iShares dominate ETFs
BlackRock’s (BLK) iShares have demonstrated continuous growth over the past few years on diversified, global offerings backed by lower costs and technology. The company manages ~$1.3 trillion, with almost two-thirds of its total funds carrying fees of less than 25 basis points, reflecting cost efficiency.
In 4Q16, the company is expected to see new flows mainly into equities and interest rate based offerings. The iShares assets formed 26% of the company’s total assets under management.
In 3Q16, BlackRock’s iShares regained its number one position for new assets globally. It was helped by long-term flows of $51.3 billion, driven by flows of $25.5 billion in equities, $22.7 billion in fixed income, and $2.9 billion in commodities. The company has seen increased interest in emerging market equities and core bond funds.
BlackRock posted net income of $3.3 billion in the previous year, competitors posted following numbers:
- Bank of New York Mellon (BK): $2.7 billion
- State Street (STT): $2.0 billion
- JPMorgan Chase (JPM): $21.8 billion
Together, these companies make up 9.1% of the Vanguard Financials ETF (VFH).
Equities to drive flows
BlackRock’s iShares benefited during the first nine months of 2016 from a rise in equity prices, valuations of various asset classes, and the trend is expected to reflect in 4Q16 earnings. The iShares division saw a rise in valuations of equities by $38.6 billion and fixed income by $1.6 billion in 3Q16.
Notably, BlackRock garners almost one-third of its total fees from iShares, accounting for $879 million in 3Q16. The company’s offerings for various economic cycles including debt offerings has enabled it to attract funds from various institutions. In 4Q16, base fees may have seen growth primarily from equities, followed by fixed income and other categories.
Now let’s examine BlackRock’s expected growth in retail business and its probable flows in 4Q16.