BlackRock Inc. (BLK:US)’s Laurence D. Fink, who has been advising investors to put more money in stocks, said clients are still overwhelmed by fear as global markets remain “fragile” despite the first-quarter rally.
BlackRock, the world’s biggest asset manager, fell by the most in four months as Fink said investors remain pessimistic and customers removed money from active equity products while turning to passive investments such as exchange-traded funds. BlackRock’s share of fees from active stock funds, which last year were the biggest contributor to investment advisory revenue, fell below stock ETFs this year as investors migrated to passive products.
“I would still say the fears of the investor still are more overwhelming than the hope for a better future,” Fink, chairman and chief executive officer of New York-based BlackRock, said today during a conference call with investors and analysts. “Despite the rally in global equities from its lows, I would still qualify the market to be quite fragile.”
Fink’s message to savers to put money in equities as bond yields have shrunk to record lows, has yet to resonate as clients continued to put more money into active fixed-income compared to stocks. BlackRock has started a new advertising campaign aimed at making it better known and to help investors allocate money amid market volatility. The firm is also seeking to increase deposits into higher-fee actively managed products as investors have continued their shift into passive products.
Fink’s comments during the call indicated “a cautious outlook on the market due to tepid retail and institutional interest,” said Macrae Sykes, an analyst with Gabelli & Co. in Rye, New York. Fink, during today’s conference call, struck a very “measured tone” with his belief that investors remain pessimistic, said Luke Montgomery, a research analyst who covers asset managers at Sanford C. Bernstein & Co. in New York.
BlackRock fell 2.9 percent, the most since Dec. 8, to $196.01 in New York. The shares (BLK:US) gained 2.9 percent in the 12 months through April 18, compared with the 8.3 percent decline in the 20-member S&P index of asset managers and custody banks.
Investors pulled $48 billion from BlackRock in the quarter, including a $36 billion previously-disclosed redemption from a single client. BlackRock attracted $18.2 billion into its iShares ETFs in the quarter, compared with deposits of $1.1 billion into active bond funds and redemptions of $4.5 billion from stock funds.
“Flows were solid, if a little bit volatile and mixed by category,” Jeffrey Hopson, a research analyst at Stifel, Nicolaus & Co. in St. Louis, said in an interview.
BlackRock’s net income rose 0.7 percent to $572 million, or $3.14 a share. Rising markets and foreign-exchange swings lifted assets to $3.68 trillion. The MSCI ACWI Index (MXWD) of global stocks rose 11 percent in the first quarter and the U.S. benchmark Standard & Poor’s 500 Index increased 12 percent.
The firm’s assets rose about 1 percent to $3.68 trillion from a year earlier and increased 4.9 percent compared with the prior quarter. BlackRock’s investment advisory fees fell about 0.4 percent compared with a year earlier.
Investors put an estimated $73 billion into active funds industrywide this year through March, while depositing $34 billion into passive funds, according to data compiled by Morningstar Inc. (MORN:US) in Chicago. U.S. exchange-traded products had their best ever start to a year, attracting new assets of $55.6 billion in the first three months of 2011, according to data compiled by BlackRock.
BlackRock in February started a “new world” campaign to tell clients how to invest in an uncertain market. Four-page inserts appeared in publications including the Wall Street Journal and the Financial Times as part of the branding initiative. Fink and other BlackRock executives have spoken publicly about how investors can be harmed by staying in cash- like products and focusing on short-term investing.
The firm is also planning to start a bond-trading platform that will allow investors to bypass investment banks. BlackRock will match clients’ orders using its own system, rather than relying on Wall Street firms or other electronic networks to trade bonds. Fink said during the call that BlackRock isn’t trying to become a broker-dealer and doesn’t expect the platform to change the relations it has with sell-side firms.
BlackRock, which acquired Barclays Global Investors in December 2009, offers actively managed stock and bond funds, passive strategies, hedge funds and portfolios that use mathematical models, giving it the broadest array of products among money managers.
Fink, who co-founded BlackRock in 1988, has built the firm through a series of acquisitions, including the 2006 purchase of Merrill Lynch & Co.’s investment unit. BlackRock acquired the hedge fund-of-funds business of Quellos Group LLC in 2008. The company last year expanded the alternatives division, which manages hedge funds, real estate funds and private-equity strategies.
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