949 $ 6,975,779 (1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing four months.
(3) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the FRBNY assignment as of June
30, 2020 (disclosed via FRBNY reporting as of
within Fixed Income iShares ETFs AUM or Fixed Income AUM above. These
holdings are excluded from Advisory AUM.
(4) Amounts include commodity iShares ETFs.
48
-------------------------------------------------------------------------------- AUM increased$851.3 billion to$7.32 trillion atJune 30, 2020 , driven by net market appreciation, positive net inflows and the positive impact of foreign exchange movements.
Net market appreciation of
Long-term net inflows of$62.2 billion included$51.0 billion and$16.2 billion net inflows into iShares ETFs and retail, respectively, partially offset by net outflows of$5.0 billion from institutional clients. Net flows in long-term products are described below.
• iShares ETFs net inflows of
fixed income and sustainable ETFs, partially offset by net outflows from
international equity exposures, linked to portfolio tactical allocation
needs. Core and non-Core iShares ETFs saw net inflows of
$49.7 billion , respectively. By region, iShares ETFs inflows were diversified with$28.5 billion of net inflows in US-listed iShares ETFs and$21.2 billion of net inflows in European-listed iShares ETFs.
• Retail net inflows of
yield bond, active equity and event-driven liquid alternatives funds.
• Institutional active net inflows of $2.5 billion were driven by fixed
income, LifePath@ target-date funds, OCIO, systematic active equity and
illiquid alternatives strategies, partially offset by net outflows from
world allocation strategies.
• Institutional index net outflows of
fixed income net outflows of
equity, or de-risking and client liquidity needs, partially offset by net
inflows of
Cash management AUM increased to
AUM increased
49
--------------------------------------------------------------------------------
Component Changes in AUM for the Six Months Ended
The following table presents the component changes in AUM by client type and
product type for the six months ended
Net
December 31, inflows Market FX June 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Retail:
Equity $ 252,413 $ 16,236 $ (11,177 ) $ (3,368 ) $ 254,104 $ 240,942
Fixed income 305,265 243 (977 ) (3,371 ) 301,160 298,574
Multi-asset 120,439 (4,903 ) (3,048 ) (554 ) 111,934 112,349
Alternatives 25,180 3,108 (207 ) (125 ) 27,956 26,277
Retail subtotal 703,297 14,684 (15,409 ) (7,418 ) 695,154 678,142
iShares ETFs:
Equity 1,632,972 (3,801 ) (153,420 ) (5,437 ) 1,470,314 1,467,523
Fixed income 565,790 55,670 14,040 (1,402 ) 634,098 587,842
Multi-asset 5,210 76 (191 ) (21 ) 5,074 4,990
Alternatives 36,093 12,857 4,174 (13 ) 53,111 43,199
iShares ETFs subtotal 2,240,065 64,802 (135,397 ) (6,873 ) 2,162,597 2,103,554
Institutional:
Active:
Equity 141,118 708 (6,342 ) (1,552 ) 133,932 129,527
Fixed income 651,368 (8,930 ) 27,735 (3,480 ) 666,693 652,186
Multi-asset 434,233 4,857 (8,281 ) (4,256 ) 426,553 418,451
Alternatives 111,951 4,016 (492 ) (1,043 ) 114,432 112,359
Active subtotal 1,338,670 651 12,620 (10,331 ) 1,341,610 1,312,523
Index:
Equity 1,793,826 (14,395 ) (104,885 ) (13,671 ) 1,660,875 1,629,613
Fixed income 792,969 (22,089 ) 61,750 (23,489 ) 809,141 802,752
Multi-asset 8,239 (393 ) (49 ) 4 7,801 7,981
Alternatives 4,848 288 (541 ) (76 ) 4,519 4,406
Index subtotal 2,599,882 (36,589 ) (43,725 ) (37,232 ) 2,482,336 2,444,752
Institutional subtotal 3,938,552 (35,938 ) (31,105 ) (47,563 ) 3,823,946 3,757,275
Long-term 6,881,914 43,548 (181,911 ) (61,854 ) 6,681,697 6,538,971
Cash management 545,949 76,639 (117 ) (3,120 ) 619,351 587,844
Advisory(3) 1,770 15,019 142 (30 ) 16,901 6,798
Total $ 7,429,633 $ 135,206 $ (181,886 ) $ (65,004 ) $ 7,317,949 $ 7,133,613 (1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing seven months.
(3) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the FRBNY assignment as of June
30, 2020 (disclosed via FRBNY reporting as of
within Fixed Income iShares ETFs AUM above. These holdings are excluded from
Advisory AUM.
50
--------------------------------------------------------------------------------
The following table presents the component changes in AUM by investment style
and product type for the six months ended
Net
December 31, inflows Market FX June 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Active:
Equity $ 316,145 $ 11,554 $ (12,073 ) $ (2,817 ) $ 312,809 $ 296,949
Fixed income 939,275 (9,016 ) 25,926 (6,042 ) 950,143 933,514
Multi-asset 554,672 (44 ) (11,329 ) (4,810 ) 538,489 530,799
Alternatives 137,130 7,124 (699 ) (1,168 ) 142,387 138,635
Active subtotal 1,947,222 9,618 1,825 (14,837 ) 1,943,828 1,899,897
Index and iShares ETFs:
iShares ETFs:
Equity 1,632,972 (3,801 ) (153,420 ) (5,437 ) 1,470,314 1,467,523
Fixed income 565,790 55,670 14,040 (1,402 ) 634,098 587,842
Multi-asset 5,210 76 (191 ) (21 ) 5,074 4,990
Alternatives 36,093 12,857 4,174 (13 ) 53,111 43,199
iShares ETFs subtotal 2,240,065 64,802 (135,397 ) (6,873 ) 2,162,597 2,103,554
Non-ETF Index
Equity 1,871,212 (9,005 ) (110,331 ) (15,774 ) 1,736,102 1,703,133
Fixed income 810,327 (21,760 ) 62,582 (24,298 ) 826,851 819,998
Multi-asset 8,239 (395 ) (49 ) 4 7,799 7,982
Alternatives 4,849 288 (541 ) (76 ) 4,520 4,407
Non-ETF Index subtotal 2,694,627 (30,872 ) (48,339 ) (40,144 ) 2,575,272 2,535,520 Index & iShares ETFs subtotal 4,934,692
33,930 (183,736 ) (47,017 ) 4,737,869 4,639,074
Long-term 6,881,914 43,548 (181,911 ) (61,854 ) 6,681,697 6,538,971
Cash management 545,949 76,639 (117 ) (3,120 ) 619,351 587,844
Advisory(3) 1,770 15,019 142 (30 ) 16,901 6,798
Total $ 7,429,633 $ 135,206 $ (181,886 ) $ (65,004 ) $ 7,317,949 $ 7,133,613 The following table presents the component changes in AUM by product type for
the six months ended
Net
December 31, inflows Market FX June 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Equity $ 3,820,329 $ (1,252 ) $ (275,824 ) $ (24,028 ) $ 3,519,225 $ 3,467,605
Fixed income 2,315,392 24,894 102,548 (31,742 ) 2,411,092 2,341,354
Multi-asset 568,121 (363 ) (11,569 ) (4,827 ) 551,362 543,771
Alternatives:
Illiquid alternatives 75,349 4,152 (2,129 ) (765 ) 76,607 75,705
Liquid alternatives 59,048 2,956 1,535 (419 ) 63,120 60,261
Currency and commodities(4) 43,675 13,161 3,528 (73 ) 60,291 50,275
Alternatives subtotal 178,072 20,269 2,934 (1,257 ) 200,018 186,241
Long-term 6,881,914 43,548 (181,911 ) (61,854 ) 6,681,697 6,538,971
Cash management 545,949 76,639 (117 ) (3,120 ) 619,351 587,844
Advisory(3) 1,770 15,019 142 (30 ) 16,901 6,798
Total $ 7,429,633 $ 135,206 $ (181,886 ) $ (65,004 ) $ 7,317,949 $ 7,133,613 (1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing seven months.
(3) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the FRBNY assignment as of June
30, 2020 (disclosed via FRBNY reporting as of
within Fixed Income iShares ETFs AUM or Fixed Income AUM above. These
holdings are excluded from Advisory AUM.
(4) Amounts include commodity iShares ETFs.
51
--------------------------------------------------------------------------------
AUM decreased
Net market depreciation of$181.9 billion was primarily driven by the impact of first quarter global equity market declines, partially offset by fixed income market appreciation.
Long-term net inflows of
• iShares ETFs net inflows of
income and sustainable ETFs. Core and non-Core iShares ETFs saw net
inflows of
iShares ETFs inflows were diversified with
US-listed iShares ETFs and
iShares ETFs.
• Retail net inflows of
active equity and alternative products, partially offset by net outflows
from multi-asset world allocation strategies.
• Institutional index net outflows of
fixed income net outflows of
and client liquidity needs.
Cash management AUM increased to
AUM decreased
52
--------------------------------------------------------------------------------
Component Changes in AUM for the Twelve Months Ended
The following table presents the component changes in AUM by client type and
product type for the twelve months ended
Net
June 30, inflows Market FX June 30, Average(in millions) 2019 (outflows) change impact(1) 2020 AUM(2) Retail: Equity$ 232,429 $ 21,011 $ 2,307 $ (1,643 ) $ 254,104 $ 238,057 Fixed income 291,772 10,186 2,182 (2,980 ) 301,160 297,562 Multi-asset 118,135 (7,463 ) 1,660 (398 ) 111,934 114,692 Alternatives 22,570 5,659 (177 ) (96 ) 27,956 24,917 Retail subtotal 664,906 29,393 5,972 (5,117 ) 695,154 675,228 iShares ETFs: Equity 1,462,623 58,351 (45,191 ) (5,469 ) 1,470,314 1,476,916 Fixed income 513,843 104,309 17,688 (1,742 ) 634,098 563,566 Multi-asset 4,442 666 (17 ) (17 ) 5,074 4,833 Alternatives 27,959 18,183 6,981 (12 ) 53,111 38,367 iShares ETFs subtotal 2,008,867 181,509 (20,539 ) (7,240 ) 2,162,597 2,083,682 Institutional: Active: Equity 125,884 5,176 3,793 (921 ) 133,932 129,091 Fixed income 649,924 (26,222 ) 45,319 (2,328 ) 666,693 652,323 Multi-asset 393,101 21,311 16,119 (3,978 ) 426,553 410,295 Alternatives 103,623 11,302 179 (672 ) 114,432 109,375 Active subtotal 1,272,532 11,567 65,410 (7,899 ) 1,341,610 1,301,084 Index: Equity 1,664,933 (37,274 ) 41,472 (8,256 ) 1,660,875 1,651,852 Fixed income 735,591 9,885 73,443 (9,778 ) 809,141 786,774 Multi-asset 8,050 (526 ) 293 (16 ) 7,801 8,011 Alternatives 4,617 289 (353 ) (34 ) 4,519 4,490 Index subtotal 2,413,191 (27,626 ) 114,855 (18,084 ) 2,482,336 2,451,127 Institutional subtotal 3,685,723 (16,059 ) 180,265 (25,983 ) 3,823,946 3,752,211 Long-term 6,359,496 194,843 165,698 (38,340 ) 6,681,697 6,511,121 Cash management 481,208 138,426 1,516 (1,799 ) 619,351 552,549 Advisory(3) 1,778 15,021 136 (34 ) 16,901 4,472 Total$ 6,842,482 $ 348,290 $ 167,350 $ (40,173 ) $ 7,317,949 $ 7,068,142
(1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing thirteen months.
(3) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the FRBNY assignment as of June
30, 2020 (disclosed via FRBNY reporting as of
within Fixed Income iShares ETFs AUM above. These holdings are excluded from
Advisory AUM.
53
--------------------------------------------------------------------------------
The following table presents the component changes in AUM by investment style
and product type for the twelve months ended
Net
June 30, inflows Market FX June 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Active:
Equity $ 289,870 $ 17,570 $ 7,084 $ (1,715 ) $ 312,809 $ 295,079
Fixed income 926,097 (17,456 ) 46,473 (4,971 ) 950,143 933,192
Multi-asset 511,236 13,849 17,780 (4,376 ) 538,489 524,986
Alternatives 126,190 16,961 4 (768 ) 142,387 134,291
Active subtotal 1,853,393 30,924 71,341 (11,830 ) 1,943,828 1,887,548
Index and iShares
ETFs:
iShares ETFs:
Equity 1,462,623 58,351 (45,191 ) (5,469 ) 1,470,314 1,476,916
Fixed income 513,843 104,309 17,688 (1,742 ) 634,098 563,566
Multi-asset 4,442 666 (17 ) (17 ) 5,074 4,833
Alternatives 27,959 18,183 6,981 (12 ) 53,111 38,367
iShares ETFs 2,008,867 181,509 (20,539 ) (7,240 ) 2,162,597 2,083,682
subtotal
Non-ETF Index:
Equity 1,733,376 (28,657 ) 40,488 (9,105 ) 1,736,102 1,723,921
Fixed income 751,190 11,305 74,471 (10,115 ) 826,851 803,467
Multi-asset 8,050 (527 ) 292 (16 ) 7,799 8,012
Alternatives 4,620 289 (355 ) (34 ) 4,520 4,491
Non-ETF Index 2,497,236 (17,590 ) 114,896 (19,270 ) 2,575,272 2,539,891
subtotal
Index & iShares
ETFs subtotal 4,506,103 163,919 94,357 (26,510 ) 4,737,869 4,623,573
Long-term 6,359,496 194,843 165,698 (38,340 ) 6,681,697 6,511,121
Cash management 481,208 138,426 1,516 (1,799 ) 619,351 552,549
Advisory(3) 1,778 15,021 136 (34 ) 16,901 4,472
Total $ 6,842,482 $ 348,290 $ 167,350 $ (40,173 ) $ 7,317,949 $ 7,068,142 The following table presents the component changes in AUM by product type for
the twelve months ended
Net
June 30, inflows Market FX June 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Equity $ 3,485,869 $ 47,264 $ 2,381 $ (16,289 ) $ 3,519,225 $ 3,495,916
Fixed income 2,191,130 98,158 138,632 (16,828 ) 2,411,092 2,300,225
Multi-asset 523,728 13,988 18,055 (4,409 ) 551,362 537,831
Alternatives:
Illiquid 67,910 11,335 (2,147 ) (491 ) 76,607 73,083
alternatives
Liquid alternatives 55,514 5,634 2,246 (274 ) 63,120 58,510
Currency and 35,345 18,464 6,531 (49 ) 60,291 45,556
commodities(4)
Alternatives 158,769 35,433 6,630 (814 ) 200,018 177,149
subtotal
Long-term 6,359,496 194,843 165,698 (38,340 ) 6,681,697 6,511,121
Cash management 481,208 138,426 1,516 (1,799 ) 619,351 552,549
Advisory(3) 1,778 15,021 136 (34 ) 16,901 4,472
Total $ 6,842,482 $ 348,290 $ 167,350 $ (40,173 ) $ 7,317,949 $ 7,068,142 (1) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing thirteen months.
(3) Advisory AUM represents mandates linked to purchases and disposition of
assets and portfolios on behalf of official institutions and long-term
portfolio liquidation assignments. Approximately
AUM held in advisory accounts associated with the FRBNY assignment as of June
30, 2020 (disclosed via FRBNY reporting as of
within Fixed Income iShares ETFs AUM or Fixed Income AUM above. These
holdings are excluded from Advisory AUM.
(4) Amounts include commodity iShares ETFs.
54
--------------------------------------------------------------------------------
AUM increased
Net market appreciation of
Long-term net inflows of$194.8 billion were comprised of net inflows of$181.5 billion ,$29.4 billion and$11.5 billion into iShares ETFs, retail and institutional active products, respectively, partially offset by net outflows of$27.6 billion from institutional index products. Net flows in long-term products are described below.
• iShares ETFs net inflows of
By region, iShares ETFs inflows were diversified with
net inflows in US-listed iShares ETFs and
European-listed iShares ETFs. Fixed income net inflows of
were led by flows into investment grade corporate bonds, treasuries, high
yield and core bond ETFs. Equity net inflows of $58.4 billion were driven
by both US and international equity market exposures.
• Retail net inflows of
net inflows reflected strength in global equity and sector equity funds,
high yield and municipal fixed income funds, and alternative funds.
• Institutional active net inflows of
continued growth in
systematic active equity, partially offset by active fixed income net
outflows.
• Institutional index net outflows of
equity net outflows of
reallocating, rebalancing and liquidity needs in a more uncertain market
environment, partially offset by fixed income net inflows of
driven by demand for liability-driven investment solutions.
Cash management AUM increased to
AUM decreased
55
--------------------------------------------------------------------------------
DISCUSSION OF FINANCIAL RESULTS
The Company's results of operations for the three and six months endedJune 30, 2020 and 2019 are discussed below. For a further description of the Company's revenue and expense, see the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 ("2019 Form 10-K").
Revenue
The table below presents detail of revenue for the three and six months endedJune 30, 2020 and 2019 and includes the product type mix of investment advisory, administration fees and securities lending revenue (collectively "base fees") and performance fees. Three Months Ended Six Months Ended June 30, June 30, (in millions) 2020 2019 2020 2019 Investment advisory, administration fees and securities lending revenue: Equity: Active$ 381 $ 385 $ 779 $ 760 iShares ETFs 792 870 1,671 1,717 Non-ETF Index 178 163 341 327 Equity subtotal 1,351 1,418 2,791 2,804 Fixed income: Active 464 474 945 931 iShares ETFs 261 234 520 454 Non-ETF Index 129 98 241 195 Fixed income subtotal 854 806 1,706 1,580 Multi-asset 270 288 563 564 Alternatives: Illiquid alternatives 128 118 276 228 Liquid alternatives 117 102 229 196 Currency and commodities(1) 35 24 67 48 Alternatives subtotal 280 244 572 472 Long-Term 2,755 2,756 5,632 5,420 Cash management 211 147 389 288 Total base fees 2,966 2,903 6,021 5,708 Investment advisory performance fees: Equity 23 4 25 4 Fixed income 2 - 4 2 Multi-asset 2 6 3 6 Alternatives: Illiquid alternatives 32 15 49 35 Liquid alternatives 53 39 72 43 Alternatives subtotal 85 54 121 78 Total performance fees 112 64 153 90 Technology services revenue 278 237 552 441 Distribution fees: Retrocessions 162 164 331 325 12b-1 fees (US mutual fund distribution fees) 78 88 169 177 Other 13 15 29 27 Total distribution fees 253 267 529 529 Advisory and other revenue: Advisory 17 22 34 41 Other 22 31 69 61 Total advisory and other revenue 39 53 103 102 Total revenue$ 3,648 $ 3,524 $ 7,358 $ 6,870
(1) Amounts include commodity iShares ETFs.
56
--------------------------------------------------------------------------------The table below lists base fees and mix of average AUM by product type:
Three Months Ended June 30, Six Months Ended June 30,
Mix of Average AUM Mix of Average AUM
Mix of Base Fees by Product Type(1) Mix of Base Fees by Asset Class(2)
2020 2019 2020 2019 2020 2019 2020 2019
Equity:
Active 13 % 13 % 4 % 4 % 12 % 13 % 4 % 4 %
iShares ETFs 27 % 30 % 20 % 22 % 28 % 30 % 21 % 22 %
Non-ETF Index 6 % 6 % 24 % 25 % 6 % 6 % 24 % 25 %
Equity subtotal 46 % 49 % 48 % 51 % 46 % 49 % 49 % 51 %
Fixed income:
Active 16 % 17 % 12 % 14 % 16 % 17 % 12 % 13 %
iShares ETFs 9 % 8 % 9 % 7 % 9 % 8 % 8 % 7 %
Non-ETF Index 4 % 3 % 12 % 11 % 4 % 3 % 12 % 11 %
Fixed income subtotal 29 % 28 % 33 % 32 % 29 % 28 % 32 % 31 %
Multi-asset 9 % 10 % 8 % 8 % 9 % 10 % 8 % 8 %
Alternatives:
Illiquid alternatives 4 % 4 % 1 % 1 % 5 % 4 % 1 % 1 %
Liquid alternatives 4 % 3 % 1 % 1 % 4 % 3 % 1 % 1 %
Currency and
commodities(3) 1 % 1 % 1 % - % 1 % 1 % 1 % 1 %
Alternatives subtotal 9 % 8 % 3 % 2 % 10 % 8 % 3 % 3 %
Long-term 93 % 95 % 92 % 93 % 94 % 95 % 92 % 93 %
Cash management 7 % 5 % 8 % 7 % 6 % 5 % 8 % 7 %
Total excluding
Advisory AUM 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %
(1) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing four months.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing seven months.
(3) Amounts include commodity iShares ETFs.
Three Months Ended
Revenue increased
Investment advisory, administration fees and securities lending revenue of$2,966 million increased$63 million from$2,903 million for the three months endedJune 30, 2019 , primarily driven by organic growth and higher securities lending revenue, partially offset by the negative impact of equity beta and foreign exchange movements on average AUM, and strategic pricing changes to certain products. Securities lending revenue of$210 million in the current quarter increased$60 million from$150 million in second quarter of 2019, primarily reflecting higher asset spreads and average balances of securities on loan.
Investment advisory performance fees of
Technology services revenue of
Advisory and other revenue of$39 million decreased$14 million from$53 million for the three months endedJune 30, 2019 , primarily reflecting the impact of the previously discussed Charitable Contribution of the remaining 20% stake inPennyMac in the first quarter of 2020. 57 --------------------------------------------------------------------------------
Six Months Ended
Revenue increased
Investment advisory, administration fees and securities lending revenue of$6,021 million increased$313 million from$5,708 million for the six months endedJune 30, 2019 , primarily driven by organic growth, partially offset by the negative impact of equity beta and foreign exchange movements on average AUM, and strategic pricing changes to certain products. Securities lending revenue of$368 million increased$70 million from$298 million for the six months endedJune 30, 2019 , primarily reflecting higher asset spreads and average balances of securities on loan. Investment advisory performance fees of$153 million increased$63 million from$90 million for the six months endedJune 30, 2019 , primarily reflecting higher revenue from alternative and long-only equity products. Technology services revenue of$552 million increased$111 million from$441 million for the six months endedJune 30, 2019 , primarily reflecting higher revenue from Aladdin and the impact of the eFront acquisition, which closed in May of 2019. Expense Three Months Ended Six Months Ended June 30, June 30, (in millions) 2020 2019 2020 2019 Expense:
Employee compensation and benefits
2,289$ 2,147 Distribution and servicing costs: Retrocessions 162 164 331 325 12b-1 costs 75 88 164 176 Other 192 164 379 319 Total distribution and servicing costs 429 416 874 820 Direct fund expense 246 252 523 494 General and administration: Marketing and promotional 39 81 108 162 Occupancy and office related 80 75 158 149 Portfolio services 65 65 130 127 Technology 92 67 180 136 Professional services 41 44 85 77 Communications 14 10 26 19 Foreign exchange remeasurement 1 12 6 20 Contingent consideration fair value adjustments (2 ) 13 23 19 Product launch costs - 59 84 59 Charitable Contribution - - 589 - Other general and administration 58 44 141 90 Total general and administration expense 388 470 1,530 858 Amortization of intangible assets 27 25 52 40 Total expense$ 2,242 $ 2,246 $ 5,268 $ 4,359 58
--------------------------------------------------------------------------------
Three Months Ended
Expense decreased
Employee compensation and benefits expense increased
General and administration expense decreased$82 million from the three months endedJune 30, 2019 , reflecting lower marketing and promotional expense, lower contingent consideration fair value adjustments related to prior acquisitions and lower foreign exchange remeasurement expense, partially offset by higher technology expense, including certain costs related to COVID-19 and a$12 million impairment of a fixed asset incurred in the three months endedJune 30, 2020 . The decrease also reflected the impact of$59 million of product launch costs incurred in the three months endedJune 30, 2019 .
Six Months Ended
Expense increased$909 million from the six months endedJune 30, 2019 , primarily driven by higher general and administration expense, including the impact of the Charitable Contribution, higher employee compensation and benefits expense, and higher volume-related expense.
Employee compensation and benefits expense increased
Direct fund expense increased
General and administration expense increased$672 million from the six months endedJune 30, 2019 , primarily driven by the$589 million of expense related to the Charitable Contribution, higher product launch costs and higher technology expense, including certain costs related to COVID-19, costs related to certain legal matters, includingAviron Capital, LLC ., and a$12 million impairment of a fixed asset. The increase was partially offset by lower marketing and promotional expense and lower foreign exchange remeasurement expense in the six months endedJune 30, 2020 . 59
--------------------------------------------------------------------------------
Nonoperating Results
The summary of nonoperating income (expense), less net income (loss) attributable to NCI for the three and six months endedJune 30, 2020 and 2019 was as follows: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2020 2019 2020 2019 Nonoperating income (expense), GAAP basis(1) $ 357 $ 57$ 286 $ 182 Less: Net income (loss) attributable to NCI 188 10 9 17 Nonoperating income (expense), net of NCI(2) $ 169 $ 47$ 277 $ 165 Three Months Ended Six Months Ended June 30, June 30, (in millions) 2020 2019 2020 2019 Net gain (loss) on investments(1)(2) Private equity $ 8 $ 32$ (10 ) $ 32 Real assets - 4 5 10 Other alternatives(3) 21 7 (4 ) 15 Other investments(4) 130 31 (20 ) 104 Subtotal 159 74 (29 ) 161 Gain related to the Charitable Contribution - - 122 - Other gains (losses)(5) 51 5 256 53 Total net gain (loss) on investments(1)(2) 210 79 349 214 Interest and dividend income 10 20 25 49 Interest expense (51 ) (52 ) (97 ) (98 ) Net interest expense (41 ) (32 ) (72 ) (49 )
Nonoperating income (expense)(1)
277$ 165
(1) Net of net income (loss) attributable to NCI.
(2) Management believes nonoperating income (expense), less net income (loss)
attributable to NCI, is an effective measure for reviewing BlackRock's
nonoperating results, which ultimately impacts BlackRock's book value. See
Non-GAAP Financial Measures for further information on non-GAAP financial
measures for the three and six months ended
(3) Amounts primarily include net gains (losses) related to direct hedge fund
strategies and hedge fund solutions.
(4) Amounts primarily include net gains (losses) related to unhedged equity,
fixed income and multi-asset seed investments.
(5) Amount for the six months ended
gain of approximately
iCapital. Additional amounts primarily include noncash pre-tax gains (losses)
related to the revaluation of a corporate minority investment.
60
--------------------------------------------------------------------------------
Income Tax Expense (Benefit)
GAAP As Adjusted(1)
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
(in millions) 2020 2019 2020 2019
2020 2019 2020 2019 Operating income(1)$ 1,406 $ 1,278 $ 2,090 $ 2,511 $ 1,406 $ 1,278 $ 2,679 $ 2,511 Total nonoperating income (expense)(1)(2)$ 169 $ 47 $ 277 $ 165 $ 169 $ 47 $ 155 $ 165 Income before income taxes$ 1,575 $ 1,325 $ 2,367 $ 2,676 $ 1,575 $ 1,325 $ 2,834 $ 2,676 Income tax expense$ 361 $ 322 $ 347 $ 620 $ 361 $ 322 $ 588 $ 620 Effective tax rate 22.9 % 24.3 % 14.7 % 23.2 % 22.9 % 24.3 % 20.7 % 23.2 %
(1) As adjusted items are described in more detail in Non-GAAP Financial
Measures.
(2) Net of net income (loss) attributable to NCI.
2020. The six months endedJune 30, 2020 income tax expense (benefit) included a discrete tax benefit of$241 million recognized in connection with the Charitable Contribution, which was excluded from as adjusted results, and$66 million of discrete tax benefits, including benefits related to stock-based compensation awards that vested in the first quarter of 2020. 2019. The six months endedJune 30, 2019 included$14 million of discrete tax benefits, including benefits related to stock-based compensation awards that vested in the first quarter of 2019. 61 --------------------------------------------------------------------------------
STATEMENT OF FINANCIAL CONDITION OVERVIEW
As Adjusted Statement of Financial Condition
The following table presents a reconciliation of the condensed consolidated statement of financial condition presented on a GAAP basis to the condensed consolidated statement of financial condition, excluding the impact of separate account assets and separate account collateral held under securities lending agreements (directly related to lending separate account securities) and separate account liabilities and separate account collateral liabilities under securities lending agreements and consolidated sponsored investment products. The Company presents the as adjusted statement of financial condition as additional information to enable investors to exclude certain assets that have equal and offsetting liabilities or noncontrolling interests that ultimately do not have an impact on stockholders' equity or cash flows. Management views the as adjusted statement of financial condition, which contains non-GAAP financial measures, as an economic presentation of the Company's total assets and liabilities; however, it does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Separate Account Assets and Liabilities and Separate Account Collateral Held under Securities Lending Agreements
Separate account assets are maintained byBlackRock Life Limited , a wholly owned subsidiary of the Company that is a registered life insurance company in theUnited Kingdom , and represent segregated assets held for purposes of funding individual and group pension contracts. The Company records equal and offsetting separate account liabilities. The separate account assets are not available to creditors of the Company and the holders of the pension contracts have no recourse to the Company's assets. The net investment income attributable to separate account assets accrues directly to the contract owners and is not reported on the condensed consolidated statements of income. While BlackRock has no economic interest in these assets or liabilities, BlackRock earns an investment advisory fee for the service of managing these assets on behalf of its clients. In addition, the Company records on its condensed consolidated statements of financial condition the separate account collateral received underBlackRock Life Limited securities lending arrangements as its own asset in addition to an equal and offsetting separate account collateral liability for the obligation to return the collateral. The collateral is not available to creditors of the Company, and the borrowers under the securities lending arrangements have no recourse to the Company's assets.
Consolidated Sponsored Investment Products
The Company consolidates certain sponsored investment products accounted for as
variable interest entities ("VIEs") and voting rights entities ("VREs"),
(collectively, "consolidated sponsored investment products"). See Note 2,
Significant Accounting Policies, in the notes to the consolidated financial
statements contained in the 2019 Form 10-K for more information on the Company's
consolidation policy.
62
--------------------------------------------------------------------------------
The Company cannot readily access cash and cash equivalents or other assets held
by consolidated sponsored investment products to use in its operating
activities. In addition, the Company cannot readily sell investments held by
consolidated sponsored investment products in order to obtain cash for use in
the Company's operations.
June 30, 2020
Separate Consolidated
Account Sponsored
GAAP Assets/ Investment As
(in millions) Basis Collateral(1) Products(2) Adjusted
Assets
Cash and cash equivalents $ 5,466 $ - $ 275 $ 5,191
Accounts receivable 2,990 - - 2,990
Investments 5,171 - 1,317 3,854
Separate account assets and
collateral held
under securities lending agreements 106,297 106,297 - -
Other assets(3) 4,545 - 104 4,441
Subtotal 124,469 106,297 1,696 16,476
Goodwill and intangible assets, net 32,873 - - 32,873
Total assets $ 157,342 $ 106,297 $ 1,696 $ 49,349
Liabilities
Accrued compensation and benefits $ 1,189 $ - $ - $ 1,189
Accounts payable and accrued
liabilities 914 - - 914
Borrowings 7,190 - - 7,190
Separate account liabilities and
collateral
liabilities under securities
lending agreements 106,297 106,297 - -
Deferred income tax liabilities(4) 3,664 - - 3,664
Other liabilities 4,054 - 392 3,662
Total liabilities 123,308 106,297 392 16,619
Equity
Total stockholders' equity 32,730 - - 32,730
Noncontrolling interests 1,304 - 1,304 -
Total equity 34,034 - 1,304 32,730
Total liabilities and equity $ 157,342 $ 106,297 $ 1,696 $ 49,349 (1) Amounts represent segregated client assets and related liabilities, in which
BlackRock has no economic interest. BlackRock earns an investment advisory
fee for the service of managing these assets on behalf of its clients.
(2) Amounts represent the portion of assets and liabilities of consolidated
sponsored investment products attributable to NCI.
(3) Amounts include property and equipment and other assets.
(4) Amounts include approximately
related to goodwill and intangibles.
The following discussion summarizes the significant changes in assets and liabilities on a GAAP basis. Please see the condensed consolidated statements of financial condition as ofJune 30, 2020 andDecember 31, 2019 contained in Part I, Item 1 of this filing. The discussion does not include changes related to assets and liabilities that are equal and offsetting and have no impact on BlackRock's stockholders' equity. Assets. Cash and cash equivalents atJune 30, 2020 andDecember 31, 2019 included$275 million and$141 million , respectively, of cash held by consolidated sponsored investment products (see Liquidity and Capital Resources for details on the change in cash and cash equivalents during the six months endedJune 30, 2020 ). Accounts receivable atJune 30, 2020 decreased$189 million fromDecember 31, 2019 , primarily due to lower receivables from base fees, partially offset by higher securities lending and technology services receivables. Investments, including the impact of consolidated sponsored investment products, decreased$318 million fromDecember 31, 2019 (for more information see Investments herein).Goodwill and intangible assets decreased$58 million fromDecember 31, 2019 , primarily due to amortization of intangible assets. Other assets (including operating lease right-of-use assets and property and equipment) increased$661 million fromDecember 31, 2019 , primarily due to an increase in unit trust receivables (substantially offset by an increase in unit trust payables recorded within other liabilities), partially offset by a net decrease in certain corporate minority investments, primarily related to the previously discussed Charitable Contribution of the remaining 20% stake inPennyMac . 63 -------------------------------------------------------------------------------- Liabilities. Accrued compensation and benefits atJune 30, 2020 decreased$868 million fromDecember 31, 2019 , primarily due to 2019 incentive compensation cash payments in the first quarter of 2020, partially offset by 2020 incentive compensation accruals. Accounts payable and accrued liabilities atJune 30, 2020 decreased$253 million fromDecember 31, 2019 , primarily due to lower current income taxes payables. Other liabilities increased$584 million fromDecember 31, 2019 , primarily due to higher unit trust payables (substantially offset by an increase in unit trust receivables recorded within other assets), partially offset by lower contingent liabilities related to certain acquisitions. Net deferred income tax liabilities atJune 30, 2020 decreased$70 million fromDecember 31, 2019 , primarily due to the effects of temporary differences associated with investment income and the income tax benefit related to the Charitable Contribution, partially offset by the effects of temporary differences associated with stock-based compensation.
Investments
The Company's investments were$5,171 million and$5,489 million atJune 30, 2020 andDecember 31, 2019 , respectively. Investments include consolidated investments held by sponsored investment products accounted for as VREs and VIEs. Management reviews BlackRock's investments on an "economic" basis, which eliminates the portion of investments that does not impact BlackRock's book value or net income attributable to BlackRock. BlackRock's management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The Company presents investments, as adjusted, to enable investors to understand the portion of investments that is owned by the Company, net of NCI, as a gauge to measure the impact of changes in net nonoperating income (expense) on investments to net income (loss) attributable to BlackRock. The Company further presents net "economic" investment exposure, net of deferred compensation investments and hedged investments, to reflect another helpful measure for investors. The economic impact of investments held pursuant to deferred compensation arrangements is offset by a change in compensation expense. The impact of certain investments is substantially mitigated by swap hedges. Carried interest capital allocations are excluded as there is no impact to BlackRock's stockholders' equity until such amounts are realized as performance fees. Finally, the Company's regulatory investment inFederal Reserve Bank stock, which is not subject to market or interest rate risk, is excluded from the Company's net economic investment exposure. June 30, December 31, (in millions) 2020 2019 Investments, GAAP $ 5,171 $ 5,489 Investments held by consolidated sponsored investment products (3,393 ) (3,784 ) Net interest in consolidated sponsored investment products(1) 2,076 2,290 Investments, as adjusted 3,854 3,995 Federal Reserve Bank stock (94 ) (93 ) Deferred compensation investments (5 ) (23 ) Hedged investments (667 ) (644 ) Carried interest (458 ) (528 ) Total "economic" investment exposure(2) $ 2,630 $ 2,707
(1) Amounts include
and
Company's "economic" investment exposure.
(2) Amounts exclude investments in corporate minority investments included in
other assets on the condensed consolidated statements of financial condition.
64
--------------------------------------------------------------------------------
The following table represents the carrying value of the Company's economic
investment exposure, by asset type, at
June 30, December 31,
(in millions) 2020 2019
Equity(1) $ 651 $ 609
Fixed income(2) 913 1,008
Multi-asset(3) 147 178
Alternatives:
Private equity 394 355
Real assets 279 322
Other alternatives(4) 246 235
Alternatives subtotal 919 912
Total "economic" investment exposure
(1) Equity includes unhedged seed investments in equity mutual funds/strategies
and equity securities.
(2) Fixed income includes unhedged seed investments in fixed income mutual
funds/strategies, bank loans and
regulatory purposes.
(3) Multi-asset includes unhedged seed investments in multi-asset mutual
funds/strategies.
(4) Other alternatives include direct hedge fund strategies and hedge fund
solutions.
As adjusted investment activity for the six months endedJune 30, 2020 was as follows: Six Months Ended (in millions)June 30, 2020 Investments, as adjusted, beginning balance $
3,995
Purchases/capital contributions 657 Sales/maturities (489 ) Distributions(1)
(135 ) Market appreciation(depreciation)/earnings from equity method investments
(77 )
Carried interest capital allocations/(distributions) (70 )
Other(2) (27 )
Investments, as adjusted, ending balance $ 3,854
(1) Amount includes distributions representing return of capital and return on
investments.
(2) Amount includes the impact of foreign exchange movements.
65
--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
BlackRock Cash Flows Excluding the Impact of Consolidated Sponsored Investment Products
The condensed consolidated statements of cash flows include the cash flows of the consolidated sponsored investment products. The Company uses an adjusted cash flow statement, which excludes the impact of consolidated sponsored investment products, as a supplemental non-GAAP measure to assess liquidity and capital requirements. The Company believes that its cash flows, excluding the impact of the consolidated sponsored investment products, provide investors with useful information on the cash flows of BlackRock relating to its ability to fund additional operating, investing and financing activities. BlackRock's management does not advocate that investors consider such non-GAAP measures in isolation from, or as a substitute for, its cash flows presented in accordance with GAAP. The following table presents a reconciliation of the condensed consolidated statements of cash flows presented on a GAAP basis to the condensed consolidated statements of cash flows, excluding the impact of the cash flows of consolidated sponsored investment products:
© Edgar Online, source
