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$7.81 trillion of AUM atSeptember 30, 2020 . With approximately 16,600 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 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.
40
--------------------------------------------------------------------------------COVID-19 Impact The COVID-19 pandemic continues to result in authorities taking numerous measures 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. 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.
41
--------------------------------------------------------------------------------
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. 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 nine months endedSeptember 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. 42 --------------------------------------------------------------------------------
EXECUTIVE SUMMARY
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions, except shares and per
share data) 2020 2019 2020 2019
GAAP basis:
Total revenue $ 4,369 $ 3,692 $ 11,727 $ 10,562
Total expense 2,612 2,190 7,880 6,549
Operating income $ 1,757 $ 1,502 $ 3,847 $ 4,013
Operating margin 40.2 % 40.7 % 32.8 % 38.0 %
Nonoperating income (expense), less net
income (loss)
attributable to noncontrolling
interests 71 (42 ) 348 123
Income tax benefit (expense) (464 ) (341 ) (811 ) (961 )
Net income attributable to BlackRock
$ 3,384 $ 3,175 Diluted earnings per common share$ 8.87 $ 7.15 $ 21.84 $ 20.17 Effective tax rate 25.4 % 23.3 % 19.3 % 23.2 % As adjusted(1): Operating income$ 1,757 $ 1,502 $ 4,436 $ 4,013 Operating margin 47.0 % 46.0 % 44.3 % 43.7 % Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests $ 71 $ (42 ) $ 226 $ 123 Net income attributable to BlackRock$ 1,418 $ 1,119 $ 3,664 $ 3,175 Diluted earnings per common share$ 9.22 $ 7.15 $ 23.64 $ 20.17 Effective tax rate 22.5 % 23.3 % 21.4 % 23.2 %
Other:
Assets under management (end of period)
$ 7,808,497 $ 6,963,932 Diluted weighted-average common shares outstanding(2) 153,742,264 156,447,387 154,959,812 157,385,956 Shares outstanding (end of period) 152,496,403 155,173,103 152,496,403 155,173,103 Book value per share(3)$ 222.12 $ 208.84 $ 222.12 $ 208.84 Cash dividends declared and paid per share$ 3.63 $ 3.30 $ 10.89 $ 9.90 (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
September 30 of the respective period-end. 43
--------------------------------------------------------------------------------
THREE MONTHS ENDED
GAAP. Operating income of$1,757 million increased$255 million and operating margin of 40.2% decreased 50 bps from the third quarter of 2019. Operating income and operating margin reflected higher performance fees and continued organic growth, partially offset by higher employee compensation and benefits expense and the impact of$83 million of product launch costs associated with theSeptember 2020 close of the$2 billion BlackRock Capital Allocation Trust. Nonoperating income (expense) less net income (loss) attributable to noncontrolling interests ("NCI") increased$113 million from the third quarter of 2019, primarily driven by mark-to-market gains onun -hedged seed and co-investment capital. Income tax expense for the third quarter of 2020 included a$54 million noncash net expense, related to the revaluation of certain deferred tax assets and liabilities as a result of legislation enacted in theUnited Kingdom increasing its corporate tax rate.
Earnings per diluted common share increased
As Adjusted. Operating margin of 47.0% increased 100 bps from the third quarter of 2019. Income tax expense for the third quarter of 2020 excluded the$54 million noncash net expense described above. Earnings per diluted common share increased$2.07 , or 27%, from the third quarter of 2019.
NINE MONTHS ENDED
GAAP. Operating income of$3,847 million decreased$166 million and operating margin of 32.8% decreased 520 bps from the nine months endedSeptember 30, 2019 . Operating income and operating margin reflected higher investment advisory, administration fees and securities lending revenue (collectively "base fees"), performance fees and technology services revenue, which were more than offset by higher expense, including the impact of$589 million related to the Charitable Contribution and higher product launch costs for the nine months endedSeptember 30, 2020 . Nonoperating income (expense) less net income (loss) attributable to NCI increased$225 million from the nine months endedSeptember 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 lower mark-to-market gains onun -hedged seed capital investments for the nine months endedSeptember 30, 2020 . Income tax expense for the nine months endedSeptember 30, 2020 included$78 million of discrete tax benefits, including benefits related to stock-based compensation awards that vested in the first quarter of 2020. Income tax expense for the nine months endedSeptember 30, 2020 included a discrete tax benefit of$241 million recognized in connection with the Charitable Contribution and a noncash net expense of approximately$54 million related to the legislation enacted in theUnited Kingdom described above. See Income Tax Expense within Discussion of Financial Results for more information. Earnings per diluted common share increased$1.67 from the nine months endedSeptember 30, 2019 , reflecting higher revenue and nonoperating income, a lower effective tax rate and a lower diluted share count, partially offset by the impact of the Charitable Contribution and higher product launch costs for the nine months endedSeptember 30, 2020 . As Adjusted. Operating income of$4,436 million increased$423 million and operating margin of 44.3% increased 60 bps from the nine months endedSeptember 30, 2019 . Earnings per diluted common share increased$3.47 , or 17%, from the nine months endedSeptember 30, 2019 , primarily due to higher operating and nonoperating income, a lower effective tax rate and a lower diluted share count in the nine months endedSeptember 30, 2020 . The financial impact related to the Charitable Contribution and legislation enacted in theUK increasing its tax rate 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.
44
--------------------------------------------------------------------------------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 Nine Months Ended
September 30, September 30,
(in millions) 2020 2019 2020 2019
Operating income, GAAP basis $ 1,757 $ 1,502 $ 3,847 $ 4,013
Non-GAAP expense adjustment:
Charitable Contribution - - 589 -
Operating income, as adjusted 1,757 1,502 4,436 4,013
Product launch costs and
commissions 83 - 170 61
Operating income used for operating
margin
measurement $ 1,840 $ 1,502 $ 4,606 $ 4,074
Revenue, GAAP basis $ 4,369 $ 3,692 $ 11,727 $ 10,562
Non-GAAP adjustments:
Distribution fees (288 ) (270 ) (817 ) (799 )
Investment advisory fees (168 ) (157 ) (513 ) (448 )
Revenue used for operating margin
measurement $ 3,913 $ 3,265 $ 10,397 $ 9,315
Operating margin, GAAP basis 40.2 % 40.7 % 32.8 % 38.0 %
Operating margin, as adjusted 47.0 % 46.0 % 44.3 % 43.7 %
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 nine months ended
Contribution expense of
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.
45
--------------------------------------------------------------------------------
• 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 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 therelationship 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 Nine Months Ended
September 30, September 30,
(in millions) 2020 2019 2020 2019
Nonoperating income (expense), GAAP
basis $ 224 $ (42 ) $ 510 $ 140
Less: Net income (loss) attributable to
NCI 153 - 162 17
Nonoperating income (expense), net of
NCI 71 (42 ) 348 123
Less: Gain related to the Charitable
Contribution - - 122 -
Nonoperating income (expense), less net
income (loss)
attributable to NCI, as adjusted $ 71 $ (42 ) $ 226 $ 123
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
nine months ended September 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 Nine Months Ended
September 30, September 30,
(in millions, except per share data) 2020 2019 2020 2019
Net income attributable to BlackRock,
Inc., GAAP basis $ 1,364 $ 1,119 $ 3,384 $ 3,175
Non-GAAP adjustments:
Charitable Contribution, net of tax - - 226 -
Income tax matters 54 - 54 -
Net income attributable to BlackRock,
Inc., as adjusted $ 1,418 $ 1,119 $ 3,664 $ 3,175
Diluted weighted-average common shares
outstanding (4) 153.7 156.4 155.0 157.4
Diluted earnings per common share, GAAP
basis (4) $ 8.87 $ 7.15 $ 21.84 $ 20.17
Diluted earnings per common share, as
adjusted (4) $ 9.22 $ 7.15 $
23.64
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. 46 -------------------------------------------------------------------------------- The nine months endedSeptember 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. Amounts for income tax matters represent net noncash (benefits) expense primarily associated with the revaluation of certain deferred tax liabilities related to intangible assets and goodwill as a result of tax rate changes. These amounts have been excluded from the as adjusted results as these items will not have a cash flow impact and to ensure comparability among periods presented.
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.
47
--------------------------------------------------------------------------------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 Nine Months Twelve Months
Ended Ended Ended
September 30, June 30, December 31, September 30, September 30, September 30, September 30,
(in millions) 2020 2020 2019 2019 2020 2020 2020
Retail $ 746,264 $ 695,154 $ 703,297 $ 668,118 $ 19,552 $ 34,236 $ 42,246
iShares ETFs 2,321,335 2,162,597 2,240,065 2,046,818 41,332 106,133 181,335
Institutional:
Active 1,427,122 1,341,610 1,338,670 1,283,064 29,619 30,270 45,567
Index 2,641,408 2,482,336 2,599,882 2,453,181 7,101 (29,488 ) (28,961 )
Institutional subtotal 4,068,530 3,823,946 3,938,552 3,736,245 36,720 782 16,606
Long-term 7,136,129 6,681,697 6,881,914 6,451,181 97,604 141,151 240,187
Cash management 652,002 619,351 545,949 510,984 27,766 104,405 134,204
Advisory(1) 20,366 16,901 1,770 1,767 3,331 18,350 18,353
Total $ 7,808,497 $ 7,317,949 $ 7,429,633 $ 6,963,932 $ 128,701 $ 263,906 $ 392,744 AUM and Net Inflows (Outflows) by Investment Style and Product Type
AUM Net inflows (outflows)
Three Months Nine Months Twelve Months
Ended Ended Ended
September 30, June 30, December 31, September 30, September 30, September 30, September 30,
(in millions) 2020 2020 2019 2019 2020 2020 2020
Active $ 2,072,673 $ 1,943,828 $
1,947,222
77,242
Index and iShares ETFs 5,063,456 4,737,869 4,934,692 4,585,744 50,545 84,476 162,945 Long-term 7,136,129 6,681,697 6,881,914 6,451,181 97,604 141,151 240,187 Cash management 652,002 619,351 545,949 510,984 27,766 104,405 134,204 Advisory(1) 20,366 16,901 1,770 1,767 3,331 18,350 18,353 Total$ 7,808,497 $ 7,317,949 $ 7,429,633 $ 6,963,932 $ 128,701 $ 263,906 $ 392,744
AUM and Net Inflows (Outflows) by Product Type
AUM Net inflows (outflows)
Three Months Nine Months Twelve Months
Ended Ended Ended
September 30, June 30, December 31, September 30, September 30, September 30, September 30,
(in millions) 2020 2020 2019 2019 2020 2020 2020
Equity $ 3,784,118 $ 3,519,225 $ 3,820,329 $ 3,488,503 $ 2,168 $ 916 $ 39,517
Fixed income 2,531,465 2,411,092 2,315,392 2,267,431 70,362 95,257 133,531
Multi-asset 598,246 551,362 568,121 527,721 13,980 13,616 28,572
Alternatives:
Illiquid alternatives 79,723 76,607 75,349 70,516 2,202 6,354 10,420
Liquid alternatives 69,255 63,120 59,048 55,544 2,553 5,509 7,804
Currency and commodities(2) 73,322 60,291 43,675 41,466 6,339 19,499 20,343
Alternatives subtotal 222,300 200,018 178,072 167,526 11,094 31,362 38,567
Long-term 7,136,129 6,681,697 6,881,914 6,451,181 97,604 141,151 240,187
Cash management 652,002 619,351 545,949 510,984 27,766 104,405 134,204
Advisory(1) 20,366 16,901 1,770 1,767 3,331 18,350 18,353
Total $ 7,808,497 $ 7,317,949 $ 7,429,633 $ 6,963,932 $ 128,701 $ 263,906 $
392,744
(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
reporting as of
Fixed Income AUM above. These holdings are excluded from Advisory AUM.
(2) Amounts include commodity iShares ETFs.
48
--------------------------------------------------------------------------------
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
June 30, inflows Market FX September 30, Average(in millions) 2020 (outflows) change impact(1) 2020 AUM(2) Retail: Equity$ 254,104 $ 7,007 $ 15,217 $ 3,099 $ 279,427 $ 272,429 Fixed income 301,160 8,321 4,185 2,342 316,008 311,193 Multi-asset 111,934 1,777 5,618 379 119,708 117,376 Alternatives 27,956 2,447 523 195 31,121 29,759 Retail subtotal 695,154 19,552 25,543 6,015 746,264 730,757 iShares ETFs: Equity 1,470,314 14,851 96,101 5,583 1,586,849 1,560,887 Fixed income 634,098 19,690 5,206 4,005 662,999 657,594 Multi-asset 5,074 154 192 10 5,430 5,297 Alternatives 53,111 6,637 6,254 55 66,057 63,687 iShares ETFs subtotal 2,162,597 41,332 107,753 9,653 2,321,335 2,287,465 Institutional: Active: Equity 133,932 4,001 9,709 1,618 149,260 145,197 Fixed income 666,693 12,011 9,122 5,235 693,061 684,720 Multi-asset 426,553 11,354 20,017 6,318 464,242 451,984 Alternatives 114,432 2,253 2,481 1,393 120,559 118,016 Active subtotal 1,341,610 29,619 41,329 14,564 1,427,122 1,399,917 Index: Equity 1,660,875 (23,691 ) 115,515 15,883 1,768,582 1,748,988 Fixed income 809,141 30,340 (2,967 ) 22,883 859,397 846,244 Multi-asset 7,801 695 285 85 8,866 8,245 Alternatives 4,519 (243 ) 211 76 4,563 4,637 Index subtotal 2,482,336 7,101 113,044 38,927 2,641,408 2,608,114 Institutional subtotal 3,823,946 36,720 154,373 53,491 4,068,530 4,008,031 Long-term 6,681,697 97,604 287,669 69,159 7,136,129 7,026,253 Cash management 619,351 27,766 274 4,611 652,002 632,869 Advisory(3) 16,901 3,331 124 10 20,366 19,025 Total$ 7,317,949 $ 128,701 $ 288,067 $ 73,780 $ 7,808,497 $ 7,678,147
(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
included within Fixed Income iShares ETFs AUM above. These holdings are
excluded from Advisory AUM.
49
--------------------------------------------------------------------------------
The following table presents the component changes in AUM by investment style
and product type for the three months ended
Net
June 30, inflows Market FX September 30, Average
(in millions) 2020 (outflows) change impact(1) 2020 AUM(2)
Active:
Equity $ 312,809 $ 10,063 $ 21,603 $ 3,156 $ 347,631 $ 338,125
Fixed income 950,143 19,166 13,135 6,968 989,412 976,832
Multi-asset 538,489 13,131 25,635 6,697 583,952 569,360
Alternatives 142,387 4,699 3,003 1,589 151,678 147,775
Active subtotal 1,943,828 47,059 63,376 18,410 2,072,673 2,032,092
Index and iShares ETFs:
iShares ETFs:
Equity 1,470,314 14,851 96,101 5,583 1,586,849 1,560,887
Fixed income 634,098 19,690 5,206 4,005 662,999 657,594
Multi-asset 5,074 154 192 10 5,430 5,297
Alternatives 53,111 6,637 6,254 55 66,057 63,687
iShares ETFs subtotal 2,162,597 41,332 107,753 9,653 2,321,335 2,287,465
Non-ETF Index:
Equity 1,736,102 (22,746 ) 118,838 17,444 1,849,638 1,828,489
Fixed income 826,851 31,506 (2,795 ) 23,492 879,054 865,325
Multi-asset 7,799 695 285 85 8,864 8,245
Alternatives 4,520 (242 ) 212 75 4,565 4,637
Non-ETF Index subtotal 2,575,272 9,213 116,540 41,096 2,742,121 2,706,696
Index & iShares ETFs subtotal 4,737,869 50,545 224,293 50,749 5,063,456 4,994,161
Long-term 6,681,697 97,604 287,669 69,159 7,136,129 7,026,253
Cash management 619,351 27,766 274 4,611 652,002 632,869
Advisory(3) 16,901 3,331 124 10 20,366 19,025
Total $ 7,317,949 $ 128,701 $ 288,067 $ 73,780 $ 7,808,497 $ 7,678,147 The following table presents the component changes in AUM by product type for
the three months ended
Net
June 30, inflows Market FX September 30, Average
(in millions) 2020 (outflows) change impact(1) 2020 AUM(2)
Equity $ 3,519,225 $ 2,168 $ 236,542 $ 26,183 $ 3,784,118 $ 3,727,501
Fixed income 2,411,092 70,362 15,546 34,465 2,531,465 2,499,751
Multi-asset 551,362 13,980 26,112 6,792 598,246 582,902
Alternatives:
Illiquid alternatives 76,607 2,202 104 810 79,723 78,413
Liquid alternatives 63,120 2,553 2,851 731 69,255 66,642
Currency and commodities(4) 60,291 6,339 6,514 178 73,322 71,044
Alternatives subtotal 200,018 11,094 9,469 1,719 222,300 216,099
Long-term 6,681,697 97,604 287,669 69,159 7,136,129 7,026,253
Cash management 619,351 27,766 274 4,611 652,002 632,869
Advisory(3) 16,901 3,331 124 10 20,366 19,025
Total $ 7,317,949 $ 128,701 $ 288,067 $ 73,780 $ 7,808,497 $ 7,678,147 (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
included within Fixed Income iShares ETFs AUM or Fixed Income AUM above.
These holdings are excluded from Advisory AUM.
(4) Amounts include commodity iShares ETFs.
50
-------------------------------------------------------------------------------- AUM increased$490.5 billion to$7.81 trillion atSeptember 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
• iShares ETFs net inflows of
fixed income and sustainable ETFs and inflows into core equity and
precision exposures. Core and non-Core iShares ETFs saw net inflows of
$13.5 billion and $27.8 billion , respectively. By region, iShares ETFs
inflows were diversified with
iShares ETFs and
ETFs.
• Retail net inflows of $19.6 billion were positive in both the US andinternationally and across all major asset classes, reflecting strength in
active fixed income, equity, liquid alternatives and multi-asset funds.
Retail net inflows also included the September 2020 close of the $2
billion BlackRock Capital Allocation Trust.
• Institutional active net inflows of
all product categories and were led by fixed income net inflows,
reflecting strong activity among insurance clients. Multi-asset net
inflows were driven by continued growth in LifePath® target-date funds and
OCIO clients.
• Institutional index net inflows of $7.1 billion were primarily led by
fixed income net inflows of
outflows of
Cash management AUM increased to
AUM increased
51
--------------------------------------------------------------------------------
Component Changes in AUM for the Nine Months Ended
The following table presents the component changes in AUM by client type and
product type for the nine months ended
Net
December 31, inflows Market FX September 30, Average(in millions) 2019 (outflows) change impact(1) 2020 AUM(2) Retail: Equity$ 252,413 $ 23,244 $ 4,038 $ (268 ) $ 279,427 $ 252,221 Fixed income 305,265 8,564 3,208 (1,029 ) 316,008 303,363 Multi-asset 120,439 (3,126 ) 2,569 (174 ) 119,708 114,401 Alternatives 25,180 5,554 317 70 31,121 27,502 Retail subtotal 703,297 34,236 10,132 (1,401 ) 746,264 697,487 iShares ETFs: Equity 1,632,972 11,050 (57,319 ) 146 1,586,849 1,504,589 Fixed income 565,790 75,359 19,246 2,604 662,999 611,117 Multi-asset 5,210 230 1 (11 ) 5,430 5,104 Alternatives 36,093 19,494 10,428 42 66,057 50,403
iShares ETFs subtotal 2,240,065 106,133 (27,644 )
2,781 2,321,335 2,171,213
Institutional:
Active:
Equity 141,118 4,708 3,369 65 149,260 135,354
Fixed income 651,368 3,082 36,857 1,754 693,061 663,749
Multi-asset 434,233 16,211 11,737 2,061 464,242 431,055
Alternatives 111,951 6,269 1,989 350 120,559 114,414
Active subtotal 1,338,670 30,270 53,952 4,230 1,427,122 1,344,572
Index:
Equity 1,793,826 (38,086 ) 10,629 2,213 1,768,582 1,674,238
Fixed income 792,969 8,252 58,782 (606 ) 859,397 819,510
Multi-asset 8,239 301 237 89 8,866 8,104
Alternatives 4,848 45 (330 ) - 4,563 4,487
Index subtotal 2,599,882 (29,488 ) 69,318 1,696 2,641,408 2,506,339
Institutional subtotal 3,938,552 782 123,270 5,926 4,068,530 3,850,911
Long-term 6,881,914 141,151 105,758 7,306 7,136,129 6,719,611
Cash management 545,949 104,405 156 1,492 652,002 602,703
Advisory(3) 1,770 18,350 266 (20 ) 20,366 10,679
Total $ 7,429,633 $ 263,906 $ 106,180 $ 8,778 $ 7,808,497 $ 7,332,993 (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 ten 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
included within Fixed Income iShares ETFs AUM above. These holdings are
excluded from Advisory AUM.
52
--------------------------------------------------------------------------------
The following table presents the component changes in AUM by investment style
and product type for the nine months ended
Net
December 31, inflows Market FX September 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Active:
Equity $ 316,145 $ 21,616 $ 9,531 $ 339 $ 347,631 $ 311,834
Fixed income 939,275 10,151 39,061 925 989,412 949,178
Multi-asset 554,672 13,086 14,307 1,887 583,952 545,455
Alternatives 137,130 11,822 2,306 420 151,678 141,915
Active subtotal 1,947,222 56,675 65,205 3,571 2,072,673 1,948,382
Index and iShares ETFs:
iShares ETFs:
Equity 1,632,972 11,050 (57,319 ) 146 1,586,849 1,504,589
Fixed income 565,790 75,359 19,246 2,604 662,999 611,117
Multi-asset 5,210 230 1 (11 ) 5,430 5,104
Alternatives 36,093 19,494 10,428 42 66,057 50,403
iShares ETFs subtotal 2,240,065 106,133 (27,644 ) 2,781 2,321,335 2,171,213
Non-ETF Index
Equity 1,871,212 (31,750 ) 8,505 1,671 1,849,638 1,749,979
Fixed income 810,327 9,747 59,786 (806 ) 879,054 837,444
Multi-asset 8,239 300 236 89 8,864 8,105
Alternatives 4,849 46 (330 ) - 4,565 4,488
Non-ETF Index subtotal 2,694,627 (21,657 ) 68,197 954 2,742,121 2,600,016
Index & iShares ETFs subtotal 4,934,692 84,476 40,553 3,735 5,063,456 4,771,229
Long-term 6,881,914 141,151 105,758 7,306 7,136,129 6,719,611
Cash management 545,949 104,405 156 1,492 652,002 602,703
Advisory(3) 1,770 18,350 266 (20 ) 20,366 10,679
Total $ 7,429,633 $ 263,906 $ 106,180 $ 8,778 $ 7,808,497 $ 7,332,993 The following table presents the component changes in AUM by product type for
the nine months ended
Net
December 31, inflows Market FX September 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Equity $ 3,820,329 $ 916 $ (39,283 ) $ 2,156 $ 3,784,118 $ 3,566,402
Fixed income 2,315,392 95,257 118,093 2,723 2,531,465 2,397,739
Multi-asset 568,121 13,616 14,544 1,965 598,246 558,664
Alternatives:
Illiquid alternatives 75,349 6,354 (2,025 ) 45 79,723 76,697
Liquid alternatives 59,048 5,509 4,387 311 69,255 62,528
Currency and commodities(4) 43,675 19,499 10,042 106 73,322 57,581
Alternatives subtotal 178,072 31,362 12,404 462 222,300 196,806
Long-term 6,881,914 141,151 105,758 7,306 7,136,129 6,719,611
Cash management 545,949 104,405 156 1,492 652,002 602,703
Advisory(3) 1,770 18,350 266 (20 ) 20,366 10,679
Total $ 7,429,633 $ 263,906 $ 106,180 $ 8,778 $ 7,808,497 $ 7,332,993 (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 ten 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
included within Fixed Income iShares ETFs AUM or Fixed Income AUM above.
These holdings are excluded from Advisory AUM.
(4) Amounts include commodity iShares ETFs.
53
--------------------------------------------------------------------------------
AUM increased
Net market appreciation of$106.2 billion was primarily driven by fixed income market appreciation, partially offset by deprecation in equity markets year to date. Long-term net inflows of$141.2 billion included$106.1 billion ,$34.2 billion and$30.3 billion of net inflows into iShares ETFs, retail and institutional active products, respectively, partially offset by net outflows$29.4 billion from institutional index clients. Net flows in long-term products are described below.
• 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, fixed income and alternative products, partially offset by
net outflows from multi-asset world allocation strategies.
• Institutional active inflows of $30.3 billion primarily reflected
continued growth in
systematic active equity.
• Institutional index net outflows of
equity net outflows of
reallocating, rebalancing and liquidity needs in a more uncertain market
environment, partially offset by
income.
Cash management AUM increased to
AUM increased
54
--------------------------------------------------------------------------------
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
September 30, inflows Market FX September 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Retail:
Equity $ 231,645 $ 25,180 $ 19,098 $ 3,504 $ 279,427 $ 248,948
Fixed income 297,186 13,556 3,959 1,307 316,008 302,419
Multi-asset 116,040 (3,714 ) 7,030 352 119,708 115,092
Alternatives 23,247 7,224 405 245 31,121 26,667
Retail subtotal 668,118 42,246 30,492 5,408 746,264 693,126
iShares ETFs:
Equity 1,468,711 60,122 52,720 5,296 1,586,849 1,507,986
Fixed income 539,260 100,322 17,597 5,820 662,999 596,496
Multi-asset 4,659 610 165 (4 ) 5,430 5,038
Alternatives 34,188 20,281 11,510 78 66,057 46,774iShares ETFs subtotal 2,046,818 181,335 81,992
11,190 2,321,335 2,156,294
Institutional:
Active:
Equity 128,723 5,232 13,331 1,974 149,260 134,610
Fixed income 649,883 (2,066 ) 38,293 6,951 693,061 660,994
Multi-asset 398,937 31,429 26,224 7,652 464,242 425,765
Alternatives 105,521 10,972 2,293 1,773 120,559 112,942
Active subtotal 1,283,064 45,567 80,141 18,350 1,427,122 1,334,311
Index:
Equity 1,659,424 (51,017 ) 140,271 19,904 1,768,582 1,681,295
Fixed income 781,102 21,719 30,216 26,360 859,397 812,141
Multi-asset 8,085 247 441 93 8,866 8,095
Alternatives 4,570 90 (179 ) 82 4,563 4,526
Index subtotal 2,453,181 (28,961 ) 170,749 46,439 2,641,408 2,506,057
Institutional subtotal 3,736,245 16,606 250,890 64,789 4,068,530 3,840,368
Long-term 6,451,181 240,187 363,374 81,387 7,136,129 6,689,788
Cash management 510,984 134,204 1,164 5,650 652,002 583,512
Advisory(3) 1,767 18,353 252 (6 ) 20,366 8,618
Total $ 6,963,932 $ 392,744 $ 364,790 $ 87,031 $ 7,808,497 $ 7,281,918 (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
included within Fixed Income iShares ETFs AUM above. These holdings are
excluded from Advisory AUM.
55
--------------------------------------------------------------------------------
The following table presents the component changes in AUM by investment style
and product type for the twelve months ended
Net
September 30, inflows Market FX September 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Active:
Equity $ 290,519 $ 22,302 $ 30,974 $ 3,836 $ 347,631 $ 308,605
Fixed income 931,179 9,025 41,606 7,602 989,412 945,830
Multi-asset 514,973 27,720 33,255 8,004 583,952 540,857
Alternatives 128,766 18,195 2,699 2,018 151,678 139,608
Active subtotal 1,865,437 77,242 108,534 21,460 2,072,673 1,934,900
Index and iShares ETFs:
iShares ETFs:
Equity 1,468,711 60,122 52,720 5,296 1,586,849 1,507,986
Fixed income 539,260 100,322 17,597 5,820 662,999 596,496
Multi-asset 4,659 610 165 (4 ) 5,430 5,038
Alternatives 34,188 20,281 11,510 78 66,057 46,774
iShares ETFs subtotal 2,046,818 181,335 81,992 11,190 2,321,335 2,156,294
Non-ETF Index:
Equity 1,729,273 (42,907 ) 141,726 21,546 1,849,638 1,756,248
Fixed income 796,992 24,184 30,862 27,016 879,054 829,724
Multi-asset 8,089 242 440 93 8,864 8,095
Alternatives 4,572 91 (180 ) 82 4,565 4,527
Non-ETF Index subtotal 2,538,926 (18,390 ) 172,848 48,737 2,742,121 2,598,594
Index & iShares ETFs subtotal 4,585,744 162,945 254,840 59,927 5,063,456 4,754,888
Long-term 6,451,181 240,187 363,374 81,387 7,136,129 6,689,788
Cash management 510,984 134,204 1,164 5,650 652,002 583,512
Advisory(3) 1,767 18,353 252 (6 ) 20,366 8,618
Total $ 6,963,932 $ 392,744 $ 364,790 $ 87,031 $ 7,808,497 $ 7,281,918 The following table presents the component changes in AUM by product type for
the twelve months ended
Net
September 30, inflows Market FX September 30, Average
(in millions) 2019 (outflows) change impact(1) 2020 AUM(2)
Equity $ 3,488,503 $ 39,517 $ 225,420 $ 30,678 $ 3,784,118 $ 3,572,839
Fixed income 2,267,431 133,531 90,065 40,438 2,531,465 2,372,050
Multi-asset 527,721 28,572 33,860 8,093 598,246 553,990
Alternatives:
Illiquid alternatives 70,516 10,420 (2,177 ) 964 79,723 75,583
Liquid alternatives 55,544 7,804 4,904 1,003 69,255 61,331
Currency and commodities(4) 41,466 20,343 11,302 211 73,322 53,995
Alternatives subtotal 167,526 38,567 14,029 2,178 222,300 190,909
Long-term 6,451,181 240,187 363,374 81,387 7,136,129 6,689,788
Cash management 510,984 134,204 1,164 5,650 652,002 583,512
Advisory(3) 1,767 18,353 252 (6 ) 20,366 8,618
Total $ 6,963,932 $ 392,744 $ 364,790 $ 87,031 $ 7,808,497 $ 7,281,918 (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
included within Fixed Income iShares ETFs AUM or Fixed Income AUM above.
These holdings are excluded from Advisory AUM.
(4) Amounts include commodity iShares ETFs.
56
--------------------------------------------------------------------------------
AUM increased $844.6 billion to $7.81 trillion at September 30, 2020 , driven by
positive net inflows, net market appreciation and the positive impact of foreign
exchange movements.
Net market appreciation of
Long-term net inflows of$240.2 billion were comprised of net inflows of$181.3 billion ,$45.6 billion and$42.2 billion from iShares ETFs, institutional active and retail clients, respectively, partially offset by net outflows of$28.9 billion from institutional index products. Net flows in long-term products are described below.
• iShares ETFs net inflows of
By region, iShares ETFs inflows were diversified with
inflows in US-listed iShares ETFs and
European-listed iShares ETFs. Fixed income net inflows of
were led by flows into investment grade corporate bonds, high yield,
treasuries and core bond ETFs. Equity net inflows of
driven by both US and international equity market exposures.
• Institutional active net inflows of
continued growth in
systematic active equity.
• Retail net inflows of
net inflows reflected strength in global equity and sector equity funds,
high yield, total return and municipal fixed income funds, and alternative
funds.
• Institutional index net outflows of
equity net outflows of
reallocating, rebalancing and liquidity needs in a more uncertain market
environment, partially offset by
income, driven by demand for liability-driven investment solutions.
Cash management AUM increased to
AUM increased
57
--------------------------------------------------------------------------------
DISCUSSION OF FINANCIAL RESULTS
The Company's results of operations for the three and nine months endedSeptember 30, 2020 and 2019 are discussed below. For a further description of the Company's revenue and expense, see the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 ("2019 Form 10-K").
Revenue
The table below presents detail of revenue for the three and nine months endedSeptember 30, 2020 and 2019 and includes the product type mix of base fees and performance fees. Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2020 2019 2020 2019 Investment advisory, administration fees and securities lending revenue: Equity: Active$ 457 $ 391 $ 1,236 $ 1,151 iShares ETFs 880 872 2,551 2,589 Non-ETF Index 164 168 505 495 Equity subtotal 1,501 1,431 4,292 4,235 Fixed income: Active 498 496 1,443 1,427 iShares ETFs 297 251 817 705 Non-ETF Index 113 98 354 293 Fixed income subtotal 908 845 2,614 2,425 Multi-asset 289 288 852 852 Alternatives: Illiquid alternatives 140 122 416 350 Liquid alternatives 132 105 361 301 Currency and commodities(1) 51 30 118 78 Alternatives subtotal 323 257 895 729 Long-Term 3,021 2,821 8,653 8,241 Cash management 204 159 593 447 Total base fees 3,225 2,980 9,246 8,688 Investment advisory performance fees: Equity 4 1 29 5 Fixed income 9 - 13 2 Multi-asset 10 1 13 7 Alternatives: Illiquid alternatives 6 5 55 40 Liquid alternatives 503 114 575 157 Alternatives subtotal 509 119 630 197 Total performance fees 532 121 685 211 Technology services revenue 282 259 834 700 Distribution fees: Retrocessions 188 166 519 491 12b-1 fees (US mutual fund distribution fees) 85 90 254 267 Other 15 14 44 41 Total distribution fees 288 270 817 799 Advisory and other revenue: Advisory 14 21 48 62 Other 28 41 97 102 Total advisory and other revenue 42 62 145 164 Total revenue$ 4,369 $ 3,692 $ 11,727 $ 10,562
(1) Amounts include commodity iShares ETFs.
58
--------------------------------------------------------------------------------The table below lists base fees and mix of average AUM by product type:
Three Months Ended September 30, Nine Months Ended September 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 15 % 13 % 4 % 4 % 14 % 13 % 4 % 4 %
iShares ETFs 27 % 29 % 20 % 21 % 28 % 30 % 21 % 21 %
Non-ETF Index 5 % 6 % 24 % 25 % 5 % 6 % 23 % 26 %
Equity subtotal 47 % 48 % 48 % 50 % 47 % 49 % 48 % 51 %
Fixed income:
Active 15 % 17 % 13 % 14 % 15 % 17 % 13 % 13 %
iShares ETFs 9 % 8 % 9 % 8 % 9 % 8 % 8 % 7 %
Non-ETF Index 4 % 3 % 11 % 11 % 4 % 3 % 12 % 11 %
Fixed income subtotal 28 % 28 % 33 % 33 % 28 % 28 % 33 % 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 % 4 % 1 % 1 % 4 % 3 % 1 % 1 %
Currency and 2 % 1 % 1 %
commodities(3) 1 % - % 1 % 1 % 1 %
Alternatives subtotal 10 % 9 % 3 % 2 % 10 % 8 % 3 % 3 %
Long-term 94 % 95 % 92 % 93 % 94 % 95 % 92 % 93 %
Cash management 6 % 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 ten months.
(3) Amounts include commodity iShares ETFs.
Three Months Ended
Revenue increased
Investment advisory, administration fees and securities lending revenue of$3,225 million increased$245 million from$2,980 million for the three months endedSeptember 30, 2019 , primarily driven by organic growth, the positive impact of market beta and foreign exchange movements on average AUM, partially offset by strategic pricing changes to certain products. Securities lending revenue of$153 million in the current quarter compared with$150 million in the third quarter of 2019. Investment advisory performance fees of$532 million increased$411 million from$121 million for the three months endedSeptember 30, 2019 , primarily reflecting strong performance from a single hedge fund with an annual performance measurement period that ends in the third quarter.
Technology services revenue of
Advisory and other revenue of$42 million decreased$20 million from$62 million for the three months endedSeptember 30, 2019 , primarily reflecting the impact of the previously discussed Charitable Contribution of BlackRock's remaining 20% stake inPennyMac in the first quarter of 2020. 59 --------------------------------------------------------------------------------
Nine Months Ended
Revenue increased
Investment advisory, administration fees and securities lending revenue of$9,246 million increased$558 million from$8,688 million for the nine months endedSeptember 30, 2019 , primarily driven by organic growth, the positive impact of market beta and foreign exchange movements on average AUM, partially offset by strategic pricing changes to certain products. Securities lending revenue of$521 million increased$73 million from$448 million for the nine months endedSeptember 30, 2019 , primarily reflecting higher asset spreads and average balances of securities on loan. Investment advisory performance fees of$685 million increased$474 million from$211 million for the nine months endedSeptember 30, 2019 , primarily reflecting higher revenue from alternative products including strong performance from a single hedge fund with an annual performance measurement period that ends in the third quarter. Technology services revenue of$834 million increased$134 million from$700 million for the nine months endedSeptember 30, 2019 , primarily reflecting higher revenue from Aladdin and the impact of the eFront acquisition, which closed in May of 2019. Expense Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2020 2019 2020 2019 Expense:
Employee compensation and benefits
3,700$ 3,258 Distribution and servicing costs: Retrocessions 188 166 519 491 12b-1 costs 83 89 247 265 Other 185 172 564 491 Total distribution and servicing costs 456 427 1,330 1,247 Direct fund expense 257 239 780 733 General and administration: Marketing and promotional 48 79 156 241 Occupancy and office related 81 75 239 224 Portfolio services 73 64 203 191 Technology 93 70 273 206 Professional services 36 38 121 115 Communications 14 10 40 29 Foreign exchange remeasurement 1 (2 ) 7 18 Contingent consideration fair value adjustments - (1 ) 23 18 Product launch costs 80 - 164 59 Charitable Contribution - - 589 - Other general and administration 35 52 176 142 Total general and administration expense 461 385 1,991 1,243 Amortization of intangible assets 27 28 79 68 Total expense$ 2,612 $ 2,190 $ 7,880 $ 6,549 60
--------------------------------------------------------------------------------
Three Months Ended
Expense increased
Employee compensation and benefits expense increased
General and administration expense increased$76 million from the three months endedSeptember 30, 2019 , reflecting$80 million of previously described product launch costs. The increase also reflected higher technology expense, including certain costs related to COVID-19, and lower marketing and promotional expense.
Nine Months Ended
Expense increased$1,331 million from the nine months endedSeptember 30, 2019 , primarily driven by higher general and administration expense, including the impact of the Charitable Contribution and higher product launch costs, higher employee compensation and benefits expense, and higher volume-related expense for the nine months endedSeptember 30, 2020 . Employee compensation and benefits expense increased$442 million from the nine months endedSeptember 30, 2019 , primarily reflecting higher base and incentive compensation, driven in part by higher performance fees and operating income.
Direct fund expense increased
General and administration expense increased$748 million from the nine months endedSeptember 30, 2019 , primarily driven by$589 million of expense related to the Charitable Contribution, higher product launch costs, 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 for the nine months endedSeptember 30, 2020 . 61 --------------------------------------------------------------------------------
Nonoperating Results
The summary of nonoperating income (expense), less net income (loss) attributable to NCI for the three and nine months endedSeptember 30, 2020 and 2019 was as follows: Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2020 2019 2020 2019 Nonoperating income (expense), GAAP basis(1) $ 224 $ (42 )$ 510 $ 140 Less: Net income (loss) attributable to NCI 153 - 162 17 Nonoperating income (expense), net of NCI(2) $ 71 $ (42 )$ 348 $ 123 Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2020 2019 2020 2019 Net gain (loss) on investments(1)(2) Private equity $ 18 $ 6$ 8 $ 38 Real assets 6 12 11 22 Other alternatives(3) 14 3 10 18 Other investments(4) 55 - 35 104 Subtotal 93 21 64 182 Gain related to the Charitable Contribution - - 122 - Other gains (losses)(5) 23 (28 ) 279 25 Total net gain (loss) on investments(1)(2) 116 (7 ) 465 207 Interest and dividend income 9 19 34 68 Interest expense (54 ) (54 ) (151 ) (152 ) Net interest expense (45 ) (35 ) (117 ) (84 )
Nonoperating income (expense)(1) $ 71
348$ 123
(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 nine 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 nine months ended
pre-tax gain of approximately
recapitalization of iCapital. Additional amounts primarily include noncash
pre-tax gains (losses) related to the revaluation of a corporate minority
investment.
62
--------------------------------------------------------------------------------
Income Tax Expense
GAAP As Adjusted(1)
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
(in millions) 2020 2019 2020 2019 2020 2019 2020 2019
Operating
income(1) $ 1,757 $ 1,502 $ 3,847 $ 4,013 $ 1,757 $ 1,502 $ 4,436 $ 4,013
Total
nonoperating
income
(expense)(1)(2) $ 71 $ (42 ) $ 348 $ 123 $ 71 $ (42 ) $ 226 $ 123
Income before
income taxes $ 1,828 $ 1,460 $ 4,195 $ 4,136 $ 1,828 $ 1,460 $ 4,662 $ 4,136
Income tax
expense $ 464 $ 341 $ 811 $ 961 $ 410 $ 341 $ 998 $ 961
Effective tax 25.4 % 23.3 % 19.3 % 23.2 % 22.5 % 23.3 % 21.4 % 23.2 %
rate
(1) As adjusted items are described in more detail in Non-GAAP Financial
Measures.
(2) Net of net income (loss) attributable to NCI.
The nine months endedSeptember 30, 2020 income tax expense included discrete tax benefit of$241 million recognized in connection with the Charitable Contribution, which was excluded from as adjusted results, and$78 million of discrete tax benefits, including benefits related to stock-based compensation awards that vested in the first quarter of 2020. The three and nine months endedSeptember 30, 2020 income tax expense also included the previously described$54 million noncash net expense related to the legislation enacted in theUnited Kingdom , which was excluded from as adjusted results. 63
--------------------------------------------------------------------------------
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.
64
--------------------------------------------------------------------------------
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.
September 30, 2020
Separate Consolidated
Account Sponsored
GAAP Assets/ Investment As
(in millions) Basis Collateral(1) Products(2) Adjusted
Assets
Cash and cash equivalents $ 6,507 $ - $ 208 $ 6,299
Accounts receivable 3,706 - - 3,706
Investments 6,307 - 2,233 4,074
Separate account assets and
collateral held
under securities lending agreements 111,131 111,131 - -
Other assets(3) 4,623 - 90 4,533
Subtotal 132,274 111,131 2,531 18,612
Goodwill and intangible assets, net 32,844 - - 32,844
Total assets $ 165,118 $ 111,131 $ 2,531 $ 51,456
Liabilities
Accrued compensation and benefits $ 1,847 $ - $ - $ 1,847
Accounts payable and accrued
liabilities 988 - - 988
Borrowings 7,227 - - 7,227
Separate account liabilities and
collateral
liabilities under securities
lending agreements 111,131 111,131 - -
Deferred income tax liabilities(4) 3,742 - - 3,742
Other liabilities 4,167 - 388 3,779
Total liabilities 129,102 111,131 388 17,583
Equity
Total stockholders' equity 33,873 - - 33,873
Noncontrolling interests 2,143 - 2,143 -
Total equity 36,016 - 2,143 33,873
Total liabilities and equity $ 165,118 $ 111,131 $ 2,531 $ 51,456 (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 ofSeptember 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 atSeptember 30, 2020 andDecember 31, 2019 included$208 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 nine months endedSeptember 30, 2020 ). Accounts receivable atSeptember 30, 2020 increased$527 million fromDecember 31, 2019 , primarily due to higher performance fee, technology services and base fee receivables. Investments, including the impact of consolidated sponsored investment products, increased$818 million fromDecember 31, 2019 (for more information see Investments herein).Goodwill and intangible assets decreased$87 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$739 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 BlackRock's remaining 20% stake inPennyMac . 65 -------------------------------------------------------------------------------- Liabilities. Accrued compensation and benefits atSeptember 30, 2020 decreased$210 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 atSeptember 30, 2020 decreased$179 million fromDecember 31, 2019 , primarily due to lower current income taxes payables. Other liabilities increased$697 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 atSeptember 30, 2020 increased$8 million fromDecember 31, 2019 , primarily due to the effects of temporary differences associated with stock-based compensation and the revaluation of certain deferred income tax liabilities due to tax legislation enacted in theUnited Kingdom , partially offset by the effects of temporary differences associated with investment income and the income tax benefit related to the Charitable Contribution.
Investments
The Company's investments were$6,307 million and$5,489 million atSeptember 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. September 30, December 31, (in millions) 2020 2019 Investments, GAAP $ 6,307 $ 5,489 Investments held by consolidated sponsored investment products (4,517 ) (3,784 ) Net interest in consolidated sponsored investment products(1) 2,284 2,290 Investments, as adjusted 4,074 3,995 Federal Reserve Bank stock (94 ) (93 ) Deferred compensation investments (5 ) (23 ) Hedged investments (735 ) (644 ) Carried interest (483 ) (528 ) Total "economic" investment exposure(2) $ 2,757 $ 2,707
(1) Amounts include carried interest (VIEs) of
on the 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.
66
-------------------------------------------------------------------------------- The following table represents the carrying value of the Company's economic investment exposure, by asset type, atSeptember 30, 2020 andDecember 31, 2019 : September 30, December 31, (in millions) 2020 2019 Equity(1) $ 715 $ 609 Fixed income(2) 1,018 1,008 Multi-asset(3) 136 178 Alternatives: Private equity 382 355 Real assets 262 322 Other alternatives(4) 244 235 Alternatives subtotal 888 912
Total "economic" investment exposure $ 2,757
(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 nine months endedSeptember 30, 2020 was as follows: Nine Months Ended (in millions)September 30, 2020 Investments, as adjusted, beginning balance $
3,995
Purchases/capital contributions 883 Sales/maturities (664 ) Distributions(1)
(170 ) Market appreciation(depreciation)/earnings from equity method investments
60
Carried interest capital allocations/(distributions) (45 ) Other(2)
15
Investments, as adjusted, ending balance $ 4,074
(1) Amount includes distributions representing return of capital and return on investments.
(2) Amount includes the impact of foreign exchange movements.
67
--------------------------------------------------------------------------------
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
