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BlackRock Expects to Attract Funds from Retail Clientele in 2016

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Apr. 8 2016, Updated 6:06 p.m. ET

Retail clientele

BlackRock’s (BLK) Retail segment had AUM (assets under management) of $541 billion as of December 31, 2015. Retail’s AUM formed 13% of the company’s total AUM. However, its contribution is expected to increase as the unemployment rate remains low and wage rates have increased over the past few quarters.

Retail investors continue to deploy savings across the asset classes, especially in index-backed products. Retail long-term inflows for the quarter stood at $7 billion, out of which $2.8 billion came from the United States and the remaining amount came from international markets.

BlackRock Expects to Attract Funds from Retail Clientele in 2016

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EBITDA of BlackRock and peers

The company attracted $3.9 billion flows in the fixed income category, seeing investments mainly into unconstrained strategies. The multi-asset category saw an outflow of $3.6 billion due to a large single-client transition out of mutual funds into a series of iShares across asset classes.

BlackRock posted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $4.7 billion in the last fiscal year. The following is an EBITDA breakdown for BlackRock’s peers:

  • JPMorgan Chase & Company (JPM)—$40.8 billion
  • Bank of New York Mellon (BK)—$6.4 billion
  • State Street (STT)—$3.6 billion

Together, these companies form 1.7% of the SPDR S&P 500 ETF (SPY).

Continuing dollar impact

Overall, BlackRock’s AUM rose by $6 billion, as compared to the previous quarter, on account of net inflows and favorable market changes, partially offset by foreign exchange impact. The positive market changes were led by equities, which rose to $4.3 billion, partially offset by falls of $1.2 billion in the fixed income category and $1.8 billion in the multi-asset category.

The foreign exchange impact led to a $2.6 billion fall in the company’s AUM, but BlackRock’s retail offerings in total base fees rose by 1.3% to $837 million in 4Q15, as compared to $850 million in the previous quarter. Retail base fees formed 34% of the company’s total fees in 4Q15, as compared to 36% in the previous quarter.

Base fees for equities fell by $37 million to $1.2 billion in 4Q15, compared to $1.3 billion in the prior year’s quarter. This drop was mainly due to a decline in the value of active funds under management.

In the next part, we’ll analyze BlackRock’s assets under management.

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