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By Ross Kerber
Fri Jan 20, 2012 10:53am GMT
n">(Reuters) - BlackRock Inc (BLK.N), the world's largest money manager by assets, said fourth-quarter net income fell 16 percent on lower fees. But the company still managed to draw new investor cash with a wide range of products.
As volatile markets drive investors away from traditional equity funds, the inflows seemed to validate BlackRock's focus on products like exchange-traded funds and institutional index funds.
Shares in BlackRock were down 1.3 percent in morning trading, at $185.40. One reason for the fall was a decline in the pipeline of new business of $54.3 billion (35.1 billion pounds) at January 12. That was down from figures BlackRock reported at the end of previous quarters -- $65.2 billion at Oct 17 and $84.3 billion at July 14.
But overall, the results showed how BlackRock has managed the movement of investors away from active products. "They have the full range of capabilities. If money goes out of one product it goes into another, and they have both sides of that," said Stifel Nicolaus analyst Jeffrey Hopson in an interview.
Hopson and several other analysts said they were satisfied with the company's results overall. Nomura analyst Glenn Schorr said in a note to investors that the inflows gave the company "a solid 3.1 percent organic growth rate in a very tough backdrop."
EARNINGS BEAT
BlackRock's net income fell to $555 million, or $3.05 per share, from $657 million, or $3.35 per share, a year earlier. Adjusted for taxes, restructuring and other items, earnings were $3.06 per share. On that basis, analysts on average had expected $2.99, according to Thomson Reuters I/B/E/S.
Assets under management at December 31 were $3.51 trillion, down from $3.56 trillion a year earlier but up from $3.35 trillion at the end of the third quarter.
The increase reflected a $143.3 billion improvement in market and investment performance as stock indexes rose in the quarter, and an inflow of $23.8 billion of new investor cash to long-term products like equity and bond funds, particularly index products. BlackRock's iShares ETF business had an inflow of $20.1 billion in the quarter.
The inflows stood out at a time when specialists expect other, smaller asset managers to report net outflows of cash with their earnings next week.
On a conference call with investors, which was webcast, BlackRock Chief Executive Laurence Fink said the results reflected his company's range of products. "The diversity of our business model has substantially dampened the impact of volatile markets," he said.
Fink also said risk-averse customers will pressure many asset managers to lower fees. "There is going to have to be some form of reckoning in the mutual fund industry," he said.
NO BIG DEALS
Fink said BlackRock is considering smaller acquisitions but it is not going to make any large-scale deals, as he has heard rumored.
BlackRock said it had taken a $32 million restructuring charge for a 3 percent cut in its workforce in the quarter. It had about 10,100 employees as of December 31, roughly 900 more than a year earlier.
Revenue fell 11 percent to $2.2 billion, reflecting lower fees from investment advisory work and administration fees because of the lower assets under management.
Also contributing to the revenue decline was a fall-off in performance fees by more than half, to $147 million in the fourth quarter, mainly because of lower performance fees on hedge funds.
Jefferies & Co analyst Dan Fannon said in a note to investors that he had expected an even sharper drop in performance fees, to $75 million. The difference was a major reason for the earnings beat, he said.
(Reporting By Ross Kerber in Boston; Editing by Lisa Von Ahn and Gerald E. McCormick)
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