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BlackRock: Strategic Initiatives amid Slowing Alpha Returns

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Part 3
BlackRock: Strategic Initiatives amid Slowing Alpha Returns PART 3 OF 10

BlackRock’s iShares Keeps Dominating New Flows in the Industry

iShares outperform

BlackRock’s (BLK) iShares continue to garner the highest share of flows among peers deployed in ETFs and index funds. The division attracted a record $74 billion in 2Q17, taking total assets under management to $1.53 trillion and forming 27% of total assets under management. iShares offerings in equity, debt, emerging market debt, blended offerings, and index funds have seen consistent inflows over the past few years.

BlackRock&#8217;s iShares Keeps Dominating New Flows in the Industry

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BlackRock attracted $51.8 billion toward its equity ETFs, helped by inflows in both US and international offerings. It managed another $21.0 billion toward debt ETFs, driven by emerging market debt, investment-grade corporate debt, and treasury bond funds.

Other major asset managers (VFH)—including State Street (STT), Vanguard, Charles Schwab (SCHW), and JPMorgan Chase (JPM)—have also seen rising asset allocation toward exchange-traded funds and index funds.

Generating stable revenues

BlackRock’s iShares garnered total base fees of $998 million, up by $70 million on a sequential basis and $148 million on a year-over-year basis and forming 37% of the company’s total fees. Growth was strong in equity ETFs due to appreciation as well as fund flows toward these offerings.

In 2Q17, managed assets for iShares rose by $115 billion over 1Q17 on long-term inflows, foreign exchange, and rises in a valuation of holdings. Equity holdings appreciated by $29.0 billion while fixed-income holdings grew by $2.1 billion. Alternative holdings fell $0.8 billion. The division managed a positive foreign exchange impact of $10.7 billion, reflecting a weaker dollar over the past few months.

The Trump administration’s policies have been quite clear since his administration began roll-outs of expected policy changes. However, the implementation has been very slow, which has triggered more questions from investors, resulting in slower buying of equities valued at high multiples.

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