BlackRock Inc, the world’s largest asset manager, posted a small rise in second-quarter profit, as the company saw net outflows for the first time in nearly three years.
New York-based BlackRock reported net income attributable to the company of $819 million, or $4.84 per share, for the quarter ended June 30, up from $808 million, or $4.72 per share, a year earlier.
On an adjusted basis, the company earned $4.96 per share, handily beating analysts’ average estimate of $4.80, according to Thomson Reuters I/B/E/S.
Net outflows totaled $36.65 billion, with investors pulling out $7.30 billion from BlackRock’s long-term funds. It was the first time that BlackRock saw outflows since the third quarter of 2012.
While institutional investors pulled money, BlackRock saw inflows into its higher-fee, revenue-generating exchange-traded funds and actively managed strategies.
Investors poured $10.85 billion into BlackRock’s ETFs, with the lion’s share going into its equity funds. And BlackRock saw $10.8 billion in flows from retail clients, the bulk of which went into its fixed income funds.
“If you think about what our ambitions were three years ago, we wanted to be known as much as an active manager as an index manager,” Larry Fink told Reuters Wednesday morning. “We have certainly proven that in fixed income, we have proven it in multi-asset and we are proving it in our model-based active funds.”
The bulk of the outflows were a result of large institutions that wanted cash, Fink said. Ten institutional clients have pulled $40 billion from BlackRock over the past two quarters, he said.
“It’s raining in some parts of the world and some of these countries have built large rainy day funds,” Fink said. “They have been building up big pools of assets for budget needs or for infrastructure funds.”
Despite BlackRock’s strength in fixed income, Fink said he is not worried that he is not concerned that there will be a flood of investors departing fixed income if the Federal Reserve begins raising rates later this year.
“Seventy percent of BlackRock’s bond holders are insurance companies and pension funds,” Fink said, noting that these institutions have long time horizons. “People don’t leave fixed income…it’s one of those myths.”
BlackRock ended the quarter with $4.7 trillion in assets under management, up from $4.6 trillion a year earlier.
Up to Tuesday’s close of $342.73 on the New York Stock Exchange, BlackRock’s shares had lost 4.2 percent this year.