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 continued 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) any failure to effectively manage conflicts of interest; (16) damage to BlackRock's reputation; (17) terrorist activities, civil unrest, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (18) the ability to attract and retain highly talented professionals; (19) fluctuations in the carrying value of BlackRock's economic investments; (20) 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; (21) BlackRock's success in negotiating distribution arrangements and maintaining distribution channels for its products; (22) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (23) operational, technological and regulatory risks associated with BlackRock's major technology partnerships; (24) any disruption to the operations of third parties whose functions are integral to BlackRock's exchange-traded funds ("ETF") platform; (25) 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 (26) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions. 35 --------------------------------------------------------------------------------
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$9.01 trillion of AUM atMarch 31, 2021 . With approximately 16,700 employees in more than 30 countries who serve clients in over 100 countries across the globe, 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, 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 intermediaries. 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.
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 governmental authorities taking 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 in certain jurisdictions, 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 BlackRock's business. While global markets have significantly recovered since then, the effects of the pandemic are ongoing, and such impact may continue in future quarters if conditions persist or worsen. BlackRock is actively monitoring COVID-19 developments and their potential impact on the Company's employees, business and operations, particularly in jurisdictions where BlackRock has significant employee populations and/or business activity. The aggregate extent to which COVID-19, and the related impact on the global economy, affect BlackRock's 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, the shifting epicenter, and emergence of new variants, of the COVID-19 virus, the continuing prevalence of severe, unconstrained and/or escalating rates of infection in certain countries and regions, the availability, adoption and the efficacy of treatments and vaccines, 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 BlackRock's products, clients, vendors and employees. See Part II, Item 1A - Risk Factors, of this filing for further information on the possible future impact of the COVID-19 pandemic on BlackRock's business, results of operations and financial condition. 36 --------------------------------------------------------------------------------
United Kingdom Exit from
OnDecember 31, 2020 , theUnited Kingdom ("UK") and theEuropean Union ("EU") reverted to being distinct regulatory, legal and customs territories. TheUK and the EU concluded a free trade agreement, known as the "EU-UK Trade and Cooperation Agreement". The agreement does not include any substantive provisions governing cross-border trade in financial services between theUK and the EU. TheUK and the EU have also concluded a memorandum of understanding governing aspects of the relationship between the jurisdictions' regulators with respect to financial services, but this has not yet been ratified or published. As a result, sinceJanuary 1, 2021 , cross-border financial services trade between theUK and the EU has been governed by their respective financial services regulations and market access regimes. BlackRock has implemented a number of steps to prepare for this outcome. These steps, which are and have been time consuming and costly and may add complexity to BlackRock's future European operations, include effecting organizational, governance and operational changes, applying for and receiving additional licenses and permissions in the EU, and engaging in client communications. In addition, depending on how the future relationship between theUK and the EU develops, BlackRock may experience further organizational and operational challenges and incur additional costs in connection with its European operations, particularly with regard to delegation and outsourcing, which may impede the Company's growth or impact its financial performance.
Acquisition
OnFebruary 1, 2021 , the Company acquired 100% of the equity interests ofAperio Group, LLC (the "Aperio Transaction" or "Aperio"), a pioneer in customizing tax-optimized index equity separately managed accounts ("SMAs") for approximately$1.1 billion in cash, using existing cash resources. The acquisition ofAperio increased BlackRock's SMA assets under management and expanded the breadth of the Company's capabilities via tax-managed strategies across factors, broad market indexing, and investor Environmental, Social, and Governance preferences across all asset classes. 37 --------------------------------------------------------------------------------
EXECUTIVE SUMMARY Three Months Ended March 31, (in millions, except shares and per share data) 2021 2020 GAAP basis: Total revenue$ 4,398 $ 3,710 Total expense 2,853 3,026 Operating income$ 1,545 $ 684 Operating margin 35.1 % 18.4 % Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (28 )
108
Income tax benefit (expense) (318 )
14
Net income attributable to BlackRock$ 1,199 $
806
Diluted earnings per common share$ 7.77 $ 5.15 Effective tax rate 20.9 % (1.7 )% As adjusted(1): Operating income$ 1,545 $ 1,273 Operating margin 44.4 % 41.7 % Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests $ (28 ) $ (14 ) Net income attributable to BlackRock$ 1,199 $
1,032
Diluted earnings per common share$ 7.77 $ 6.60 Effective tax rate 20.9 % 18.0 % Other: AUM (end of period)$ 9,007,411 $ 6,466,668
Diluted weighted-average common shares outstanding(2) 154,301,812 156,416,726 Shares outstanding (end of period)
152,635,930
155,085,806
Book value per share(3)$ 231.79 $
212.87
Cash dividends declared and paid per share$ 4.13 $ 3.63
(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. As of
outstanding.
(3) Total BlackRock stockholders' equity divided by total shares outstanding at
March 31 of the respective period-end. 38
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THREE MONTHS ENDED
GAAP. Operating income of$1,545 million increased$861 million and operating margin of 35.1% increased 1,670 bps from the first quarter of 2020. Increases in operating income and operating margin reflected the impact of$589 million related to the previously reported charitable contribution of BlackRock's remaining 20% stake in PennyMac Financial Services, Inc. (the "Charitable Contribution") in the first quarter of 2020. Operating income and operating margin also reflected higher investment advisory and administration fees, performance fees and technology services revenue, partially offset by higher employee compensation and benefits expense and higher product launch costs in 2021, including the impact of$178 million associated with theMarch 2021 close of the$4.9 billion BlackRock Innovation and Growth Trust. Nonoperating income (expense) less net income (loss) attributable to noncontrolling interests ("NCI") decreased$136 million from the first quarter of 2020, reflecting 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 in the first quarter of 2020. Nonoperating income (expense) less net income (loss) attributable to NCI also included higher mark-to-market gains on the Company's co-investment portfolio, largely offset by the revaluation of certain minority investments in the first quarter of 2021. First quarter 2021 and 2020 income tax expense (benefit) reflected$39 million and$64 million , respectively, of discrete tax benefits, including benefits related to stock-based compensation awards that vest in the first quarter of each year. Income tax benefit for the first quarter of 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 increased$2.62 , or 51%, from the first quarter of 2020, reflecting the impact of the Charitable Contribution incurred in the first quarter of 2020. The increase in earnings per diluted common share also included higher revenue and a lower diluted share count, partially offset by higher product launch costs, lower nonoperating income, and a higher effective tax rate in the current quarter. As Adjusted. Operating income of$1,545 million increased$272 million and operating margin of 44.4% increased 270 bps from the first quarter of 2020. Earnings per diluted common share increased$1.17 , or 18%, from the first quarter of 2020, primarily due to higher operating income and a lower diluted share count, partially offset by lower nonoperating income and a higher effective tax rate in the current quarter. The financial impact related to the Charitable Contribution has been excluded from as adjusted results for the first quarter of 2020. 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.
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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 March 31, (in millions) 2021 2020 Operating income, GAAP basis$ 1,545 $ 684 Non-GAAP expense adjustment: Charitable Contribution - 589 Operating income, as adjusted 1,545 1,273 Product launch costs and commissions 185 87
Operating income used for operating margin
measurement$ 1,730 $ 1,360 Revenue, GAAP basis$ 4,398 $ 3,710 Non-GAAP adjustments: Distribution fees (340 ) (276 ) Investment advisory fees (165 ) (169 )
Revenue used for operating margin measurement
35.1 % 18.4 % Operating margin, as adjusted 44.4 % 41.7 % 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 three 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. 40
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• 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 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 a
predetermined 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 March 31, (in millions) 2021 2020 Nonoperating income (expense), GAAP basis$ 46 $ (71 ) Less: Net income (loss) attributable to NCI 74 (179 ) Nonoperating income (expense), net of NCI (28 )
108
Less: Gain related to the Charitable Contribution -
122
Nonoperating income (expense), less net income (loss)
attributable to NCI, as adjusted$ (28 ) $ (14 ) 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 three months endedMarch 31, 2020 , the noncash, nonoperating pre-tax gain of$122 million related to the Charitable Contribution has been excluded from nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, due to its nonrecurring nature.
(3) Net income attributable to
Three Months EndedMarch 31 , (in millions, except per share data) 2021
2020
Net income attributable to BlackRock, Inc., GAAP basis$ 1,199 $ 806 Non-GAAP adjustment: Charitable Contribution, net of tax -
226
Net income attributable to BlackRock, Inc., as adjusted$ 1,199 $ 1,032 Diluted weighted-average common shares outstanding (4) 154.3 156.4 Diluted earnings per common share, GAAP basis (4)$ 7.77 $ 5.15 Diluted earnings per common share, as adjusted (4)$ 7.77 $ 6.60 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. 41 -------------------------------------------------------------------------------- The three months endedMarch 31, 2020 included a discrete tax benefit of$241 million recognized in connection with the Charitable Contribution. The discrete tax benefit has been excluded from as adjusted results due to the non-recurring nature of the Charitable Contribution.
Per share amounts reflect net income attributable to
(4) Nonvoting participating preferred stock is considered to be a common stock
equivalent for purposes of determining basic and diluted earnings per share
calculations. At
42 --------------------------------------------------------------------------------
ASSETS UNDER MANAGEMENT AUM for reporting purposes generally is based upon how investment advisory and administration fees are calculated for each portfolio. Net asset values, total assets, committed assets or other measures may be used to determine portfolio AUM.
AUM and Net Inflows (Outflows) by Client Type and Product Type
AUM Net inflows (outflows) Three Months Twelve Months Ended Ended March 31, December 31, March 31, March 31, March 31, (in millions) 2021 2020 2020 2021 2021 Retail$ 934,177 $ 845,917 $ 608,824 $ 36,511 $ 107,593 ETFs 2,813,524 2,669,007 1,852,190 68,490 239,545 Institutional: Active 1,524,430 1,524,462 1,230,092 16,533 50,020 Index 3,009,150 2,948,683 2,178,499 11,106 11,491 Institutional subtotal 4,533,580 4,473,145 3,408,591 27,639 61,511 Long-term 8,281,281 7,988,069 5,869,605 132,640 408,649 Cash management 703,916 666,252 594,089 39,190 100,098 Advisory(1) 22,214 22,359 2,974 (187 ) 18,748 Total$ 9,007,411 $ 8,676,680 $ 6,466,668 $ 171,643 $ 527,495
AUM and Net Inflows (Outflows) by Investment Style and Product Type
AUM Net inflows (outflows) Three Months Twelve Months Ended Ended March 31, December 31, March 31, March 31, March 31, (in millions) 2021 2020 2020 2021 2021 Active$ 2,297,642 $ 2,250,887 $ 1,758,548 $ 58,954 $ 155,638 Index and ETFs 5,983,639 5,737,182 4,111,057 73,686 253,011 Long-term 8,281,281 7,988,069 5,869,605 132,640 408,649 Cash management 703,916 666,252 594,089 39,190 100,098 Advisory(1) 22,214 22,359 2,974 (187 ) 18,748 Total$ 9,007,411 $ 8,676,680 $ 6,466,668 $ 171,643 $ 527,495
AUM and Net Inflows (Outflows) by Product Type
AUM Net inflows (outflows) Three Months Twelve Months Ended Ended March 31, December 31, March 31, March 31, March 31, (in millions) 2021 2020 2020 2021 2021 Equity$ 4,745,781 $ 4,419,806 $ 2,959,662 $ 49,861 $ 95,693 Fixed income 2,620,460 2,674,488 2,235,815 60,839 254,173 Multi-asset 677,372 658,733 494,177 13,753 22,576 Alternatives: Illiquid alternatives 92,207 85,770 75,101 6,225 14,541 Liquid alternatives 76,266 73,218 58,127 2,354 7,339 Currency and commodities(2) 69,195 76,054 46,723 (392 ) 14,327 Alternatives subtotal 237,668 235,042 179,951 8,187 36,207 Long-term 8,281,281 7,988,069 5,869,605 132,640 408,649 Cash management 703,916 666,252 594,089 39,190 100,098 Advisory(1) 22,214 22,359 2,974 (187 ) 18,748 Total$ 9,007,411 $ 8,676,680 $ 6,466,668 $ 171,643 $ 527,495
(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
held in advisory accounts associated with the
York ("FRBNY") assignment as of
as of
These holdings are excluded from Advisory AUM.
(2) Amounts include commodity ETFs.
43
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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 December 31, inflows Market FX March 31, Average (in millions) 2020 (outflows) Acquisition(1) change impact(2) 2021 AUM(3) Retail: Equity$ 338,434 $ 14,334 $ 41,324 $ 14,643 $ (1,020 ) $ 407,715 $ 373,077 Fixed income 340,468 14,797 - (3,780 ) (1,845 ) 349,640 345,893 Multi-asset 132,624 3,995 - 2,677 (181 ) 139,115 135,402 Alternatives 34,391 3,385 - 39 (108 ) 37,707 35,979 Retail subtotal 845,917 36,511 41,324 13,579 (3,154 ) 934,177 890,351 ETFs: Equity 1,905,101 66,422 - 111,882 (5,587 ) 2,077,818 1,974,558 Fixed income 690,033 1,605 - (20,971 ) (2,838 ) 667,829 680,376 Multi-asset 6,268 567 - 109 14 6,958 6,539 Alternatives 67,605 (104 ) - (6,530 ) (52 ) 60,919 66,169 ETFs subtotal 2,669,007 68,490 - 84,490 (8,463 ) 2,813,524 2,727,642 Institutional: Active: Equity 169,522 467 - 7,088 (996 ) 176,081 171,927 Fixed income 716,269 2,264 - (22,394 ) (3,665 ) 692,474 704,175 Multi-asset 511,242 8,483 - 6,646 (4,151 ) 522,220 514,123 Alternatives 127,429 5,319 - 1,416 (509 ) 133,655 129,964 Active subtotal 1,524,462 16,533 - (7,244 ) (9,321 ) 1,524,430 1,520,189 Index: Equity 2,006,749 (31,362 ) - 120,531 (11,751 ) 2,084,167 2,026,675 Fixed income 927,718 42,173 - (46,816 ) (12,558 ) 910,517 916,050 Multi-asset 8,599 708 - (1 ) (227 ) 9,079 8,603 Alternatives 5,617 (413 ) - 234 (51 ) 5,387 5,510 Index subtotal 2,948,683 11,106 -
73,948 (24,587 ) 3,009,150 2,956,838 Institutional subtotal 4,473,145
27,639 - 66,704 (33,908 ) 4,533,580 4,477,027 Long-term 7,988,069 132,640 41,324 164,773 (45,525 ) 8,281,281 8,095,020 Cash management 666,252 39,190 - (127 ) (1,399 ) 703,916 664,958 Advisory(4) 22,359 (187 ) - 35 7 22,214 22,373 Total$ 8,676,680 $ 171,643 $ 41,324 $ 164,681 $ (46,917 ) $ 9,007,411 $ 8,782,351
(1) Amounts include AUM attributable to the Aperio Transaction.
(2) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing four months.
(4) 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
held in advisory accounts associated with the FRBNY assignment as of March
31, 2021 (disclosed via FRBNY reporting as of
within Fixed Income ETFs AUM above. These holdings are excluded from Advisory
AUM. 44
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The following table presents the component changes in AUM by investment style
and product type for the three months ended
Net December 31, inflows Market FX March 31, Average (in millions) 2020 (outflows) Acquisition(1) change impact(2) 2021 AUM(3) Active: Equity$ 410,189 $ 21,020 $ -$ 14,593 $ (2,022 ) $ 443,780 $ 425,842 Fixed income 1,035,015 16,752 - (25,059 ) (5,540 ) 1,021,168 1,028,651 Multi-asset 643,864 12,478 - 9,323 (4,332 ) 661,333 649,520 Alternatives 161,819 8,704 - 1,455 (617 ) 171,361 165,943 Active subtotal 2,250,887 58,954 - 312 (12,511 ) 2,297,642 2,269,956 Index and ETFs: ETFs: Equity 1,905,101 66,422 - 111,882 (5,587 ) 2,077,818 1,974,558 Fixed income 690,033 1,605 - (20,971 ) (2,838 ) 667,829 680,376 Multi-asset 6,268 567 - 109 14 6,958 6,539 Alternatives 67,605 (104 ) - (6,530 ) (52 ) 60,919 66,169 ETFs subtotal 2,669,007 68,490 - 84,490 (8,463 ) 2,813,524 2,727,642 Non-ETF Index: Equity 2,104,516 (37,581 ) 41,324 127,669 (11,745 ) 2,224,183 2,145,837 Fixed income 949,440 42,482 - (47,931 ) (12,528 ) 931,463 937,467 Multi-asset 8,601 708 - (1 ) (227 ) 9,081 8,608 Alternatives 5,618 (413 ) - 234 (51 ) 5,388 5,510 Non-ETF Index subtotal 3,068,175 5,196 41,324
79,971 (24,551 ) 3,170,115 3,097,422 Index & ETFs subtotal 5,737,182
73,686 41,324 164,461 (33,014 ) 5,983,639 5,825,064 Long-term 7,988,069 132,640 41,324 164,773 (45,525 ) 8,281,281 8,095,020 Cash management 666,252 39,190 - (127 ) (1,399 ) 703,916 664,958 Advisory(4) 22,359 (187 ) - 35 7 22,214 22,373 Total$ 8,676,680 $ 171,643 $ 41,324 $ 164,681 $ (46,917 ) $ 9,007,411 $ 8,782,351
The following table presents the component changes in AUM by product type for
the three months ended
Net December 31, inflows Market FX March 31, Average (in millions) 2020 (outflows) Acquisition(1) change impact(2) 2021 AUM(3) Equity$ 4,419,806 $ 49,861 $ 41,324 $ 254,144 $ (19,354 ) $ 4,745,781 $ 4,546,237 Fixed income 2,674,488 60,839 - (93,961 ) (20,906 ) 2,620,460 2,646,494 Multi-asset 658,733 13,753 - 9,431 (4,545 ) 677,372 664,667 Alternatives: Illiquid alternatives 85,770 6,225 - 601 (389 ) 92,207 88,042 Liquid alternatives 73,218 2,354 - 791 (97 ) 76,266 74,975 Currency and commodities(5) 76,054 (392 ) - (6,233 ) (234 ) 69,195 74,605 Alternatives subtotal 235,042 8,187 - (4,841 ) (720 ) 237,668 237,622 Long-term 7,988,069 132,640 41,324 164,773 (45,525 ) 8,281,281 8,095,020 Cash management 666,252 39,190
- (127 ) (1,399 ) 703,916 664,958 Advisory(4) 22,359 (187 ) - 35 7 22,214 22,373 Total$ 8,676,680 $ 171,643 $ 41,324 $ 164,681 $ (46,917 ) $ 9,007,411 $ 8,782,351
(1) Amounts include AUM attributable to the Aperio Transaction.
(2) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing four months.
(4) 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
held in advisory accounts associated with the FRBNY assignment as of March
31, 2021 (disclosed via FRBNY reporting as of
within Fixed Income ETFs AUM or Fixed Income AUM above. These holdings are
excluded from Advisory AUM.
(5) Amounts include commodity ETFs.
45 --------------------------------------------------------------------------------
AUM increased
Long-term net inflows of$132.6 billion included$68.5 billion ,$36.5 billion and$27.6 billion of net inflows into ETFs, retail and institutional products, respectively. Net flows in long-term products are described below.
• ETFs net inflows of
equity and sustainable ETFs and inflows into precision exposures. Net
inflows were positive across all asset classes, led by equity net inflows
of
billion of net inflows in US-listed ETFs and
European-listed ETFs. • Retail net inflows of$36.5 billion were positive in both the US and internationally, and across all major asset classes. Flows were led by
fixed income and equity net inflows of
respectively.
• Institutional active net inflows of
growth in LifePath® target-date funds and alternatives.
• Institutional index net inflows of
fixed income net inflows of
outflows of
Cash management AUM increased to
Net market appreciation of
AUM decreased
46 --------------------------------------------------------------------------------
Component Changes in AUM for the Twelve Months Ended
The following table presents the component changes in AUM by client type and
product type for the twelve months ended
Net March 31, inflows Market FX March 31, Average (in millions) 2020 (outflows) Acquisition(1) change impact(2) 2021 AUM(3) Retail: Equity$ 204,742 $ 44,571 $ 41,324 $ 110,169 $ 6,909 $ 407,715 $ 296,733 Fixed income 278,057 45,994 - 20,643 4,946 349,640 318,547 Multi-asset 101,032 7,073 - 30,113 897 139,115 121,220 Alternatives 24,993 9,955 - 2,331 428 37,707 31,213 Retail subtotal 608,824 107,593 41,324 163,256 13,180 934,177 767,713 ETFs: Equity 1,253,690 132,281 - 679,068 12,779 2,077,818 1,658,862 Fixed income 554,009 92,136 - 13,449 8,235 667,829 649,739 Multi-asset 4,499 1,189 - 1,190 80 6,958 5,622 Alternatives 39,992 13,939 - 6,831 157 60,919 60,194 ETFs subtotal 1,852,190 239,545 - 700,538 21,251 2,813,524 2,374,417 Institutional: Active: Equity 112,440 1,334 - 58,411 3,896 176,081 149,489 Fixed income 625,345 22,770 - 33,391 10,968 692,474 682,312 Multi-asset 381,416 13,928 - 112,304 14,572 522,220 462,609 Alternatives 110,891 11,988 - 7,556 3,220 133,655 120,861 Active subtotal 1,230,092 50,020 - 211,662 32,656 1,524,430 1,415,271 Index: Equity 1,388,790 (82,493 ) - 741,420 36,450 2,084,167 1,793,919 Fixed income 778,404 93,273 - (2,241 ) 41,081 910,517 860,592 Multi-asset 7,230 386 - 1,479 (16 ) 9,079 8,192 Alternatives 4,075 325 - 879 108 5,387 4,867 Index subtotal 2,178,499 11,491 -
741,537 77,623 3,009,150 2,667,570 Institutional subtotal 3,408,591
61,511 - 953,199 110,279 4,533,580 4,082,841 Long-term 5,869,605 408,649 41,324 1,816,993 144,710 8,281,281 7,224,971 Cash management 594,089 100,098 - 70 9,659 703,916 646,190 Advisory(4) 2,974 18,748 - 431 61 22,214 17,984 Total$ 6,466,668 $ 527,495 $ 41,324 $ 1,817,494 $ 154,430 $ 9,007,411 $ 7,889,145
(1) Amounts include AUM attributable to the Aperio Transaction.
(2) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing thirteen months.
(4) 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
held in advisory accounts associated with the FRBNY assignment as of March
31, 2021 (disclosed via FRBNY reporting as of
within Fixed Income ETFs AUM above. These holdings are excluded from Advisory
AUM. 47
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The following table presents the component changes in AUM by investment style
and product type for the twelve months ended
Net March 31, inflows Market FX March 31, Average (in millions) 2020 (outflows) Acquisition(1) change impact(2) 2021 AUM(3) Active: Equity$ 252,758 $ 47,354 $ -$ 136,792 $ 6,876 $ 443,780 $ 355,594 Fixed income 887,458 65,347 - 53,929 14,434 1,021,168 981,422 Multi-asset 482,450 20,995 - 142,419 15,469 661,333 583,827 Alternatives 135,882 21,942 - 9,889 3,648 171,361 152,073 Active subtotal 1,758,548 155,638 - 343,029 40,427 2,297,642 2,072,916 Index and ETFs: ETFs: Equity 1,253,690 132,281 - 679,068 12,779 2,077,818 1,658,862 Fixed income 554,009 92,136 - 13,449 8,235 667,829 649,739 Multi-asset 4,499 1,189 - 1,190 80 6,958 5,622 Alternatives 39,992 13,939 - 6,831 157 60,919 60,194 ETFs subtotal 1,852,190 239,545 - 700,538 21,251 2,813,524 2,374,417 Non-ETF Index: Equity 1,453,214 (83,942 ) 41,324 773,208 40,379 2,224,183 1,884,547 Fixed income 794,348 96,690 - (2,136 ) 42,561 931,463 880,029 Multi-asset 7,228 392 - 1,477 (16 ) 9,081 8,194 Alternatives 4,077 326 - 877 108 5,388 4,868 Non-ETF Index subtotal 2,258,867 13,466 41,324
773,426 83,032 3,170,115 2,777,638 Index & ETFs subtotal 4,111,057 253,011
41,324 1,473,964 104,283 5,983,639 5,152,055 Long-term 5,869,605 408,649 41,324 1,816,993 144,710 8,281,281 7,224,971 Cash management 594,089 100,098 - 70 9,659 703,916 646,190 Advisory(4) 2,974 18,748 - 431 61 22,214 17,984 Total$ 6,466,668 $ 527,495 $ 41,324 $ 1,817,494 $ 154,430 $ 9,007,411 $ 7,889,145
The following table presents the component changes in AUM by product type for
the twelve months ended
Net March 31, inflows Market FX March 31, Average (in millions) 2020 (outflows) Acquisition(1) change impact(2) 2021 AUM(3) Equity$ 2,959,662 $ 95,693 $ 41,324 $ 1,589,068 $ 60,034 $ 4,745,781 $ 3,899,003 Fixed income 2,235,815 254,173 - 65,242 65,230 2,620,460 2,511,190 Multi-asset 494,177 22,576 - 145,086 15,533 677,372 597,643 Alternatives: Illiquid alternatives 75,101 14,541 - 852 1,713 92,207 81,264 Liquid alternatives 58,127 7,339 - 8,830 1,970 76,266 68,042 Currency and commodities(5) 46,723 14,327 - 7,915 230 69,195 67,829 Alternatives subtotal 179,951 36,207 - 17,597 3,913 237,668 217,135 Long-term 5,869,605 408,649 41,324 1,816,993 144,710 8,281,281 7,224,971 Cash management 594,089 100,098 - 70 9,659 703,916 646,190 Advisory(4) 2,974 18,748 - 431 61 22,214 17,984 Total$ 6,466,668 $ 527,495 $ 41,324 $ 1,817,494 $ 154,430 $ 9,007,411 $ 7,889,145
(1) Amounts include AUM attributable to the Aperio Transaction.
(2) Foreign exchange reflects the impact of translating non-US dollar denominated
AUM into US dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts
for the trailing thirteen months.
(4) 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
held in advisory accounts associated with the FRBNY assignment as of March
31, 2021 (disclosed via FRBNY reporting as of
within Fixed Income ETFs AUM or Fixed Income AUM above. These holdings are
excluded from Advisory AUM.
(5) Amounts include commodity ETFs.
48 --------------------------------------------------------------------------------
AUM increased
Long-term net inflows of$408.6 billion were comprised of net inflows of$239.5 billion ,$107.6 billion and$61.5 billion from ETFs, retail and institutional clients, respectively. Net flows in long-term products are described below.
• ETFs net inflows of
equity, strategic and precision ETFs, and across asset classes. Equity net
inflows of
market exposures. Fixed income net inflows of
flows into investment grade corporate bonds, high yield, treasuries and
core bond ETFs. By region, ETFs inflows were diversified with
billion of net inflows in US-listed ETFs and
in European-listed ETFs.
• Retail net inflows of
Retail net inflows reflected strength in thematic and global equity funds, global and US core fixed income funds, and alternative funds.
• Institutional active net inflows of
continued growth inLifePath target-date funds, active fixed income strategies and illiquid alternatives.
• Institutional index net inflows of
fixed income net inflows of
billion of net outflows from equity, as clients re-balanced portfolios
after significant equity market gains or sought to immunize portfolios
though
Cash management AUM increased to
Net market appreciation of
AUM increased
49 --------------------------------------------------------------------------------
DISCUSSION OF FINANCIAL RESULTS
The Company's results of operations for the three months endedMarch 31, 2021 and 2020 are discussed below. For a further description of the Company's revenue and expense, see the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 ("2020 Form 10-K").
Revenue
The table below presents detail of revenue for the three months endedMarch 31, 2021 and 2020 and includes the product type mix of investment advisory and administration fees (collectively "base fees"), and securities lending revenue and performance fees. Three Months Ended March 31, (in millions) 2021 2020
Investment advisory, administration fees and
securities lending revenue: Equity: Active$ 576 $ 398 ETFs 1,068 879 Non-ETF Index 176 163 Equity subtotal 1,820 1,440 Fixed income: Active 525 481 ETFs 295 259 Non-ETF Index 113 112 Fixed income subtotal 933 852 Multi-asset 328 293 Alternatives: Illiquid alternatives 168 148 Liquid alternatives 147 112 Currency and commodities(1) 53 32 Alternatives subtotal 368 292 Long-term 3,449 2,877 Cash management 143 178
Total investment advisory, administration fees and 3,592 3,055
securities lending revenue Investment advisory performance fees: Equity 26 2 Fixed income 14 2 Multi-asset 8 1 Alternatives: Illiquid alternatives 7 17 Liquid alternatives 74 19 Alternatives subtotal 81 36 Total performance fees 129 41 Technology services revenue 306 274 Distribution fees: Retrocessions 238 169 12b-1 fees (US mutual fund distribution fees) 85 91 Other 17 16 Total distribution fees 340 276 Advisory and other revenue: Advisory 15 17 Other 16 47 Total advisory and other revenue 31 64 Total revenue$ 4,398 $ 3,710
(1) Amounts include commodity ETFs.
50 --------------------------------------------------------------------------------
The table below lists a percentage breakdown of base fees and securities lending revenue and average AUM by product type:
Three Months Ended March 31, Percentage of Base Fees and Percentage of Average AUM Securities Lending Revenue by Product Type(1) 2021 2020 2021 2020 Equity: Active 16 % 12 % 5 % 4 % ETFs 30 % 29 % 23 % 21 % Non-ETF Index 5 % 5 % 24 % 24 % Equity subtotal 51 % 46 % 52 % 49 % Fixed income: Active 15 % 16 % 10 % 12 % ETFs 8 % 8 % 8 % 8 % Non-ETF Index 3 % 4 % 11 % 12 % Fixed income subtotal 26 % 28 % 29 % 32 % Multi-asset 9 % 10 % 8 % 8 % Alternatives: Illiquid alternatives 5 % 5 % 1 % 1 % Liquid alternatives 4 % 4 % 1 % 1 % Currency and commodities(2) 1 % 1 % 1 % 1 % Alternatives subtotal 10 % 10 % 3 % 3 % Long-term 96 % 94 % 92 % 92 % Cash management 4 % 6 % 8 % 8 % Total excluding Advisory AUM 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) Amounts include commodity ETFs.
Three Months Ended
Revenue increased$688 million , or 19%, from the three months endedMarch 31, 2020 , reflecting higher base and performance fees and 12% growth in technology services revenue. Investment advisory, administration fees and securities lending revenue of$3,592 million increased$537 million from$3,055 million for the three months endedMarch 31, 2020 , primarily driven by the positive impact of market beta and foreign exchange movements on average AUM and organic growth, partially offset by the impact of yield-related fee waivers on certain money market funds and strategic pricing changes to certain products, lower securities lending revenue, and the effect of one less day in the quarter. Securities lending revenue of$127 million decreased from$158 million for the three months endedMarch 31, 2020 , primarily reflecting lower spreads, partially offset by higher average balances of securities on loan.
Investment advisory performance fees of
Technology services revenue of
Advisory and other revenue of$31 million decreased$33 million from$64 million for the three months endedMarch 31, 2020 , primarily reflecting the impact of the Charitable Contribution and lower transition management assignments. 51
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Expense Three Months Ended March 31, (in millions) 2021 2020 Expense: Employee compensation and benefits$ 1,409 $ 1,137 Distribution and servicing costs: Retrocessions 238 169 12b-1 costs 83 89 Other 184 187 Total distribution and servicing costs 505 445 Direct fund expense 320 277 General and administration expense: Marketing and promotional 35 69 Occupancy and office related 79 78 Portfolio services 87 65 Technology 104 88 Professional services 39 44 Communications 11 12 Foreign exchange remeasurement 4 5 Contingent consideration fair value adjustments 3 25 Product launch costs 178 84 Charitable Contribution - 589 Other general and administration 45 83 Total general and administration expense 585 1,142 Amortization of intangible assets 34 25 Total expense$ 2,853 $ 3,026
Three Months Ended
Expense decreased$173 million from the three months endedMarch 31, 2020 , largely driven by lower general and administration expense, reflecting the impact of the Charitable Contribution in the first quarter of 2020. Expense also reflected higher product launch costs, higher employee compensation and benefits expense and higher volume-related expense in the first quarter of 2021. Employee compensation and benefits expense increased$272 million from the three months endedMarch 31, 2020 , primarily reflecting higher incentive compensation, driven by higher operating income and higher performance fees, and the higher mark-to-market impact of certain deferred compensation programs.
Direct fund expense increased
General and administration expense decreased$557 million from the three months endedMarch 31, 2020 , largely driven by the Charitable Contribution in the year ago quarter. General and administration expense also reflected higher product launch costs, and higher portfolio services and technology expense, offset by lower marketing and promotional expense and contingent consideration fair value adjustments, and the impact of costs related to certain legal matters incurred during the three months endedMarch 31, 2020 . Amortization of intangible assets expense increased$9 million from the three months endedMarch 31, 2020 , primarily reflecting amortization of intangible assets related to the Aperio Transaction. 52 --------------------------------------------------------------------------------
Nonoperating Results
The summary of nonoperating income (expense), less net income (loss) attributable to NCI for the three months endedMarch 31, 2021 and 2020 was as follows: Three Months Ended March 31, (in millions) 2021 2020
Nonoperating income (expense), GAAP basis(1)
(179 )
Nonoperating income (expense), net of NCI(2)
Three Months Ended March 31, (in millions) 2021 2020 Net gain (loss) on investments(1)(2) Private equity$ 22 $ (18 ) Real assets 3 5 Other alternatives(3) 13 (25 ) Other investments(4) (3 ) (150 ) Subtotal 35 (188 ) Gain related to the Charitable Contribution - 122 Other gains (losses)(5) (27 ) 205 Total net gain (loss) on investments(1)(2) 8 139 Interest and dividend income 19 15 Interest expense (55 ) (46 ) Net interest expense (36 ) (31 ) Nonoperating income (expense)(1)$ (28 ) $ 108
(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 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 three months ended
pre-tax gain of approximately
recapitalization of iCapital. Additional amounts primarily include noncash
pre-tax gains (losses) related to the revaluation of certain other corporate minority investments. 53
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Income Tax Expense (Benefit) GAAP As Adjusted(1) Three Months Ended Three Months Ended March 31, March 31, (in millions) 2021 2020 2021 2020 Operating income(1)$ 1,545 $ 684$ 1,545 $ 1,273 Total nonoperating income (expense)(1)(2) $ (28 ) $ 108 $ (28 ) $ (14 ) Income before income taxes$ 1,517 $ 792$ 1,517 $ 1,259 Income tax expense (benefit) $ 318 $ (14 ) $ 318 $ 227 Effective tax rate 20.9 % (1.7 )% 20.9 % 18.0 %
(1) As adjusted items are described in more detail in Non-GAAP Financial
Measures.
(2) Net of net income (loss) attributable to NCI.
The three months endedMarch 31, 2021 and 2020 income tax expense (benefit) reflected$39 million and$64 million , respectively, of discrete tax benefits, including benefits related to stock-based compensation awards that vest in the first quarter of each year.
The three months ended
54 --------------------------------------------------------------------------------
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 2020 Form 10-K for more information on the Company's consolidation policy. 55
-------------------------------------------------------------------------------- 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. March 31, 2021 Separate Consolidated Account Sponsored GAAP Assets/ Investment As (in millions) Basis Collateral(1) Products(2) Adjusted Assets Cash and cash equivalents$ 6,267 $ - $ 242$ 6,025 Accounts receivable 3,825 - - 3,825 Investments 7,145 - 2,548 4,597 Separate account assets and collateral held under securities lending agreements 118,126 118,126 - - Other assets(3) 4,632 - 88 4,544 Subtotal 139,995 118,126 2,878 18,991 Goodwill and intangible assets, net 33,864 - - 33,864 Total assets$ 173,859 $ 118,126 $ 2,878 $ 52,855 Liabilities Accrued compensation and benefits$ 1,077 $ - $ -$ 1,077 Accounts payable and accrued liabilities 1,196 - - 1,196 Borrowings 7,232 - - 7,232 Separate account liabilities and collateral liabilities under securities lending agreements 118,126 118,126 - - Deferred income tax liabilities(4) 3,794 - - 3,794 Other liabilities 4,594 - 418 4,176 Total liabilities 136,019 118,126 418 17,475 EquityTotal BlackRock, Inc. stockholders' equity 35,380 - - 35,380 Noncontrolling interests 2,460 - 2,460 - Total equity 37,840 - 2,460 35,380 Total liabilities and equity$ 173,859 $ 118,126 $ 2,878 $ 52,855
(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 ofMarch 31, 2021 andDecember 31, 2020 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 atMarch 31, 2021 andDecember 31, 2020 included$242 million and$206 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 three months endedMarch 31, 2021 ). Accounts receivable atMarch 31, 2021 increased$290 million fromDecember 31, 2020 , primarily due to higher base and performance fee receivables. Investments, including the impact of consolidated sponsored investment products, increased$226 million fromDecember 31, 2020 (for more information see Investments herein).Goodwill and intangible assets increased$1,050 million fromDecember 31, 2020 , primarily due to the Aperio Transaction, partially offset by amortization of intangible assets. Other assets (including operating lease right-of-use assets and property and equipment) increased$752 million fromDecember 31, 2020 , primarily due to an increase in unit trust receivables (substantially offset by an increase in unit trust payables recorded within other liabilities). 56 -------------------------------------------------------------------------------- Liabilities. Accrued compensation and benefits atMarch 31, 2021 decreased$1,422 million fromDecember 31, 2020 , primarily due to 2020 incentive compensation cash payments in the first quarter of 2021, partially offset by 2021 incentive compensation accruals. Accounts payable and accrued liabilities atMarch 31, 2021 increased$168 million fromDecember 31, 2020 , including the impact of fund launch costs in the current quarter. Other liabilities increased$902 million fromDecember 31, 2020 , primarily due to higher unit trust payables (substantially offset by an increase in unit trust receivables recorded within other assets) and higher other liabilities of consolidated sponsored investment products. Net deferred income tax liabilities atMarch 31, 2021 increased$121 million fromDecember 31, 2020 , primarily due to the Aperio Transaction and the effects of temporary differences associated with stock-based compensation.
Investments
The Company's investments were$7,145 million and$6,919 million atMarch 31, 2021 andDecember 31, 2020 , 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. March 31, December 31, (in millions) 2021 2020 Investments, GAAP $ 7,145 $ 6,919 Investments held by consolidated sponsored investment products (5,100 ) (4,976 ) Net interest in consolidated sponsored investment products(1) 2,552 2,490 Investments, as adjusted 4,597 4,433 Federal Reserve Bank stock (95 ) (94 ) Deferred compensation investments - (6 ) Hedged investments (778 ) (833 ) Carried interest (805 ) (627 ) Total "economic" investment exposure(2) $ 2,919 $ 2,873
(1) Amounts include carried interest (VIEs) of
the Company's "economic" investment exposure.
(2) Amounts exclude corporate minority investments included in other assets on
the condensed consolidated statements of financial condition. 57
-------------------------------------------------------------------------------- The following table represents the carrying value of the Company's economic investment exposure, by asset type, atMarch 31, 2021 andDecember 31, 2020 : March 31, December 31, (in millions) 2021 2020 Equity(1)$ 943 $ 835 Fixed income(2) 838 958 Multi-asset(3) 138 127 Alternatives: Private equity 462 418 Real assets 241 251 Other alternatives(4) 297 284 Alternatives subtotal 1,000 953
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 three months endedMarch 31, 2021 was as follows: Three Months Ended (in millions)March 31, 2021 Investments, as adjusted, beginning balance $
4,433
Purchases/capital contributions 301 Sales/maturities (310 ) Distributions(1)
(42 ) Market appreciation(depreciation)/earnings from equity method investments
73
Carried interest capital allocations/(distributions)
178
Other(2) (36 ) Investments, as adjusted, ending balance $ 4,597
(1) Amount includes distributions representing return of capital and return on investments.
(2) Amount includes the impact of foreign exchange movements. 58
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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:
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