The world’s largest asset manager, BlackRock, saw its Assets Under Management (AUM) decrease in the third fiscal quarter of 2021. Its AUM totalled $9.46 trillion at the end of September, up 21% year-on-year, but slightly lower than the $9.49 trillion it was at the end of June. BlackRock CEO Larry Fink ascribes the decline in his company’s AUM to the strength of the US dollar in the period. BlackRock still dominates the global asset management league table, with its nearest industry-rival Vanguard in second place with $8.3 trillion in AUM as at the end of August.
The S&P 500 Index, despite a volatile quarter in the markets, ended the period flat. It was however the indexes worst quarterly performance in six quarters. For Blackrock it was the 10th consecutive quarter of active equity inflows. Revenue for active equity and ETF products increased by 47% and 38% year-on-year respectively, and now account for 37% of total revenue. Total revenue for the group rose 6% to a record $5.1 billion on demand for sustainable actively managed and index strategies. Environmental, social and governance strategies have emerged as meaningful source of growth for BlackRock.
Organic growth as well as improved technology services revenue helped offset lower performance fees in the third quarter. Net income was up 23% to $1.68 billion, and adjusted earnings per share came in at $10.95, exceeding expectations. Increased non-operating income from gains in strategic minority investments also boosted the bottom line. The adjusted operating margin came under pressure however, easing to 38.3% in the quarter, from 40.2% a year ago. This was driven in part by the fall in performance fees.
BlackRock is a high-quality company which has experienced massive tailwinds from the many forms of stimulus deployed to stabilise the pandemic-economy and financial markets. Its AUM has grown by almost 36% since Q3 2019, before the pandemic. Whilst some investors were anticipating BlackRock to surpass the $10 trillion in assets under management milestone this quarter, unaccommodating market conditions have made this accomplishment a more likely scenario for 2022. BlackRock is trading on 25x earnings and a 1.85% dividend yield. Conditions have been optimal for BlackRock. But rising interest rates are traditionally bad for equities. And with tightening monetary and fiscal policy expectations, and few catalysts on the horizon, the share feels a bit pricey at these levels.