Retail clientele’s subdued flows
BlackRock’s (BLK) retail business has seen negative flows over the past few quarters. Retail investors have withdrawn funds from the alternatives, fixed income, and multiasset categories and deployed funds toward lower-cost ETFs and index funds.
The trend is expected to continue in 2017, with more investors moving toward ETFs. The company managed total assets of $542 billion for its retail clientele division on December 31, 2016. Retail assets made up 10% of the company’s total AUM (assets under management). In 4Q16, long-term retail outflows stood at $2.4 billion, including $1.6 billion from the United States and $0.8 billion internationally.
BlackRock posted operating income of $4.6 billion in 2016, compared to the following operating incomes of its peers in 2016:
- State Street (STT): $3.6 billion
- Bank of New York Mellon (BK): $6.4 billion
- JPMorgan Chase (JPM): $40.8 billion
Together, these companies make up 1.8% of the SPDR S&P 500 ETF (SPX-INDEX) (SPY).
Fixed income, dollar put pressure
BlackRock’s retail clientele has seen outflows from fixed income, the impact of negative foreign exchange, and alternatives. Investors are deploying more funds toward indexes and ETFs and more funds toward global equities.
In 4Q16, BlackRock’s retail assets fell $13 billion from the previous quarter due to net outflows $2.4 billion, a fall of $4.8 billion in its fixed income valuations, and a negative currency impact of $6 billion. The fall was partially offset by a $1.5 billion rise in equities.
BlackRock’s retail offerings’ total base fees fell to $789 million in 4Q16, compared to $821 million in 4Q15. Its retail base fees made up 31% of its total fees, lower than the previous quarter’s 34%.
In the next article, we’ll study how institutional investors are contributing to BlackRock’s funds.