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BlackRock Inc posted a smaller-than-expected drop in quarterly profit on Thursday as strong demand for exchange-traded funds and other low-risk products cushioned the hit to fee income from a global market rout, but its assets under management fell below expectations.

The threat of a recession, surging interest rates and the Ukraine crisis have slammed both bonds and stocks this year, keeping investors on the back foot in a blow to businesses such as BlackRock. Global market uncertainty has increased in recent weeks as the U.K. government’s fiscal plans toppled British markets into chaos; BlackRock’s clients have significant exposure in pension vehicles at the center of the drama.

The company’s assets under management (AUM) dropped to $7.96 trillion in the third quarter, down 16% year-on-year, as the stronger dollar dampened the value of investments in Europe and Asia.

“The speed at which central banks are raising rates to rein in inflation alongside slowing economic growth is creating extraordinary uncertainty, increased volatility, and lower levels of market liquidity,” said BlackRock chief executive Larry Fink on a conference call.

The world’s largest asset manager, which makes most of its money from fees charged for investment advisory and administration services, recorded a 16% fall in adjusted profit to $9.55 per share.

That surpassed analysts’ expectations of $7.07 per share, according to IBES data from Refinitiv.

Shares of the company, down 42% so far this year, dropped on Thursday, hitting a near 2-1/2 year low amid broader market weakness after a hot U.S. inflation reading.

AUM declined below analysts’ expectations from about $8.5 trillion at the end of the second quarter. “Given the lower than expected AUM result, that sets a lower bar for revenue generation in the fourth quarter,” said Kyle Sanders, an analyst at Edward Jones.

Overall net inflows were positive in the quarter, with long-term net inflows of $65 billion, as momentum from ETFs offset the hit from retail clients withdrawing about $5 billion. Year-to-date inflows amounted to $248 billion.

“We see 6%-8% lower revenues in 2022 on weak market conditions, but note long-term asset inflows remain positive,” Cathy Seifert, vice president at CFRA Research, said in a note. CFRA keeps a “strong buy” opinion on BlackRock’s shares.

Net inflows into ETFs were about $22 billion in the quarter, boosted by $37 billion of flows in bond ETFs.

BlackRock’s President Robert Kapito said the company was helping clients adjust portfolios in light of higher yields in fixed income. “We saw $37 billion of net inflows into bond ETFs, which is the second best quarter we’ve had in history ... I think we’re going see dramatic and large inflows into fixed income over the next year as interest rates rise,” he said.

BlackRock’s third-quarter revenue fell 15% to $4.31 billion. Net income fell to $1.4 billion, or $9.25 per share, for the three months ended Sept. 30, from $1.68 billion, or $10.89 per share, a year earlier.

The benchmark S&P 500 Index has lost nearly 25% so far this year, with analysts expecting more pain as the U.S. Federal Reserve stays aggressive.

BlackRock plans to pause discretionary hiring plans for the rest of the year as a recovery in market conditions may take longer than in previous economic downturns.

“While we continue to have deep conviction in our strategy and the long-term growth of the global capital markets, we have begun to more aggressively manage the pace of certain discretionary spend,” CFO Gary Shedlin said.

BlackRock is a major provider of liability-driven investment strategies (LDI) for British pension schemes, which are racing to sell assets - including UK government bonds, or gilts - to raise cash and shore up derivative positions before the Bank of England calls time on support aimed at keeping them afloat.

Fink said BlackRock has about 20% of the LDI market in the U.K., or about $250 billion. On Wednesday, he said he had private conversations with the government there.

“As of this morning the gilt market was stable so it appears much of the reconstruction of these products may have been done and the market should be a little more normalized,” Fink said on Thursday.

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