Under the Spotlight Wall St: BlackRock (BLK)

It’s amusing to think that BlackRock ($BLK) CEO Larry Fink considered naming the wealth management giant Black Pebble. 

Three decades on from its spin-off from Blackstone ($BX) in 1994, BlackRock is more monolith than pebble. Its US$11.58t of assets under management rank it the world’s largest asset manager. With a market cap of $US134b, BlackRock isn’t far off the US$157b market cap of its former parent. 

BlackRock is arguably best known for its iShares ETF business, which it picked up through the acquisition of Barclays Global Investors in 2009. With more than 1,400 ETFs listed across global markets, the company competes with big rivals like Vanguard and State Street ($STT) to offer convenient and low-cost access to a range of investment options for retail investors. 

Leveraged to the fortunes of global markets, BlackRock’s shares haven’t proved immune to the volatility unleashed by U.S. president Donald Trump’s tariffs and trade war. Its shares are down 15% in 2025.

Massive passive

BlackRock’s Q1 earnings showcased its strength in ETFs. ETF inflows totalled US$107b during the quarter, which is impressive given inflows of US$390b across all of 2024. Total ETF assets under management (AUM) were US$4.3t, with its European ETF platform crossing US$1t in AUM for the first time. The big contributor to ETF inflows was the US$46b that flowed into its core equity ETFs. 

While ETFs performed strongly, BlackRock’s total Q1 inflows were US$84b as some institutional money exited low fee institutional index products amid a volatile quarter of trading. But management is focused on the long game. Chief Financial Officer Martin Small told investors on the 11 April earnings call that it has a ‘track record of share gains when there's money in motion.’ BlackRock believes it has the products and innovation capabilities needed to meet client’s demands as they reassess asset allocations in an uncertain world.  

That money in motion was reflected in US$8b of institutional active net inflows into infrastructure private markets, its LifePath target date products and systematic active equity offerings. Retail net inflows of US$13b were led by record quarterly flows into Aperio (which offers tax-efficient investments), demand for fixed income offerings and systematic liquid alternatives funds. More than US$3b flowed into its digital asset offerings in Q1. Market volatility saw US$20b flow into its cash management offerings in the early part of April, taking the total to around US$950b. 

Money maker

The calculus for BlackRock is simple: more AUM equals more revenue and profit growth. Q1 revenues increased 12% year-on-year (YoY) to US$5.3b driven by organic growth and higher markets on average AUM, base fees from its Global Infrastructure Partners acquisition and higher technology services and subscription revenue. Adjusted EPS rose 15% YoY.

Base fees are a prime focus for BlackRock management. It generated 6% annualised base fee growth in the quarter, with organic base fee growth above its 5% target over the last 12 months. This was its third consecutive quarter at or above its base fee target. ETFs accounted for 41% of base fees and securities lending revenues. BlackRock expects to drive base fee revenue and average fee rates as it grows its private markets business, which includes private equity and private credit (more on this later). Private markets were 2% of Q1 AUM, but accounted for 12% of base fees and securities lending revenue in Q1. 

The company faces fee competition: Vanguard cut fees across 87 funds in February, which is expected to save investors US$350m this year. BlackRock has in the past made ‘price investments’ in high-growth categories where clients are price-sensitive, assuming it can earn back revenue through volumes. This ‘investment’ has historically been about 1.5% to 2.5% of global iShares revenue. But it didn’t cut fees in Q1, with the US$107b of inflows seen as proof it can attract clients without having to forgo future revenue – for now. 

Taking credit

Bigger is better in asset management. Clients want choice, innovative products, scale and access to talent. BlackRock has invested across the cycle to ensure it can continue to drive volumes and fee growth, especially in private markets (which generate higher fees).   

Just last month, BlackRock invested in Viridium, a platform for the management of closed life insurance portfolios. The company manages approximately US$700b for the global insurance industry, primarily in index and public credit strategies. 

BlackRock bolstered its strength in credit strategies through the US$12b acquisition of HPS Investment Partners in December. The deal brings in US$148b of AUM and boosts BlackRock’s private credit offering to US$220b. 

The firm’s private credit capabilities will also be enhanced through last month’s acquisition of Preqin, a private markets data provider. And BlackRock’s infrastructure business was part of the consortium that acquired a portfolio of global ports – including two along the Panama Canal – from CK Hutchison for US$22.8b in March. 

But shareholders haven’t been forgotten when it comes to capital allocation. BlackRock increased its quarterly dividend by 2% and bought back US$375m of shares in the first quarter. Based on its capital spending plans for 2025, it anticipates repurchasing at least US$375m of shares a quarter for the balance of the year. 

Capital gains

As the world’s largest asset manager, BlackRock finds itself at the intersection of global capital markets and wealth creation. It’s shown an ability to evolve through global market cycles to deliver products and technologies trusted by retail and institutional clients to generate long-term wealth. 

But right now, BlackRock is another player at the mercy of volatile global markets and jittery investors yearning for a bedrock of certainty, rather than the rocky path offered by Trump’s trade war.

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.