The world’s largest asset manager Blackrock has reported its weakest level of net inflows in recent years as anxious investors redeemed money in droves from passive and active equity funds.
In its financial results for the third quarter, Blackrock said net inflows across its business totalled $10.6bn, down markedly from the $55bn and $20bn of net inflows reported during the first and second quarters of this year.
Institutions pull back
Institutional investors withdrew a combined $24.8bn from its index-linked funds and its actively managed portfolios. Its non-ETF passive equity funds accounted for the majority of these redemptions, haemorrhaging $30.8bn during the period.
Equity funds were also a weak point for its retail business, with clients pulling $2.9bn from its active strategies. The fund group’s retail segment finished the quarter with net inflows of $1.7bn.
Institutional outflows were ultimately offset by massive inflows of $33.7bn into its iShares business, which is the family of exchange-traded funds (ETFs) managed by BlackRock.
Risk-averse investors
However, net subscriptions are down substantially from where they were last year. In Q2 of 2017, iShares brought in $138.2bn alone, while institutional investors poured $173.9bn in total into index and active funds.
Laurence D. Fink, chairman and chief executive of Blackrock said outflows were the result of pension funds and other institutional investors de-risking their portfolios in light of divergent monetary policies and geopolitical uncertainty.
“Over the last 12 months, total net inflows of $177bn reflect continued growth in key areas of our business, including iShares, multi-asset solutions, illiquid alternatives and Aladdin,” he added.
AUM hits $6.4trn
Assets under management (AUM) at Blackrock grew 8% year-on-year to hit $6.4trn. This included $28bn of net AUM added from strategic transactions.
The asset manager also posted adjusted earnings per share (EPS) of $7.52, up 27% from the same period last year when it EPS was $5.90. The firm said this was boosted by higher non-operating income and a lower effective tax rate.
These results come as last week, Scottish Widows chose Blackrock to run £30bn of assets in its index strategies as part of a £109bn investment contract set to be withdrawn from Standard Life Aberdeen (SLA). Fellow asset manager Schroders, which is reported to win the remaining slice of the mandate, showed sluggish AUM growth in results on Monday.
Fink added: “We continue to build and evolve our business in order to stay ahead of clients’ needs and industry disruption, and completed several strategic transactions during the quarter to accelerate future growth.
“We are more confident than ever before in our ability to be a strategic partner to clients as a result of our broad array of integrated investment and technology offerings.”
