By Kirsten Grind
BlackRock Inc. said investors poured a record amount of new
money into the firm last year partly because of turmoil at rival
Pacific Investment Management Co.
Clients committed $181 billion to mutual funds and
separately-managed accounts managed by BlackRock, the world's
largest asset manager. The surge was the highest annual amount
since Laurence Fink, chairman and chief executive, co-founded the
firm in 1988. Quarterly inflows of $87.8 billion during the final
three months of 2014 also set a record.
The disclosures came as New York-based BlackRock reported a 3%
drop in fourth-quarter earnings, and the company missed analyst
expectations' for revenue. BlackRock's shares rose 0.53% to $347.59
in morning trading.
Mr. Fink said in an interview that he believed some of
BlackRock's new money came from Pimco, the Newport Beach,
Calif.-based manager that struggled to keep clients following the
loss of star manager Bill Gross in September. Investors pulled $150
billion from Pimco's mutual funds during 2014, according to fund
tracker Morningstar Inc., including $103 billion from a flagship
fund once managed by Mr. Gross.
BlackRock has used advertising and client communications in
recent months to position itself against Pimco and recruit its
clients.
But in a later conference call, Mr. Fink said much of the new
funds were unrelated to BlackRock's "West Coast friend and
competitor." It is difficult for asset managers to know where new
money originates unless clients disclose that information.
A spokesman for Pimco didn't immediately return a request for
comment.
The flow of new money into BlackRock helped push its assets to
$4.65 trillion during the fourth quarter, up 8% from $4.33 trillion
in the year-ago quarter.
But a decrease in performance fees during the fourth quarter
dropped earnings to $813 million, or $4.77 a share, compared with
$841 million, or $4.86 a share last year. Mr. Fink attributed the
bulk of the decline in fees to a one-time boost in the year-ago
quarter from the liquidation of a financial crisis-related fund.
Revenue rose slightly to $2.78 billion from the year-ago
quarter.
Analysts polled by Thomson Reuters had estimated $4.67 a share
in earnings and $2.87 billion in revenue.
Jim Shanahan, a senior analyst with Edward Jones, described the
quarter as strong for investor inflows, but said he wasn't excited
that much of that money went to index funds and exchange-traded
funds that generate lower fees.
Of $87.8 billion of inflows in the quarter, about half went into
the firm's ETFs, which track baskets of securities and trade on an
exchange. It is unclear how much went into BlackRock's index funds,
as it doesn't break out those numbers. Other index funds saw
inflows of $22.8 billion during the quarter.
"Their fee rate continues to fall," Mr. Shanahan said. "I feel
like they should be doing better than they are."
BlackRock's results also revealed more struggles in its active
equity business, with institutional clients like pension funds and
endowments pulling a net $5.5 billion from its funds during the
quarter. Only 37% of its active stock funds beat their benchmarks
or peers over a one-year period during the quarter, the company
said.
Mr. Fink said BlackRock is two years into a five-year turnaround
effort with that business and said it would take time for new
portfolio managers and other changes to take hold. Stock fund
managers broadly suffered in 2014, with more than 70%
underperforming their category benchmarks and outflows across all
funds, according to fund research firm Morningstar Inc.
"I would like to be further along than we are, but we're not,"
Mr. Fink said in an interview.
BlackRock raised its dividend to $2.18 a share from $1.93 in the
third quarter, while boosting its share-buyback program by 6
million shares under its existing plan for a total of as many as
9.4 million shares.
Citigroup Inc. analyst William Katz reaffirmed his buy rating on
the company Thursday morning, citing "booming flows" and "strong
capital management."
In an interview before the analyst call, Mr. Fink said he
believes plunging oil prices have caused a major redistribution in
wealth, which is fantastic for the U.S. consumer.
Michael Calia contributed to this article.
Write to Kirsten Grind at kirsten.grind@wsj.com
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