UPDATE 3-BlackRock profit falls in 3rd qtr but tops expectations

miércoles 14 de octubre de 2015 13:26 GYT

(Adds dateline, recasts, CEO and analyst quote, stock quote)
    By Trevor Hunnicutt
    NEW YORK, Oct 14 (Reuters) - Investors piled into BlackRock
Inc bond ETFs and paid more in hedge fund fees in the
third quarter, helping the world's largest asset manager beat
Wall Street's earnings forecasts and offsetting a higher tax hit
that cut profits 8 percent from a year earlier.
    Rough-and-tumble markets saw BlackRock trim core investment
advice and administration fees by $12 million from 2014 and give
up 5 percent of assets under management from the second quarter.
     But both institutional and retail investors sent a net
$23.3 billion in new money to the firm's iShares exchange-traded
funds unit, the company said in an earnings report on Wednesday.
That, plus a gain in performance fees by one of its hedge funds,
helped bolster revenues to $2.9 billion, up $61 million from a
year earlier.
    "We had a great quarter because our positioning as an
organization," said BlackRock chairman and chief executive
officer Laurence D. Fink. "Despite the volatility, clients have
to put their money to work."
    BlackRock shares were up 3.45 percent in trading Wednesday
in New York.
    New money moving into BlackRock's long-term asset management
business rose to $35 billion from $29 billion a year earlier in
net terms, including the iShares business. Seventy-nine percent
of all the new money BlackRock saw moved into fixed-income
    But the new money wasn't enough to offset the impact of
volatile markets which hurt assets and of currency swings which
hurt fee income. It took a hedge fund to do that.
    While the New York-based company took in more revenue during
the three months that ended Sept. 30 this year than it did
during the same period in 2014, that growth was driven
"primarily," the company said, by a single unnamed hedge fund
whose "strong" annual performance was measured during the
quarter. Performance fees were up $75 million for the quarter to
 $208 million.
    "We think they'll continue to build out their alternatives
platform, which could lead to quarters like this where they have
strong performance fees," said Rory Callagy, an analyst at
Moody's Investors Service.
    BlackRock earns sharply higher fees on alternative
investments, such as hedge funds, private equity, infrastructure
and real estate than traditional stock and bond products. While
they account for 3 percent of the firm's long-term assets under
management, they account for 8 percent of base fees, as well as
additional performance-based revenue not included in that 8
percent number. 
    Overall, BlackRock's net income fell 8 percent to $843
million, or $5 per share, from $917 million, or $5.37 per share,
a year earlier. Analysts on average were expecting a profit of
$4.57 per share, excluding transactions that don't affect the
company's value, according to Thomson Reuters I/B/E/S.
    "I cannot control the world's activities, and net income was
a function of global capital markets," said Fink.
    The company did manage to put a stop to net outflows for
now. In the second quarter, long-term net outflows were $7.3
billion, the company's first net outflow since 2012.
    In the third quarter, Blackrock paid $342 million in taxes,
up $110 million from the same period a year ago. 
    The firm's strong sales may be an outlier among its
competitors for the quarter. JPMorgan Chase & Co, whose
asset management unit has been a top seller of actively managed
mutual funds, on Tuesday reported outflows of $4 billion from
its long-term products for its third quarter. JPMorgan did not
respond to a request for comment. 
    "Investors seem to be focused on cost of investments so
unless that goes away, ETFs will continue to be attractive given
their fee rates," said Callagy. 
    BlackRock has been working to improve the investment
performance in its "fundamental" stock-picking business. Eighty
percent of its products in that segment are above their
benchmark or peer averages over a one-year period, Blackrock
said on Wednesday, citing its own figures.
    Overall, BlackRock ended the quarter with $4.51 trillion in
assets under management, down 5 percent from $4.72 trillion in
the second quarter.

 (Reporting By Trevor Hunnicutt in New York. Additional
reporting by Sudarshan Varadhan in Bengaluru.; Editing by Anil
D'Silva and W Simon)