BlackRock’s Institutional Flows Indicate Subdued Expectations


May. 18 2018, Updated 9:32 a.m. ET

Institutional investors

BlackRock (BLK) manages the highest assets for institutional investors across various product offerings when compared with its global peers. On March 31, the company managed ~$3.5 trillion for institutional clients in active and index offerings, which formed 55.0% of its total assets.

Active fund offerings totaled ~$1.1 trillion in assets, garnering higher fees for the company compared to the ~$2.3 trillion being managed in passive fund offerings. Passive fund offerings have seen more demand than active offerings due to the ease of shifting between asset classes.


Diversified holdings

Institutional investors are vying for alternatives, commodities, and private market space for generating higher returns amid high valuations for equities.

On the passive offering front, BlackRock added $17.5 billion in fixed income index offerings, partially offset by an outflow of $7.2 billion from equity index offerings. On the active offering front, BlackRock saw outflows of $7.1 billion, mainly due to $4.1 billion from the fixed income category and multi-asset outflows, respectively. The company added $1.4 billion in private equity, hedge funds, and infrastructure offerings.

Among BlackRock’s peers (VFH), Goldman Sachs (GS), Blackstone (BX), and Bank of America (BAC) are focusing on alternative and hedge fund offerings to add new funds in 2018.

Base fees enhance

BlackRock made $783.0 million in base fees from institutional offerings in the first quarter, forming 27.0% of its total fees during the quarter. The division’s assets declined by $1.3 billion sequentially, due to a $43.0 billion decline in valuations of holdings and partially offset by new flows of $3.3 billion and positive forex impact of $39.1 billion.

US-based corporations have benefited from the weaker dollar in the recent months owing to lower tax rates. The trend is expected to continue in the upcoming quarters and help improve profitability.

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