BlackRock has reported third quarter 2013 diluted EPS of USD4.21, up 15% from a year ago.
Revenue increased 7% from the third quarter 2012, reflecting growth in markets, long-term net inflows and strength in BlackRock Solutions. Operating income for the third quarter 2013 was USD966 million with an operating margin of 39.1%.
As adjusted results: Third quarter 2013 diluted EPS of USD3.88 and operating income of USD978 million both rose 12% compared with the third quarter 2012. Third quarter 2012 included USD25 million of closed-end fund launch costs. Diluted EPS included operating income of USD3.96 per diluted share and net non-operating expense of USD0.08 per diluted share. Operating margin of 41.2% in the third quarter 2013 rose 50 bps from the third quarter 2012. Compared with the second quarter 2013, operating margin and diluted EPS declined 10 bps and USD0.27, respectively, reflecting seasonally lower securities lending fees, partially offset by strength in base fees and BlackRock Solutions revenue. The decline in diluted EPS compared with second quarter 2013 also reflected the USD39 million non-cash, pre-tax non-operating gain related to the PennyMac IPO recorded in the second quarter 2013.
“Our solid third quarter 2013 results are continued evidence of the benefits of our broad, diversified investment platform and strong investment performance,” says Laurence D Fink, Chairman and CEO of BlackRock. “Long-term net inflows of more than USD25 billion reflected positive flows across all major asset classes and geographies, driven by demand for outcome-oriented solutions, unconstrained fixed income and retail alternative strategies. We are seeing the steps we have taken to further enhance performance and invest in our brand drive accelerating growth in retail flows. Our Global Retail business added USD8.3 billion of long-term net inflows in the quarter and more than USD22 billion thus far in 2013, driving 7% year-to-date annualized organic growth, up from 3% growth for full year 2012. Our iShares ETFs also saw strong net inflows as liquidity-oriented investors turned to iShares once again to increase exposure during the quarter, and as buy-and-hold investors continued to access our Core Series product suite, which has attracted USD9 billion of inflows year to date.
“The current investment environment presents a wide range of challenges for our clients. Fundamentals continue to be outweighed by policy decisions and global growth is dictated more by central bankers and elected officials than business leaders. This uncertainty is keeping many investors on the sidelines, at exactly the time they need to be investing to plan for their futures, and in the face of these unknowns, clients are turning to BlackRock to provide solutions.
“Longevity and the ensuing need for sufficient retirement savings remains one of the most important investment challenges facing clients. Corporate pension plans are underfunded and individual investors are not prepared for retirement. We continue to partner with providers of defined contribution plans to provide advice and outcome-oriented solutions such as our LifePath® target-date portfolios, which gathered more than USD3 billion of assets this quarter.
“In the current low, volatile rate environment, yield-starved investors are becoming more aware of the risk in their fixed income portfolios and pursuing solutions to shorten duration while continuing to earn income. While the industry continues to see sizable fixed income redemptions, BlackRock once again experienced net inflows, driven by strong performance across the platform and our best-in-class nontraditional fixed income offerings. We have spent the past several quarters advising our clients on the benefits of unconstrained fixed income, and our flagship fund, the Strategic Income Opportunities Fund, gathered more than USD1 billion of assets for the third straight quarter.
“While crossing the USD4 trillion asset threshold was another milestone in our growth story, it only encourages us to continue pursuing the many opportunities we have to grow in the future, as we deliver the full value of our diverse platform, solutions-oriented investment culture and leading risk management capabilities to our clients regardless of market conditions.”
Long-term net inflows were positive across all regions, with net inflows of USD23.1 billion, USD1.8 billion and USD0.4 billion from clients in the Americas (defined as the United States, Caribbean, Canada, Latin America and Iberia), EMEA and Asia-Pacific, respectively. At September 30, 2013, BlackRock managed 61% of long-term AUM for investors in the Americas and 39% for international clients.
Retail global long-term net inflows of USD8.3 billion included net inflows of USD3.4 billion in the United States and USD4.5 billion in EMEA. Long-term net inflows were diversified across all asset classes, led by multi-asset class net inflows of USD2.9 billion with particular demand for the flagship Multi-asset Income and Global Allocation funds. Fixed income long-term net inflows of USD2.3 billion reflected strong interest in unconstrained fixed income offerings and equity net inflows of USD1.2 billion were driven by flows into the European equities suite. Alternative mutual funds generated over USD1 billion in net inflows for the second straight quarter, paced by the Global Long/Short Credit fund.
iShares long-term net inflows of USD20.2 billion included U.S. and European iShares net inflows of USD16.4 billion and USD5.0 billion, respectively. Renewed appetite for emerging markets and broad market European equity exposure in the latter part of the quarter drove equity net inflows of USD21.1 billion, partially offset by fixed income net outflows of USD1.5 billion. The Core Series generated USD2.0 billion of net inflows, concentrated in US equity.
Institutional active long-term net inflows of USD0.1 billion reflected strong flows of USD4.9 billion and USD2.2 billion into fixed income and multi-asset class products, respectively, largely offset by equity and active currency net outflows of USD6.1 billion and USD0.4 billion, respectively. Multi-asset class flows were driven by continued demand for the LifePath target-date suite, which had net inflows of USD3.0 billion.
Institutional index long-term net outflows of USD3.4 billion were due to equity net outflows of USD4.9 billion, primarily from U.S. equities. Equity net outflows were partially offset by fixed income net inflows of USD1.8 billion, largely into global bond and short or intermediate duration mandates.
Cash management AUM increased 3%, or USD7.5 billion, to USD260.1 billion.
Advisory AUM decreased 4% to USD38.5 billion due to planned portfolio liquidations.