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BlackRock Expects Its Funds to See Retail Contribution in 3Q16

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Retail clients to contribute

BlackRock’s (BLK) retail offerings have attracted a huge amount of funds over the years. The company is expected to see a rise in retail participation in the current quarter as equities and other asset classes have risen on improving fundamentals.

BlackRock’s retail business managed $544 billion on June 30, 2016. Retail AUM formed 12% of the company’s total AUM.

Retail clients withdrew funds totaling $6.3 billion in 2Q16, including $2.7 billion from the United States and $3.6 billion in international funds. Fixed income attracted flows of $2.3 billion, offset by outflows of $4.9 billion from equities and $2.6 billion from the multiasset category. Outflows in international equities were mainly driven by market uncertainty and de-risking.

BlackRock posted EBITDA (earnings before interest, tax, depreciation, and amortization) of $4.7 billion last year. Let’s compare this to the EBITDAs of its peers:

  • JPMorgan Chase (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).

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Market drives AUM to rise

BlackRock’s retail division saw assets under management (or AUM) rise $2 billion 2Q16, helped by positive market changes and partially offset by net outflows and foreign exchange. In 3Q16, the division is expected to see higher inflows in equities, market appreciation, and unfavorable foreign exchange. BlackRock’s retail offerings’ total base fees rose to $806 million in 2Q16 compared to $789 million in the previous quarter.

As BlackRock sees higher margins in its retail offerings, it’s likely that the company will increase its offerings for retail clients in order to boost its overall margins. In the next article, we’ll see how institutional investors are benefiting the company.

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