Asset Manager BlackRock Posts $423m Q1 Profit
Asset manager BlackRock (BLK) reported $423m of net income in Q110, up $339m compared to the year-ago quarter as revenue soared 102% to $1.995bn. “Following last year’s sharp rally in global equity markets and significant tightening of credit spreads, institutional investors stepped back to reassess their asset allocation strategies," said chairman and CEO Laurence Fink, in a statement. "As a result, institutional ‘re-risking’ activity slowed down and reallocations focused primarily on shifting from active to passive and from money market funds to deposits." Assets under management grew $17.6bn to $3.36trn as of March 31. Blackrock said investors redeemed $22.3bn out of actively managed equity and fixed-income portfolios, and put another $18.2bn of new in index equity and fixed-income products, as well as $13bn in multi-asset and alternative investments. The company reported $20m net gain on distressed credit and mortgage funds -- which represent 20-25% of economic investments as of the end of Q110. This is improved from a $12m net loss in the year-ago quarter. The gain comes after Curtis Arledge, chief investment officer for fixed income at BlackRock, said earlier this month that banks may need to record some losses on distressed mortgages before the company will continue to buy private label mortgage security bonds. This is amid the push in Congress for financial regulatory reform legislation that would require banks to hold a piece of credit risk in an aim to ensure the soundness of financial products sold and packaged into mortgage-backed securities (MBS) like those in which BlackRock invests. Reform legislation that heads to a Senate vote this week would also force forms of derivatives trading into greater transparency. BlackRock's Fink added: "In a time of tremendous upheaval, with profound financial reform under consideration, I remain incredibly enthusiastic about BlackRock’s global business model, our exclusive focus on serving clients, and our unique ability to create value for our clients." BlackRock also reported a $8m net gain on private equity investments (25-30% of investments) in Q110, reversed from a $20m net loss in the year-ago quarter. The company posted a $1m net loss on real estate-related investments (representing less than 10% of economic investments), narrowed from a $93m net loss last year. Write to Diana Golobay. Disclosure: the author holds no relevant investments.