4:41 p.m. | Updated
The giant money manager BlackRock said that investors are showing an increasing willingness to take on risk after years of shying away from it, helping the firm post record profits for the final quarter of 2012.
Over the last few months, BlackRock’s customers have been opting for stocks, or equities, instead of the apparently low-risk investments in bonds that they have favored since the financial crisis, the company’s chief executive, Laurence D. Fink, said. The trend has, if anything, sped up the new year, Mr. Fink said. In the first week of 2013, investors put more money into stock-based mutual funds than any other week in the last five years, according to the data company EPFR.
“It was an extraordinary amount of reallocation into equities and we are benefiting from that,” Mr. Fink said Thursday in a call with analysts. “I think this is going to be one of the major themes of 2013.”
A steady improvement in stock prices has encouraged many investors, but they have also been pushed into stocks by the low interest rates being offered by benchmark government bonds.
Within BlackRock the clearest sign of this movement came in the company’s exchange traded funds business, iShares. During the final three months of 2012, customers put $35.7 billiion into iShares E.T.F.’s, which are baskets of assets that can be traded as a single stock. That is the biggest inflow since BlackRock acquired the iShares business from Barclays in 2009. Most of the new money, $30.1 billion, went into E.T.F.s that hold individual stocks.
BlackRock has aggressively courted this business by starting an aggressive marketing campaign last year and creating a new series of low-cost E.T.F.’s in part to compete with other fund managers who have lowered their fees. Mr. Fink said the new low-cost funds attracted about $4 billion. BlackRock also acquired Credit Suisse’s European E.T.F. business at the end of the fourth quarter.
The influx of money helped push up BlackRock’s revenues and profit, though the company saw growth across most of its business lines, including its hedge funds and consulting operations. The company reported net income of $695 million in the fourth quarter, or $3.96 a share, on an adjusted basis. The earnings were significantly better than the $3.73 a share that analysts polled by Thomson Reuters predicted.
“This is our strongest quarter ever,” Mr. Fink, said in an interview. “Things just all came together.”
The firm said that its board had voted to increase the quarterly dividend 12 percent, to $1.68, and to increase its share buyback program. BlackRock’s stock rose sharply after the announcement, closing the day up 4.4 percent, at $232 a share.
The company’s success in the fourth quarter was driven in part by customers entrusting it with more money to manage. The total amount of money being managed by BlackRock climbed 8 percent from a year earlier, to $3.79 trillion. But the profits were also helped by customers moving or being put into products that charge higher fees.
Last year, it appeared that the breakneck growth that BlackRock had been experiencing for years was slowing, with quarterly profits slipping. Now, though, the company has found a way through marketing, management changes and new acquisitions to continue growing despite its size. Mr. Fink said that the slower growth had been caused by acquisitions and by investments the company was making, which are now helping the company’s performance.
“We’ve said it was going to take some time to reorganize,” Mr. Fink said . “It’s all starting to pay off.”
The fourth-quarter results excluded several one-time adjustments related mostly to charges incurred as a result of regulatory changes. Factoring in those adjustments, BlackRock earned $690 million on $2.5 billion in revenue in the fourth quarter.
DealBook: BlackRock Reports 29% Increase in Earnings
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DealBook: BlackRock Reports 29% Increase in Earnings
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DealBook: BlackRock Reports 29% Increase in Earnings
