BlackRock's Profit Jumps on Bond, ETF Activity

By Dawn Lim 

Money management giant BlackRock Inc.'s quarterly profit rose 21% as investors leaned on its bond funds to make new bets in volatile markets roiled by the coronavirus pandemic.

The investment firm posted second-quarter profit of $1.2 billion, or $7.85 a share, up from the year-prior period of $1 billion, or $6.41 a share. Its revenue rose 4% to $3.6 billion.

The world's largest asset manager ended the quarter with $7.3 trillion it manages for clients, up from $6.5 trillion in March. It took in $100 billion in net new money, down from $151 billion in the year-ago quarter.

The firm beat analyst revenue and profit estimates.

Asset managers came under acute pressure at the end of the first quarter in March as markets sold off, But after the Federal Reserve rushed in to stabilize markets, many investment firms reaped the benefits of the Fed's intervention across a host of markets in the second quarter. Higher asset prices translate to bigger revenues for managers; they take a cut of fees on money they oversee for investors.

BlackRock's gains signal that the firm stands to cement its power in a world shaken by Covid-19.

Its exchange-traded-funds arm did a brisk business as traders and financial institutions used ETFs to zip in and out of markets, make wagers, or hedge risks during unprecedented volatility. ETFs are collections of instruments that trade like stocks on exchanges. BlackRock's ETFs took in $51 billion in the latest quarter, up from over $36 billion in the year-ago period.

BlackRock sells software, including a suite of tools called Aladdin, to banks and other institutions to evaluate financial risks. Its technology services revenue -- which includes fees from Aladdin -- rose by 17%. Many investors have struggled to price in the risks of their trades with the U.S. stock market rallying even as the U.S. faces a downturn with no end in sight.

That technology gives BlackRock a vantage point into markets and helped the firm land a coveted, but highly scrutinized, role in helping the Fed buy ETFs and bonds to support credit markets.

Write to Dawn Lim at [e-mail]

(END) Dow Jones Newswires

July 17, 2020 06:58 ET (10:58 GMT)

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