BlackRock, the world’s largest money manager by assets under management, was downbeat in its outlook as slowing growth in China and turmoil in Europe had “shaken the confidence of investors worldwide”.
Laurence Fink, chief executive, said that, unlike last year, business was more cautious as well. “CEOs have contracted their field of vision,” he said.
His remarks followed a drop in revenues of 5 per cent in the second quarter to $2.29-billion (U.S.) as choppy equity markets ate into the value of customer holdings.
Mr. Fink remained cautious about the path ahead, warning that Europe’s debt problems would take five to eight years to fix, while the U.S. faced the uncertainty of the so-called fiscal cliff, with tax rises due to kick in automatically after elections in November without political action.
He also said havens such as U.S. and German government debt could prove illusory. “Extraordinary low yield levels cannot meet the long-term return expectations of anyone.”
His comments followed a quarter in which investors withdrew their money from high-margin actively managed stock funds. BlackRock reported strong inflows to passive bond market investments, with fixed income exchange traded funds adding a net $12-billion in flows, but these were more than offset by market weakness.
Assets under management dropped 3 per cent from the year before, and the previous quarter, to $3.56-trillion, largely due to $95-billion of market-related declines in value.
Bill Katz, analyst for Citigroup described the results as a mixed bag and said that it “reinforces likely tough flow dynamics for traditional asset managers given sluggish long-term volumes and attrition across active mandates”.
Net income fell 11 per cent to $554-million. When adjusted for exceptional items which had boosted profits during the same period a year ago, the fall in earnings was 3 per cent.
But earnings per share of $3.08 were up 3 per cent on the year before, helped by the effect of buying back $1-billion of shares when Barclays sold its 19.6 per cent stake in BlackRock in May. The consensus estimate of analysts surveyed by Bloomberg was $3 per share.
Over all, the asset manager reported $3.7-billion of net new inflows, and reported a $55-billion pipeline of new business as of July.
As the asset manager that Mr. Fink has built through acquisitions switches its focus to internal growth, he said BlackRock would continue to invest in a program of brand building and hiring personnel.
He highlighted a new role for Philipp Hildebrand, the former chairman of the Swiss National Bank, who will join this year to deal with BlackRock’s 100 most important clients.
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