BlackRock’s Retail Division to Add Assets Related to Fixed Income
Retail clientele generating wealth
BlackRock’s (BLK) retail division has participated in the latest rally of the markets since 1Q17. It has positively contributed to active equity and debt offerings for investments inside and outside the United States. Retail investors seeking higher returns have resorted to a traditional active style of investment in order to generate superior returns. They are expected to contribute new flows in 4Q17 and 2018 amid possible tax cuts and other financial reforms.
BlackRock is managing $608 billion (or 10%) of total assets under management for its retail division as of September 30, 2017. For the last three quarters, the division has attracted positive flows in the range of $5–$7 billion.
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Fixed income attracts investments
In 3Q17, retail added long-term inflows of $7.4 billion, with international accounting for $3.7 billion and domestic forming $3.7 billion. Fixed income offerings attracted $4.6 billion invested in municipal offerings, unconstrained strategies, and emerging market debt. Equities added $1.7 billion in mutual funds and active funds. The remaining $1 billion was brought in for the multi-asset income fund family. Among active retail fund offering providers, T. Rowe Price (TROW), Goldman Sachs (GS), and JPMorgan Chase (JPM) are adding to mutual funds and customized offerings.
High fees, appreciation
Asset managers (VFH) garner higher fees on retail offerings compared to index funds or institutional offerings. BlackRock managed to grow its retail assets by $22 billion in 3Q17 compared to 2Q17, helped by inflows, a portfolio rise of $10.7 billion, and a favorable dollar.
The division’s managed total base fees rose $843 million compared with $819 million in the previous quarter. The fees formed 30% of the company’s total base fees. Retail clients shifted toward debt in 3Q17, which was in line with institutional investors.