BlackRock predicts ‘trillions’ in fixed income investments as profits rise

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BlackRock predicts investment in bond funds will surge after the US Federal Reserve stops raising interest rates as the money manager beat earnings expectations and reported assets under management reaching $9.4 trillion. Has been.

Investors have turned to money market funds to take advantage of rising interest rates — pushing the total in U.S. MMFs above $5 trillion — but BlackRock said it would wait until investors are sure yields won’t be affected. Majority of the crowd is ready to move into fixed income. Further Fed action.

“Finally there is income to be earned in the fixed income market and we are looking forward to a resurgence in demand,” said Rob Kapito, chief operating officer. “There are trillions. , , They are ready, when people feel that rates have peaked, they will flood the market and we need to prepare ourselves to capture that.

While some analysts believe the Fed may pause after another quarter-point hike at its July meeting, BlackRock and its chief executive Larry Fink have repeatedly suggested that rates remain high for a longer period of time. have to keep.

Assets of global bond exchange-traded funds passed $2 trillion this week, more than double their total assets three years ago, and BlackRock predicts that assets will triple to $6 trillion by 2030.

The New York-based conglomerate reported net income of $1.4 billion in the second quarter, a 27 percent increase over the same period last year, even as total revenue declined 1 percent year-on-year to $4.5 billion and operating income was lower Went. 3 percent.

Assets under management benefited as some leading tech stocks outperformed the benchmark S&P 500 index and net inflows topped $80bn in the quarter, well below expectations of $92bn. $23 billion flowed into BlackRock’s cash management products.

BlackRock’s profits are rising as rival asset managers struggle with lower margins and increasing competition, and despite continued attacks from Republican politicians in the US for what they claim is a “wholesome” approach to investing.

The group has tried to deflect criticism by emphasizing the breadth of its offerings, from index trackers to options. “Customers want more from BlackRock, not less,” Fink said. BlackRock shares were down 1.4 percent in New York morning.

BlackRock’s recent cost-cutting efforts have enabled it to return to an adjusted operating margin of 42 percent, roughly where it was in the second quarter of 2022.

KBW analyst Michael Brown said, “It was a good quarter and the long-term growth story still holds up” despite lower revenue.

BlackRock reported diluted earnings per share of $9.06, up 28 percent year-over-year. The adjusted figure of $9.28 was higher than the $8.41 expected by analysts polled by Bloomberg.

Revenue from the group’s Aladdin risk management system and other technology services rose 8 percent year-on-year to $359 million, beating analysts’ expectations. The company said at last month’s investor day that two-thirds of its 25 largest clients had given BlackRock a substantial portion of their spending over the past five years.

“They’ve built a better mousetrap in terms of technology and alternatives across all asset classes,” said Kyle Sanders, equity analyst at Edward Jones. “Most asset managers are shrinking and BlackRock is growing.”

T Rowe Price reported net outflows of $20 billion for the quarter on Thursday, although surging markets pushed assets under management to $1.4 trillion.