Institutional investments

BlackRock (BLK) drew a majority of its assets under management—55.0% of total AUM—on December 31, 2017. The company manages $3.5 trillion in active and index-based offerings.

In active fund offerings, BlackRock manages ~$1.1 trillion and provides substantial fees compared to index fund offerings that have an AUM of $2.3 trillion. In 2018, institutional investors are expected to see more flows toward various asset classes primarily due to rising valuations of the broad markets (SPY)(SPX-INDEX).

BlackRock’s Institutional Assets See Deployment toward Debt

Asset classes other than equities

Institutional investors have deployed funds in debt and multi-asset class in the last several quarters in order to diversify their risk amid high valuations of equities. On the product front, there is a strong preference for passive fund offerings seen in the high traction for index funds.

In index offerings for 4Q17, BlackRock added $24.0 billion in fixed income index offerings—partially offset by an outflow of $9.0 billion from equity index offerings—and $2.5 billion from alternatives, resulting in a net addition of $12 billion.

On the active offering front, BlackRock added $2.9 billion in the multi-asset category with continued demand for LifePath target-date series and other strategies. The company added $2.3 billion in the fixed-income category, which was partially offset by outflows of $1.2 billion in equity inflows.

In the active category, alternatives added $2.1 billion of new flows, more than offset by capital returns in real estate and private equity funds.

Goldman Sachs (GS), Morgan Stanley (MS), and Blackstone Group (BX) attract institutionals for active fund offerings. State Street Advisors (STT) is adding new funds primarily to index fund offerings.

Earnings rise

BlackRock earned total base fees of $765.0 million in 4Q17 from institutional offerings, forming 27.0% of its total fees. The division’s assets increased by $150.0 billion sequentially due to a $97.0 billion rise in equities, $53 billion rise in fixed income, alternatives, and multi-asset categories.

In the last few quarters, institutional investors have deployed a portion of funds from equities to multi-asset categories, alternatives, equities.