EX-99.1 2 blk-ex991_54.htm EARNINGS RELEASE DATED JULY 16, 2018 blk-ex991_54.htm

Exhibit 99.1

 

 

 

 

 

 

 

 

INVESTOR RELATIONS:

Tom Wojcik      212.810.8127

 

MEDIA RELATIONS:

Brian Beades    212.810.5596

 

 

New York, July 16, 2018 – BlackRock, Inc. (NYSE: BLK) today reported financial results for the three months and six months ended June 30, 2018.

 

BlackRock Reports Second Quarter 2018 Diluted EPS of $6.62, or $6.66 as adjusted

 

 

 

$20 billion of total net inflows, positive across active, index and cash management

 

11% revenue growth year-over-year driven by base fees, performance fees and technology services revenue

 

16% operating income growth year-over-year reflects

operating margin expansion

 

27% diluted EPS growth (28% as adjusted) driven in part by lower tax rate

 

$300 million of quarterly share repurchases

 

Laurence D. Fink, Chairman and CEO:

 

“BlackRock delivered strong financial results in the second quarter, as revenue increased 11%, operating income increased 16% and EPS increased 28% year-over-year.

 

“Our diverse global platform generated $20 billion of total net inflows in the quarter and $276 billion over the last twelve months. Secular trends supportive of BlackRock’s future growth continue, especially in technology, including Aladdin and digital wealth, alternatives and iShares.

 

“Despite an industry-wide slowdown in flows associated with investor uncertainty in the current market environment, our dialogue with clients and opportunities to provide long-term solutions are more robust than ever before.

 

“We have seen markets like these before, and BlackRock’s product breadth, unparalleled portfolio construction capabilities, digital tools and technology uniquely position us to deliver long-term value to clients and shareholders.”

 

 

 

 

 

FINANCIAL RESULTS

 

 

Q2

 

Q2

 

 

 

 

 

(in millions, except per share data)

2018

 

2017*

 

Change

 

 

AUM

$

6,299,706

 

$

5,689,273

 

 

11

%

 

Total net flows

$

20,015

 

$

103,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP basis:

 

 

 

 

 

 

 

 

 

 

Revenue

$

3,605

 

$

3,236

 

 

11

%

 

Operating income

$

1,440

 

$

1,237

 

 

16

%

 

Operating margin

 

39.9

%

 

38.2

%

 

170

bps

 

Net income(1)

$

1,073

 

$

854

 

 

26

%

 

Diluted EPS

$

6.62

 

$

5.20

 

 

27

%

 

Weighted average diluted

   shares

 

162.2

 

 

164.1

 

 

(1

)%

 

 

 

 

 

 

 

 

 

 

 

 

As Adjusted:

 

 

 

 

 

 

 

 

 

 

Operating income(2)

$

1,443

 

$

1,241

 

 

16

%

 

Operating margin(2)

 

45.2

%

 

43.9

%

 

130

bps

 

Net income(1) (2)

$

1,080

 

$

857

 

 

26

%

 

Diluted EPS(2)

$

6.66

 

$

5.22

 

 

28

%

 

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.

(1)

Net income represents net income attributable to BlackRock, Inc.  

(2)

See notes (1) through (3) to the condensed consolidated statements of income and supplemental information on pages 11 and 12 for more information on as adjusted items and the reconciliation to GAAP.

NET FLOW HIGHLIGHTS

 

Long-term net inflows of $14.5 billion by region:

 

 

Americas:

$

21.0

 billion

 

EMEA:

$

(7.4)

 billion

 

APAC:

$

0.9

 billion

 

Long-term net inflows of $14.5 billion by client type:

 

 

Retail:

$

5.5

 billion

 

U.S.:

$

8.2

 billion

 

International:

$

(2.7)

 billion

 

 

iShares®:

$

17.8

 billion

 

Core:

$

20.4

 billion

 

Non-Core:

$

(2.6)

 billion

 

 

Institutional:

$

(8.8)

 billion

 

Index:

$

(13.5)

 billion

 

Active:

$

4.7

 billion

 

Cash management net inflows of $5.7 billion

 

1

 

BUSINESS RESULTS

 

 

 

 

 

 

 

 

 

 

June 30, 2018

 

 

Q2 2018

 

 

 

Q2 2018

 

June 30, 2018

 

Q2 2018

 

AUM

 

 

Base fees(1)

 

 

(in millions), (unaudited)

Net flows

 

AUM

 

Base fees(1)

 

% of Total

 

 

% of Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESULTS BY CLIENT TYPE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

$

5,496

 

$

636,825

 

$

858

 

 

10

%

 

 

29

%

 

iShares ETFs

 

17,811

 

 

1,776,765

 

 

1,143

 

 

28

%

 

 

39

%

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

4,657

 

 

1,123,388

 

 

511

 

 

18

%

 

 

18

%

 

Index

 

(13,466

)

 

2,304,764

 

 

275

 

 

37

%

 

 

9

%

 

Total institutional

 

(8,809

)

 

3,428,152

 

 

786

 

 

55

%

 

 

27

%

 

Long-term

 

14,498

 

 

5,841,742

 

 

2,787

 

 

93

%

 

 

95

%

 

Cash management

 

5,728

 

 

457,054

 

 

157

 

 

7

%

 

 

5

%

 

Advisory

 

(211

)

 

910

 

 

-

 

 

-

 

 

 

-

 

 

Total

$

20,015

 

$

6,299,706

 

$

2,944

 

 

100

%

 

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESULTS BY INVESTMENT STYLE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

$

7,889

 

$

1,682,794

 

$

1,352

 

 

27

%

 

 

46

%

 

Index and iShares ETFs

 

6,609

 

 

4,158,948

 

 

1,435

 

 

66

%

 

 

49

%

 

Long-term

 

14,498

 

 

5,841,742

 

 

2,787

 

 

93

%

 

 

95

%

 

Cash management

 

5,728

 

 

457,054

 

 

157

 

 

7

%

 

 

5

%

 

Advisory

 

(211

)

 

910

 

 

-

 

 

-

 

 

 

-

 

 

Total

$

20,015

 

$

6,299,706

 

$

2,944

 

 

100

%

 

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESULTS BY PRODUCT TYPE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

(22,377

)

$

3,366,480

 

$

1,524

 

 

53

%

 

 

52

%

 

Fixed income

 

26,420

 

 

1,858,609

 

 

766

 

 

30

%

 

 

26

%

 

Multi-asset

 

8,376

 

 

481,666

 

 

295

 

 

8

%

 

 

10

%

 

Alternatives

 

2,079

 

 

134,987

 

 

202

 

 

2

%

 

 

7

%

 

Long-term

 

14,498

 

 

5,841,742

 

 

2,787

 

 

93

%

 

 

95

%

 

Cash management

 

5,728

 

 

457,054

 

 

157

 

 

7

%

 

 

5

%

 

Advisory

 

(211

)

 

910

 

 

-

 

 

-

 

 

 

-

 

 

Total

$

20,015

 

$

6,299,706

 

$

2,944

 

 

100

%

 

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Base fees include investment advisory, administration fees and securities lending revenue.

 

INVESTMENT PERFORMANCE AT JUNE 30, 2018(1)

One-year period

 

Three-year period

 

Five-year period

 

  Fixed income:

 

 

 

 

 

 

 

 

 

  Actively managed AUM above benchmark or peer median

 

 

 

 

 

 

 

 

 

Taxable

78%

 

71%

 

85%

 

Tax-exempt

78%

 

77%

 

76%

 

  Index AUM within or above applicable tolerance

96%

 

99%

 

100%

 

  Equity:

 

 

 

 

 

 

 

 

 

  Actively managed AUM above benchmark or peer median

 

 

 

 

 

 

 

 

 

Fundamental

59%

 

78%

 

80%

 

Systematic

86%

 

82%

 

91%

 

  Index AUM within or above applicable tolerance

98%

 

98%

 

99%

 

(1)

Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to page 13 for performance disclosure detail.

 

TELECONFERENCE, WEBCAST AND PRESENTATION INFORMATION

Chairman and Chief Executive Officer, Laurence D. Fink, President, Robert S. Kapito, and Chief Financial Officer, Gary S. Shedlin, will host a teleconference call for investors and analysts on Monday, July 16, 2018 at 8:30 a.m. (Eastern Time). Members of the public who are interested in participating in the teleconference should dial, from the United States, (800) 374-0176, or from outside the United States, (706) 679-8281, shortly before 8:30 a.m. and reference the BlackRock Conference Call (ID Number 5768688). A live, listen-only webcast will also be available via the investor relations section of www.blackrock.com.

Both the teleconference and webcast will be available for replay by 12:30 p.m. (Eastern Time) on Monday, July 16, 2018 and ending at midnight on Monday, July 30, 2018. To access the replay of the teleconference, callers from the United States should dial (855) 859-2056 and callers from outside the United States should dial (404) 537-3406 and enter the Conference ID Number 5768688. To access the webcast, please visit the investor relations section of www.blackrock.com.

ABOUT BLACKROCK

BlackRock helps investors build better financial futures. As a fiduciary to our clients, we provide the investment and technology solutions they need when planning for their most important goals. As of June 30, 2018, the firm managed approximately $6.3 trillion in assets on behalf of investors worldwide. For additional information on BlackRock, please visit www.blackrock.com | Twitter: @blackrock | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock.

2

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

2018

 

 

2017*

 

 

Change

 

 

2018

 

 

Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and

  securities lending revenue

$

2,944

 

 

$

2,667

 

 

$

277

 

 

$

2,947

 

 

$

(3

)

Investment advisory performance fees

 

91

 

 

 

48

 

 

 

43

 

 

 

70

 

 

 

21

 

Technology services revenue

 

198

 

 

 

158

 

 

 

40

 

 

 

184

 

 

 

14

 

Distribution fees

 

294

 

 

 

292

 

 

 

2

 

 

 

311

 

 

 

(17

)

Advisory and other revenue

 

78

 

 

 

71

 

 

 

7

 

 

 

71

 

 

 

7

 

Total revenue

 

3,605

 

 

 

3,236

 

 

 

369

 

 

 

3,583

 

 

 

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

1,082

 

 

 

998

 

 

 

84

 

 

 

1,121

 

 

 

(39

)

Distribution and servicing costs

 

415

 

 

 

410

 

 

 

5

 

 

 

432

 

 

 

(17

)

Direct fund expense

 

264

 

 

 

221

 

 

 

43

 

 

 

261

 

 

 

3

 

General and administration

 

393

 

 

 

345

 

 

 

48

 

 

 

383

 

 

 

10

 

Amortization of intangible assets

 

11

 

 

 

25

 

 

 

(14

)

 

 

11

 

 

 

-

 

Total expense

 

2,165

 

 

 

1,999

 

 

 

166

 

 

 

2,208

 

 

 

(43

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

1,440

 

 

 

1,237

 

 

 

203

 

 

 

1,375

 

 

 

65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on investments

 

3

 

 

 

36

 

 

 

(33

)

 

 

15

 

 

 

(12

)

Interest and dividend income

 

19

 

 

 

13

 

 

 

6

 

 

 

15

 

 

 

4

 

Interest expense

 

(46

)

 

 

(48

)

 

 

2

 

 

 

(46

)

 

 

-

 

Total nonoperating income (expense)

 

(24

)

 

 

1

 

 

 

(25

)

 

 

(16

)

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

1,416

 

 

 

1,238

 

 

 

178

 

 

 

1,359

 

 

 

57

 

Income tax expense (benefit)

 

338

 

 

 

374

 

 

 

(36

)

 

 

265

 

 

 

73

 

Net income

 

1,078

 

 

 

864

 

 

 

214

 

 

 

1,094

 

 

 

(16

)

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling

  interests

 

5

 

 

 

10

 

 

 

(5

)

 

 

5

 

 

 

-

 

Net income attributable to BlackRock, Inc.

$

1,073

 

 

$

854

 

 

$

219

 

 

$

1,089

 

 

$

(16

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

160,980,960

 

 

 

162,502,465

 

 

 

(1,521,505

)

 

 

161,250,018

 

 

 

(269,058

)

Diluted

 

162,161,937

 

 

 

164,149,861

 

 

 

(1,987,924

)

 

 

162,918,961

 

 

 

(757,024

)

Earnings per share attributable to BlackRock, Inc.

   common stockholders (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

6.67

 

 

$

5.26

 

 

$

1.41

 

 

$

6.75

 

 

$

(0.08

)

Diluted

$

6.62

 

 

$

5.20

 

 

$

1.42

 

 

$

6.68

 

 

$

(0.06

)

Cash dividends declared and paid per share

$

2.88

 

 

$

2.50

 

 

$

0.38

 

 

$

2.88

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM (end of period)

$

6,299,706

 

 

$

5,689,273

 

 

$

610,433

 

 

$

6,316,984

 

 

$

(17,278

)

Shares outstanding (end of period)

 

160,779,596

 

 

 

162,207,216

 

 

 

(1,427,620

)

 

 

161,275,008

 

 

 

(495,412

)

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

39.9

%

 

 

38.2

%

 

 

170

  bps

 

 

38.4

%

 

 

150

bps

Effective tax rate

 

24.0

%

 

 

30.5

%

 

 

(650

) bps

 

 

19.6

%

 

 

440

bps

As adjusted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (1)

$

1,443

 

 

$

1,241

 

 

$

202

 

 

$

1,378

 

 

$

65

 

Operating margin (1)

 

45.2

%

 

 

43.9

%

 

 

130

  bps

 

 

44.1

%

 

 

110

bps

Nonoperating income (expense), less net income

     (loss) attributable to noncontrolling interests

$

(29

)

 

$

(9

)

 

$

(20

)

 

$

(21

)

 

$

(8

)

Net income attributable to BlackRock, Inc. (2)

$

1,080

 

 

$

857

 

 

$

223

 

 

$

1,092

 

 

$

(12

)

Diluted earnings attributable to BlackRock, Inc.

     common stockholders per share (2) (3)

$

6.66

 

 

$

5.22

 

 

$

1.44

 

 

$

6.70

 

 

$

(0.04

)

Effective tax rate

 

23.7

%

 

 

30.4

%

 

 

(670

) bps

 

 

19.6

%

 

 

410

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See pages 11-12 for the reconciliation to GAAP and notes (1) through (3) for more information on as adjusted items.

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  


3

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2018

 

 

2017*

 

 

Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and securities

      lending revenue

$

5,891

 

 

$

5,190

 

 

$

701

 

Investment advisory performance fees

 

161

 

 

 

118

 

 

 

43

 

Technology services revenue

 

382

 

 

 

312

 

 

 

70

 

Distribution fees

 

605

 

 

 

579

 

 

 

26

 

Advisory and other revenue

 

149

 

 

 

129

 

 

 

20

 

Total revenue

 

7,188

 

 

 

6,328

 

 

 

860

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

2,203

 

 

 

2,019

 

 

 

184

 

Distribution and servicing costs

 

847

 

 

 

811

 

 

 

36

 

Direct fund expense

 

525

 

 

 

427

 

 

 

98

 

General and administration

 

776

 

 

 

641

 

 

 

135

 

Amortization of intangible assets

 

22

 

 

 

50

 

 

 

(28

)

Total expense

 

4,373

 

 

 

3,948

 

 

 

425

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

2,815

 

 

 

2,380

 

 

 

435

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on investments

 

18

 

 

 

87

 

 

 

(69

)

Interest and dividend income

 

34

 

 

 

20

 

 

 

14

 

Interest expense

 

(92

)

 

 

(113

)

 

 

21

 

Total nonoperating income (expense)

 

(40

)

 

 

(6

)

 

 

(34

)

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

2,775

 

 

 

2,374

 

 

 

401

 

Income tax expense

 

603

 

 

 

642

 

 

 

(39

)

Net income

 

2,172

 

 

 

1,732

 

 

 

440

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interests

 

10

 

 

 

19

 

 

 

(9

)

Net income attributable to BlackRock, Inc.

$

2,162

 

 

$

1,713

 

 

$

449

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

161,114,746

 

 

 

162,758,112

 

 

 

(1,643,366

)

Diluted

 

162,532,637

 

 

 

164,544,760

 

 

 

(2,012,123

)

Earnings per share attributable to BlackRock, Inc.

   common stockholders (3)

 

 

 

 

 

 

 

 

 

 

 

Basic

$

13.42

 

 

$

10.52

 

 

$

2.90

 

Diluted

$

13.30

 

 

$

10.41

 

 

$

2.89

 

Cash dividends declared and paid per share

$

5.76

 

 

$

5.00

 

 

$

0.76

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM (end of period)

$

6,299,706

 

 

$

5,689,273

 

 

$

610,433

 

Shares outstanding (end of period)

 

160,779,596

 

 

 

162,207,216

 

 

 

(1,427,620

)

GAAP:

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

39.2

%

 

 

37.6

%

 

 

160

  bps

Effective tax rate

 

21.8

%

 

 

27.3

%

 

 

(550

) bps

As adjusted:

 

 

 

 

 

 

 

 

 

 

 

Operating income (1)

$

2,821

 

 

$

2,388

 

 

$

433

 

Operating margin (1)

 

44.7

%

 

 

43.3

%

 

 

140

  bps

Nonoperating income (expense), less net income (loss)

     attributable to noncontrolling interests

$

(50

)

 

$

(25

)

 

$

(25

)

Net income attributable to BlackRock, Inc. (2)

$

2,172

 

 

$

1,719

 

 

$

453

 

Diluted earnings attributable to BlackRock, Inc.

     common stockholders per share (2) (3)

$

13.36

 

 

$

10.45

 

 

$

2.91

 

Effective tax rate

 

21.7

%

 

 

27.3

%

 

 

(560

) bps

 

 

 

 

 

 

 

 

 

 

 

 

See pages 11-12 for the reconciliation to GAAP and notes (1) through (3) for more information on as adjusted items.

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  

 

4

 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Current Quarter Component Changes by Client Type and Product Type

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

inflows

 

 

Market

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2018

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

232,955

 

 

$

(1,564

)

 

$

5,110

 

 

$

(3,884

)

 

$

232,617

 

 

$

234,543

 

Fixed income

 

266,571

 

 

 

6,218

 

 

 

(3,431

)

 

 

(2,371

)

 

 

266,987

 

 

 

266,611

 

Multi-asset

 

121,601

 

 

 

(80

)

 

 

(1,649

)

 

 

(573

)

 

 

119,299

 

 

 

120,909

 

Alternatives

 

17,236

 

 

 

922

 

 

 

(57

)

 

 

(179

)

 

 

17,922

 

 

 

17,552

 

Retail subtotal

 

638,363

 

 

 

5,496

 

 

 

(27

)

 

 

(7,007

)

 

 

636,825

 

 

 

639,615

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,344,564

 

 

 

1,379

 

 

 

7,901

 

 

 

(7,556

)

 

 

1,346,288

 

 

 

1,355,041

 

Fixed income

 

394,191

 

 

 

15,948

 

 

 

(4,567

)

 

 

(3,841

)

 

 

401,731

 

 

 

399,012

 

Multi-asset

 

3,766

 

 

 

23

 

 

 

(20

)

 

 

(2

)

 

 

3,767

 

 

 

3,761

 

Alternatives

 

25,404

 

 

 

461

 

 

 

(812

)

 

 

(74

)

 

 

24,979

 

 

 

25,808

 

iShares ETFs subtotal

 

1,767,925

 

 

 

17,811

 

 

 

2,502

 

 

 

(11,473

)

 

 

1,776,765

 

 

 

1,783,622

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

136,470

 

 

 

(1,213

)

 

 

2,345

 

 

 

(2,616

)

 

 

134,986

 

 

 

136,675

 

Fixed income

 

563,572

 

 

 

(2,919

)

 

 

(3,077

)

 

 

(7,132

)

 

 

550,444

 

 

 

554,919

 

Multi-asset

 

343,344

 

 

 

7,909

 

 

 

6,023

 

 

 

(6,731

)

 

 

350,545

 

 

 

347,240

 

Alternatives

 

87,060

 

 

 

880

 

 

 

886

 

 

 

(1,413

)

 

 

87,413

 

 

 

87,128

 

Active subtotal

 

1,130,446

 

 

 

4,657

 

 

 

6,177

 

 

 

(17,892

)

 

 

1,123,388

 

 

 

1,125,962

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,649,248

 

 

 

(20,979

)

 

 

46,758

 

 

 

(22,438

)

 

 

1,652,589

 

 

 

1,658,275

 

Fixed income

 

662,189

 

 

 

7,173

 

 

 

(5,329

)

 

 

(24,586

)

 

 

639,447

 

 

 

648,092

 

Multi-asset

 

7,986

 

 

 

524

 

 

 

(259

)

 

 

(196

)

 

 

8,055

 

 

 

7,905

 

Alternatives

 

4,904

 

 

 

(184

)

 

 

72

 

 

 

(119

)

 

 

4,673

 

 

 

4,681

 

Index subtotal

 

2,324,327

 

 

 

(13,466

)

 

 

41,242

 

 

 

(47,339

)

 

 

2,304,764

 

 

 

2,318,953

 

Institutional subtotal

 

3,454,773

 

 

 

(8,809

)

 

 

47,419

 

 

 

(65,231

)

 

 

3,428,152

 

 

 

3,444,915

 

Long-term

 

5,861,061

 

 

 

14,498

 

 

 

49,894

 

 

 

(83,711

)

 

 

5,841,742

 

 

 

5,868,152

 

Cash management

 

454,784

 

 

 

5,728

 

 

 

328

 

 

 

(3,786

)

 

 

457,054

 

 

 

458,521

 

Advisory (3)

 

1,139

 

 

 

(211

)

 

 

22

 

 

 

(40

)

 

 

910

 

 

 

1,048

 

Total

$

6,316,984

 

 

$

20,015

 

 

$

50,244

 

 

$

(87,537

)

 

$

6,299,706

 

 

$

6,327,721

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Quarter Component Changes by Investment Style and Product Type (Long-term)

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

inflows

 

 

Market

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2018

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

308,367

 

 

$

(4,395

)

 

$

4,999

 

 

$

(4,873

)

 

$

304,098

 

 

$

308,232

 

Fixed income

 

816,274

 

 

 

2,652

 

 

 

(6,564

)

 

 

(8,847

)

 

 

803,515

 

 

 

807,687

 

Multi-asset

 

464,945

 

 

 

7,830

 

 

 

4,374

 

 

 

(7,304

)

 

 

469,845

 

 

 

468,149

 

Alternatives

 

104,297

 

 

 

1,802

 

 

 

829

 

 

 

(1,592

)

 

 

105,336

 

 

 

104,680

 

Active subtotal

 

1,693,883

 

 

 

7,889

 

 

 

3,638

 

 

 

(22,616

)

 

 

1,682,794

 

 

 

1,688,748

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,344,564

 

 

 

1,379

 

 

 

7,901

 

 

 

(7,556

)

 

 

1,346,288

 

 

 

1,355,041

 

Fixed income

 

394,191

 

 

 

15,948

 

 

 

(4,567

)

 

 

(3,841

)

 

 

401,731

 

 

 

399,012

 

Multi-asset

 

3,766

 

 

 

23

 

 

 

(20

)

 

 

(2

)

 

 

3,767

 

 

 

3,761

 

Alternatives

 

25,404

 

 

 

461

 

 

 

(812

)

 

 

(74

)

 

 

24,979

 

 

 

25,808

 

iShares ETFs subtotal

 

1,767,925

 

 

 

17,811

 

 

 

2,502

 

 

 

(11,473

)

 

 

1,776,765

 

 

 

1,783,622

 

Non-ETF Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,710,306

 

 

 

(19,361

)

 

 

49,214

 

 

 

(24,065

)

 

 

1,716,094

 

 

 

1,721,261

 

Fixed income

 

676,058

 

 

 

7,820

 

 

 

(5,273

)

 

 

(25,242

)

 

 

653,363

 

 

 

661,935

 

Multi-asset

 

7,986

 

 

 

523

 

 

 

(259

)

 

 

(196

)

 

 

8,054

 

 

 

7,905

 

Alternatives

 

4,903

 

 

 

(184

)

 

 

72

 

 

 

(119

)

 

 

4,672

 

 

 

4,681

 

Non-ETF Index subtotal

 

2,399,253

 

 

 

(11,202

)

 

 

43,754

 

 

 

(49,622

)

 

 

2,382,183

 

 

 

2,395,782

 

Index & iShares ETFs subtotal

 

4,167,178

 

 

 

6,609

 

 

 

46,256

 

 

 

(61,095

)

 

 

4,158,948

 

 

 

4,179,404

 

Long-term

$

5,861,061

 

 

$

14,498

 

 

$

49,894

 

 

$

(83,711

)

 

$

5,841,742

 

 

$

5,868,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Quarter Component Changes by Product Type (Long-term)

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

inflows

 

 

Market

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2018

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Equity

$

3,363,237

 

 

$

(22,377

)

 

$

62,114

 

 

$

(36,494

)

 

$

3,366,480

 

 

$

3,384,534

 

Fixed income

 

1,886,523

 

 

 

26,420

 

 

 

(16,404

)

 

 

(37,930

)

 

 

1,858,609

 

 

 

1,868,634

 

Multi-asset

 

476,697

 

 

 

8,376

 

 

 

4,095

 

 

 

(7,502

)

 

 

481,666

 

 

 

479,815

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

101,563

 

 

 

1,905

 

 

 

816

 

 

 

(1,516

)

 

 

102,768

 

 

 

102,047

 

Currency and commodities(4)

 

33,041

 

 

 

174

 

 

 

(727

)

 

 

(269

)

 

 

32,219

 

 

 

33,122

 

Alternatives subtotal

 

134,604

 

 

 

2,079

 

 

 

89

 

 

 

(1,785

)

 

 

134,987

 

 

 

135,169

 

Long-term

$

5,861,061

 

 

$

14,498

 

 

$

49,894

 

 

$

(83,711

)

 

$

5,841,742

 

 

$

5,868,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

(2)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.

(3)

Advisory AUM represents long-term portfolio liquidation assignments.

(4)

Amounts include commodity iShares ETFs.

5

 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-to-Date Component Changes by Client Type and Product Type

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

inflows

 

 

Market

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

233,218

 

 

$

2,683

 

 

$

(1,601

)

 

$

(1,683

)

 

$

232,617

 

 

$

236,491

 

Fixed income

 

257,571

 

 

 

16,283

 

 

 

(5,619

)

 

 

(1,248

)

 

 

266,987

 

 

 

264,271

 

Multi-asset

 

120,855

 

 

 

1,955

 

 

 

(3,205

)

 

 

(306

)

 

 

119,299

 

 

 

121,817

 

Alternatives

 

16,733

 

 

 

1,260

 

 

 

6

 

 

 

(77

)

 

 

17,922

 

 

 

17,357

 

Retail subtotal

 

628,377

 

 

 

22,181

 

 

 

(10,419

)

 

 

(3,314

)

 

 

636,825

 

 

 

639,936

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,329,610

 

 

 

31,093

 

 

 

(9,444

)

 

 

(4,971

)

 

 

1,346,288

 

 

 

1,363,023

 

Fixed income

 

395,252

 

 

 

19,158

 

 

 

(10,321

)

 

 

(2,358

)

 

 

401,731

 

 

 

397,326

 

Multi-asset

 

3,761

 

 

 

70

 

 

 

(60

)

 

 

(4

)

 

 

3,767

 

 

 

3,778

 

Alternatives

 

23,616

 

 

 

2,138

 

 

 

(721

)

 

 

(54

)

 

 

24,979

 

 

 

25,319

 

iShares ETFs subtotal

 

1,752,239

 

 

 

52,459

 

 

 

(20,546

)

 

 

(7,387

)

 

 

1,776,765

 

 

 

1,789,446

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

137,185

 

 

 

(1,510

)

 

 

606

 

 

 

(1,295

)

 

 

134,986

 

 

 

138,306

 

Fixed income

 

570,050

 

 

 

(6,988

)

 

 

(10,212

)

 

 

(2,406

)

 

 

550,444

 

 

 

560,667

 

Multi-asset

 

347,825

 

 

 

3,799

 

 

 

2,863

 

 

 

(3,942

)

 

 

350,545

 

 

 

347,459

 

Alternatives

 

84,248

 

 

 

2,266

 

 

 

1,560

 

 

 

(661

)

 

 

87,413

 

 

 

86,441

 

Active subtotal

 

1,139,308

 

 

 

(2,433

)

 

 

(5,183

)

 

 

(8,304

)

 

 

1,123,388

 

 

 

1,132,873

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,671,628

 

 

 

(28,128

)

 

 

17,450

 

 

 

(8,361

)

 

 

1,652,589

 

 

 

1,676,202

 

Fixed income

 

632,592

 

 

 

24,650

 

 

 

(8,315

)

 

 

(9,480

)

 

 

639,447

 

 

 

643,658

 

Multi-asset

 

7,837

 

 

 

564

 

 

 

(372

)

 

 

26

 

 

 

8,055

 

 

 

8,208

 

Alternatives

 

4,750

 

 

 

(171

)

 

 

115

 

 

 

(21

)

 

 

4,673

 

 

 

4,780

 

Index subtotal

 

2,316,807

 

 

 

(3,085

)

 

 

8,878

 

 

 

(17,836

)

 

 

2,304,764

 

 

 

2,332,848

 

Institutional subtotal

 

3,456,115

 

 

 

(5,518

)

 

 

3,695

 

 

 

(26,140

)

 

 

3,428,152

 

 

 

3,465,721

 

Long-term

 

5,836,731

 

 

 

69,122

 

 

 

(27,270

)

 

 

(36,841

)

 

 

5,841,742

 

 

 

5,895,103

 

Cash management

 

449,949

 

 

 

8,403

 

 

 

413

 

 

 

(1,711

)

 

 

457,054

 

 

 

456,259

 

Advisory (3)

 

1,515

 

 

 

(565

)

 

 

8

 

 

 

(48

)

 

 

910

 

 

 

1,192

 

Total

$

6,288,195

 

 

$

76,960

 

 

$

(26,849

)

 

$

(38,600

)

 

$

6,299,706

 

 

$

6,352,554

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-to-Date Component Changes by Investment Style and Product Type (Long-term)

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

inflows

 

 

Market

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

311,209

 

 

$

(3,390

)

 

$

(1,460

)

 

$

(2,261

)

 

$

304,098

 

 

$

312,829

 

Fixed income

 

815,135

 

 

 

7,510

 

 

 

(15,786

)

 

 

(3,344

)

 

 

803,515

 

 

 

811,643

 

Multi-asset

 

468,679

 

 

 

5,754

 

 

 

(342

)

 

 

(4,246

)

 

 

469,845

 

 

 

469,276

 

Alternatives

 

100,982

 

 

 

3,526

 

 

 

1,566

 

 

 

(738

)

 

 

105,336

 

 

 

103,798

 

Active subtotal

 

1,696,005

 

 

 

13,400

 

 

 

(16,022

)

 

 

(10,589

)

 

 

1,682,794

 

 

 

1,697,546

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,329,610

 

 

 

31,093

 

 

 

(9,444

)

 

 

(4,971

)

 

 

1,346,288

 

 

 

1,363,023

 

Fixed income

 

395,252

 

 

 

19,158

 

 

 

(10,321

)

 

 

(2,358

)

 

 

401,731

 

 

 

397,326

 

Multi-asset

 

3,761

 

 

 

70

 

 

 

(60

)

 

 

(4

)

 

 

3,767

 

 

 

3,778

 

Alternatives

 

23,616

 

 

 

2,138

 

 

 

(721

)

 

 

(54

)

 

 

24,979

 

 

 

25,319

 

iShares ETFs subtotal

 

1,752,239

 

 

 

52,459

 

 

 

(20,546

)

 

 

(7,387

)

 

 

1,776,765

 

 

 

1,789,446

 

Non-ETF Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,730,822

 

 

 

(23,565

)

 

 

17,915

 

 

 

(9,078

)

 

 

1,716,094

 

 

 

1,738,170

 

Fixed income

 

645,078

 

 

 

26,435

 

 

 

(8,360

)

 

 

(9,790

)

 

 

653,363

 

 

 

656,953

 

Multi-asset

 

7,838

 

 

 

564

 

 

 

(372

)

 

 

24

 

 

 

8,054

 

 

 

8,208

 

Alternatives

 

4,749

 

 

 

(171

)

 

 

115

 

 

 

(21

)

 

 

4,672

 

 

 

4,780

 

Non-ETF Index subtotal

 

2,388,487

 

 

 

3,263

 

 

 

9,298

 

 

 

(18,865

)

 

 

2,382,183

 

 

 

2,408,111

 

Index & iShares ETFs subtotal

 

4,140,726

 

 

 

55,722

 

 

 

(11,248

)

 

 

(26,252

)

 

 

4,158,948

 

 

 

4,197,557

 

Long-term

$

5,836,731

 

 

$

69,122

 

 

$

(27,270

)

 

$

(36,841

)

 

$

5,841,742

 

 

$

5,895,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-to-Date Component Changes by Product Type (Long-term)

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

inflows

 

 

Market

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Equity

$

3,371,641

 

 

$

4,138

 

 

$

7,011

 

 

$

(16,310

)

 

$

3,366,480

 

 

$

3,414,022

 

Fixed income

 

1,855,465

 

 

 

53,103

 

 

 

(34,467

)

 

 

(15,492

)

 

 

1,858,609

 

 

 

1,865,922

 

Multi-asset

 

480,278

 

 

 

6,388

 

 

 

(774

)

 

 

(4,226

)

 

 

481,666

 

 

 

481,262

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

98,533

 

 

 

3,437

 

 

 

1,567

 

 

 

(769

)

 

 

102,768

 

 

 

101,197

 

Currency and commodities(4)

 

30,814

 

 

 

2,056

 

 

 

(607

)

 

 

(44

)

 

 

32,219

 

 

 

32,700

 

Alternatives subtotal

 

129,347

 

 

 

5,493

 

 

 

960

 

 

 

(813

)

 

 

134,987

 

 

 

133,897

 

Long-term

$

5,836,731

 

 

$

69,122

 

 

$

(27,270

)

 

$

(36,841

)

 

$

5,841,742

 

 

$

5,895,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

(2)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing seven months.

(3)

Advisory AUM represents long-term portfolio liquidation assignments.

(4)

Amounts include commodity iShares ETFs.

 

6

 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-over-Year Component Changes by Client Type and Product Type

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

inflows

 

 

Market

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

215,808

 

 

$

5,553

 

 

$

10,214

 

 

$

1,042

 

 

$

232,617

 

 

$

230,679

 

Fixed income

 

240,932

 

 

 

28,902

 

 

 

(3,398

)

 

 

551

 

 

 

266,987

 

 

 

256,593

 

Multi-asset

 

113,903

 

 

 

4,991

 

 

 

273

 

 

 

132

 

 

 

119,299

 

 

 

119,738

 

Alternatives

 

16,113

 

 

 

1,494

 

 

 

213

 

 

 

102

 

 

 

17,922

 

 

 

17,181

 

Retail subtotal

 

586,756

 

 

 

40,940

 

 

 

7,302

 

 

 

1,827

 

 

 

636,825

 

 

 

624,191

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,139,850

 

 

 

109,084

 

 

 

96,272

 

 

 

1,082

 

 

 

1,346,288

 

 

 

1,296,774

 

Fixed income

 

364,991

 

 

 

45,356

 

 

 

(9,874

)

 

 

1,258

 

 

 

401,731

 

 

 

389,917

 

Multi-asset

 

3,240

 

 

 

501

 

 

 

25

 

 

 

1

 

 

 

3,767

 

 

 

3,639

 

Alternatives

 

20,155

 

 

 

4,625

 

 

 

196

 

 

 

3

 

 

 

24,979

 

 

 

23,689

 

iShares ETFs subtotal

 

1,528,236

 

 

 

159,566

 

 

 

86,619

 

 

 

2,344

 

 

 

1,776,765

 

 

 

1,714,019

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

126,446

 

 

 

(6,042

)

 

 

14,130

 

 

 

452

 

 

 

134,986

 

 

 

134,602

 

Fixed income

 

553,652

 

 

 

(4,179

)

 

 

(866

)

 

 

1,837

 

 

 

550,444

 

 

 

560,698

 

Multi-asset

 

311,921

 

 

 

10,187

 

 

 

26,326

 

 

 

2,111

 

 

 

350,545

 

 

 

337,401

 

Alternatives

 

83,836

 

 

 

(56

)

 

 

3,470

 

 

 

163

 

 

 

87,413

 

 

 

85,288

 

Active subtotal

 

1,075,855

 

 

 

(90

)

 

 

43,060

 

 

 

4,563

 

 

 

1,123,388

 

 

 

1,117,989

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,532,592

 

 

 

(56,739

)

 

 

172,551

 

 

 

4,185

 

 

 

1,652,589

 

 

 

1,635,591

 

Fixed income

 

545,049

 

 

 

85,523

 

 

 

4,068

 

 

 

4,807

 

 

 

639,447

 

 

 

615,894

 

Multi-asset

 

7,672

 

 

 

(33

)

 

 

346

 

 

 

70

 

 

 

8,055

 

 

 

8,037

 

Alternatives

 

7,880

 

 

 

(3,661

)

 

 

372

 

 

 

82

 

 

 

4,673

 

 

 

5,643

 

Index subtotal

 

2,093,193

 

 

 

25,090

 

 

 

177,337

 

 

 

9,144

 

 

 

2,304,764

 

 

 

2,265,165

 

Institutional subtotal

 

3,169,048

 

 

 

25,000

 

 

 

220,397

 

 

 

13,707

 

 

 

3,428,152

 

 

 

3,383,154

 

Long-term

 

5,284,040

 

 

 

225,506

 

 

 

314,318

 

 

 

17,878

 

 

 

5,841,742

 

 

 

5,721,364

 

Cash management

 

402,575

 

 

 

52,189

 

 

 

1,026

 

 

 

1,264

 

 

 

457,054

 

 

 

440,751

 

Advisory (3)

 

2,658

 

 

 

(1,695

)

 

 

(106

)

 

 

53

 

 

 

910

 

 

 

1,769

 

Total

$

5,689,273

 

 

$

276,000

 

 

$

315,238

 

 

$

19,195

 

 

$

6,299,706

 

 

$

6,163,884

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-over-Year Component Changes by Investment Style and Product Type (Long-term)

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

inflows

 

 

Market

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

290,196

 

 

$

(7,436

)

 

$

20,141

 

 

$

1,197

 

 

$

304,098

 

 

$

306,495

 

Fixed income

 

782,622

 

 

 

22,978

 

 

 

(4,409

)

 

 

2,324

 

 

 

803,515

 

 

 

804,466

 

Multi-asset

 

425,824

 

 

 

15,178

 

 

 

26,599

 

 

 

2,244

 

 

 

469,845

 

 

 

457,139

 

Alternatives

 

99,949

 

 

 

1,438

 

 

 

3,683

 

 

 

266

 

 

 

105,336

 

 

 

102,469

 

Active subtotal

 

1,598,591

 

 

 

32,158

 

 

 

46,014

 

 

 

6,031

 

 

 

1,682,794

 

 

 

1,670,569

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,139,850

 

 

 

109,084

 

 

 

96,272

 

 

 

1,082

 

 

 

1,346,288

 

 

 

1,296,774

 

Fixed income

 

364,991

 

 

 

45,356

 

 

 

(9,874

)

 

 

1,258

 

 

 

401,731

 

 

 

389,917

 

Multi-asset

 

3,240

 

 

 

501

 

 

 

25

 

 

 

1

 

 

 

3,767

 

 

 

3,639

 

Alternatives

 

20,155

 

 

 

4,625

 

 

 

196

 

 

 

3

 

 

 

24,979

 

 

 

23,689

 

iShares ETFs subtotal

 

1,528,236

 

 

 

159,566

 

 

 

86,619

 

 

 

2,344

 

 

 

1,776,765

 

 

 

1,714,019

 

Non-ETF Index

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,584,650

 

 

 

(49,792

)

 

 

176,754

 

 

 

4,482

 

 

 

1,716,094

 

 

 

1,694,377

 

Fixed income

 

557,011

 

 

 

87,268

 

 

 

4,213

 

 

 

4,871

 

 

 

653,363

 

 

 

628,719

 

Multi-asset

 

7,672

 

 

 

(33

)

 

 

346

 

 

 

69

 

 

 

8,054

 

 

 

8,037

 

Alternatives

 

7,880

 

 

 

(3,661

)

 

 

372

 

 

 

81

 

 

 

4,672

 

 

 

5,643

 

Non-ETF Index subtotal

 

2,157,213

 

 

 

33,782

 

 

 

181,685

 

 

 

9,503

 

 

 

2,382,183

 

 

 

2,336,776

 

Index & iShares ETFs subtotal

 

3,685,449

 

 

 

193,348

 

 

 

268,304

 

 

 

11,847

 

 

 

4,158,948

 

 

 

4,050,795

 

Long-term

$

5,284,040

 

 

$

225,506

 

 

$

314,318

 

 

$

17,878

 

 

$

5,841,742

 

 

$

5,721,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-over-Year Component Changes by Product Type (Long-term)

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

inflows

 

 

Market

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Equity

$

3,014,696

 

 

$

51,856

 

 

$

293,167

 

 

$

6,761

 

 

$

3,366,480

 

 

$

3,297,646

 

Fixed income

 

1,704,624

 

 

 

155,602

 

 

 

(10,070

)

 

 

8,453

 

 

 

1,858,609

 

 

 

1,823,102

 

Multi-asset

 

436,736

 

 

 

15,646

 

 

 

26,970

 

 

 

2,314

 

 

 

481,666

 

 

 

468,815

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

97,551

 

 

 

1,362

 

 

 

3,607

 

 

 

248

 

 

 

102,768

 

 

 

99,991

 

Currency and commodities(4)

 

30,433

 

 

 

1,040

 

 

 

644

 

 

 

102

 

 

 

32,219

 

 

 

31,810

 

Alternatives subtotal

 

127,984

 

 

 

2,402

 

 

 

4,251

 

 

 

350

 

 

 

134,987

 

 

 

131,801

 

Long-term

$

5,284,040

 

 

$

225,506

 

 

$

314,318

 

 

$

17,878

 

 

$

5,841,742

 

 

$

5,721,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

(2)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.

(3)

Advisory AUM represents long-term portfolio liquidation assignments.

(4)

Amounts include commodity iShares ETFs.

7

 

SUMMARY OF REVENUE

 

 

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

  (in millions), (unaudited)

2018

 

 

2017*

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017*

 

 

Change

 

 

Investment advisory, administration fees

and securities lending revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

$

426

 

 

$

411

 

 

$

15

 

 

$

438

 

 

$

(12

)

 

$

864

 

 

$

811

 

 

$

53

 

 

iShares ETFs

 

911

 

 

 

776

 

 

 

135

 

 

 

926

 

 

 

(15

)

 

 

1,837

 

 

 

1,497

 

 

 

340

 

 

Non-ETF Index

 

187

 

 

 

175

 

 

 

12

 

 

 

176

 

 

 

11

 

 

 

363

 

 

 

335

 

 

 

28

 

 

Equity subtotal

 

1,524

 

 

 

1,362

 

 

 

162

 

 

 

1,540

 

 

 

(16

)

 

 

3,064

 

 

 

2,643

 

 

 

421

 

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

458

 

 

 

424

 

 

 

34

 

 

 

456

 

 

 

2

 

 

 

914

 

 

 

831

 

 

 

83

 

 

iShares ETFs

 

207

 

 

 

200

 

 

 

7

 

 

 

208

 

 

 

(1

)

 

 

415

 

 

 

385

 

 

 

30

 

 

Non-ETF Index

 

101

 

 

 

84

 

 

 

17

 

 

 

93

 

 

 

8

 

 

 

194

 

 

 

169

 

 

 

25

 

 

Fixed income subtotal

 

766

 

 

 

708

 

 

 

58

 

 

 

757

 

 

 

9

 

 

 

1,523

 

 

 

1,385

 

 

 

138

 

 

Multi-asset

 

295

 

 

 

282

 

 

 

13

 

 

 

296

 

 

 

(1

)

 

 

591

 

 

 

554

 

 

 

37

 

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

176

 

 

 

156

 

 

 

20

 

 

 

178

 

 

 

(2

)

 

 

354

 

 

 

300

 

 

 

54

 

 

Currency and commodities

 

26

 

 

 

22

 

 

 

4

 

 

 

25

 

 

 

1

 

 

 

51

 

 

 

44

 

 

 

7

 

 

Alternatives subtotal

 

202

 

 

 

178

 

 

 

24

 

 

 

203

 

 

 

(1

)

 

 

405

 

 

 

344

 

 

 

61

 

 

Long-term

 

2,787

 

 

 

2,530

 

 

 

257

 

 

 

2,796

 

 

 

(9

)

 

 

5,583

 

 

 

4,926

 

 

 

657

 

 

Cash management

 

157

 

 

 

137

 

 

 

20

 

 

 

151

 

 

 

6

 

 

 

308

 

 

 

264

 

 

 

44

 

 

Total base fees

 

2,944

 

 

 

2,667

 

 

 

277

 

 

 

2,947

 

 

 

(3

)

 

 

5,891

 

 

 

5,190

 

 

 

701

 

 

Investment advisory performance fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

43

 

 

 

12

 

 

 

31

 

 

 

18

 

 

 

25

 

 

 

61

 

 

 

27

 

 

 

34

 

 

Fixed income

 

(1

)

 

 

1

 

 

 

(2

)

 

 

3

 

 

 

(4

)

 

 

2

 

 

 

11

 

 

 

(9

)

 

Multi-asset

 

9

 

 

 

7

 

 

 

2

 

 

 

5

 

 

 

4

 

 

 

14

 

 

 

12

 

 

 

2

 

 

Alternatives

 

40

 

 

 

28

 

 

 

12

 

 

 

44

 

 

 

(4

)

 

 

84

 

 

 

68

 

 

 

16

 

 

Total performance fees

 

91

 

 

 

48

 

 

 

43

 

 

 

70

 

 

 

21

 

 

 

161

 

 

 

118

 

 

 

43

 

 

Technology services revenue

 

198

 

 

 

158

 

 

 

40

 

 

 

184

 

 

 

14

 

 

 

382

 

 

 

312

 

 

 

70

 

 

Distribution fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrocessions

 

181

 

 

 

160

 

 

 

21

 

 

 

192

 

 

 

(11

)

 

 

373

 

 

 

315

 

 

 

58

 

 

12b-1 fees (U.S. mutual funds distribution fees)

 

103

 

 

 

121

 

 

 

(18

)

 

 

108

 

 

 

(5

)

 

 

211

 

 

 

243

 

 

 

(32

)

 

Other

 

10

 

 

 

11

 

 

 

(1

)

 

 

11

 

 

 

(1

)

 

 

21

 

 

 

21

 

 

 

-

 

 

Total distribution fees

 

294

 

 

 

292

 

 

 

2

 

 

 

311

 

 

 

(17

)

 

 

605

 

 

 

579

 

 

 

26

 

 

Advisory and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

 

33

 

 

 

25

 

 

 

8

 

 

 

21

 

 

 

12

 

 

 

54

 

 

 

49

 

 

 

5

 

 

Other

 

45

 

 

 

46

 

 

 

(1

)

 

 

50

 

 

 

(5

)

 

 

95

 

 

 

80

 

 

 

15

 

 

Advisory and other revenue

 

78

 

 

 

71

 

 

 

7

 

 

 

71

 

 

 

7

 

 

 

149

 

 

 

129

 

 

 

20

 

 

Total revenue

$

3,605

 

 

$

3,236

 

 

$

369

 

 

$

3,583

 

 

$

22

 

 

$

7,188

 

 

$

6,328

 

 

$

860

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  

Highlights

▪

Investment advisory, administration fees and securities lending revenue increased $277 million from the second quarter of 2017, reflecting the impact of higher markets and organic growth on average AUM, partially offset by previously announced pricing changes to select investment products. Securities lending revenue of $183 million in the current quarter compared with $156 million in the second quarter of 2017.

Investment advisory, administration fees and securities lending revenue of $2,944 million in the current quarter compared with $2,947 million in the first quarter of 2018, reflecting lower average AUM, including the impact of foreign exchange movements, partially offset by the effect of one additional day in the current quarter and seasonally higher securities lending revenue. 

▪

Performance fees increased $43 million from the second quarter of 2017, primarily reflecting improved performance in long-only equity and single strategy hedge fund products, and increased $21 million from the first quarter of 2018, primarily reflecting improved performance in long-only equity products.

▪

Technology services revenue increased $40 million from the second quarter of 2017 and $14 million from the first quarter of 2018, reflecting ongoing demand for institutional Aladdin®.  


8

 

SUMMARY OF OPERATING EXPENSE

 

Three

 

 

 

 

 

 

Three

 

 

 

 

 

 

Six

 

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

(in millions), (unaudited)

2018

 

 

2017*

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017*

 

 

Change

 

 

Operating expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

$

1,082

 

 

$

998

 

 

$

84

 

 

$

1,121

 

 

$

(39

)

 

$

2,203

 

 

$

2,019

 

 

$

184

 

 

Distribution and servicing costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrocessions

 

181

 

 

 

160

 

 

 

21

 

 

 

192

 

 

 

(11

)

 

 

373

 

 

 

315

 

 

 

58

 

 

12b-1 costs

 

101

 

 

 

119

 

 

 

(18

)

 

 

106

 

 

 

(5

)

 

 

207

 

 

 

238

 

 

 

(31

)

 

Other

 

133

 

 

 

131

 

 

 

2

 

 

 

134

 

 

 

(1

)

 

 

267

 

 

 

258

 

 

 

9

 

 

Total distribution and servicing costs

 

415

 

 

 

410

 

 

 

5

 

 

 

432

 

 

 

(17

)

 

 

847

 

 

 

811

 

 

 

36

 

 

Direct fund expense

 

264

 

 

 

221

 

 

 

43

 

 

 

261

 

 

 

3

 

 

 

525

 

 

 

427

 

 

 

98

 

 

General and administration:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Marketing and promotional

 

91

 

 

 

86

 

 

 

5

 

 

 

85

 

 

 

6

 

 

 

176

 

 

 

155

 

 

 

21

 

 

   Occupancy and office related

 

73

 

 

 

69

 

 

 

4

 

 

 

74

 

 

 

(1

)

 

 

147

 

 

 

134

 

 

 

13

 

 

   Portfolio services

 

73

 

 

 

58

 

 

 

15

 

 

 

70

 

 

 

3

 

 

 

143

 

 

 

115

 

 

 

28

 

 

   Technology

 

58

 

 

 

51

 

 

 

7

 

 

 

53

 

 

 

5

 

 

 

111

 

 

 

94

 

 

 

17

 

 

   Professional services

 

37

 

 

 

30

 

 

 

7

 

 

 

32

 

 

 

5

 

 

 

69

 

 

 

55

 

 

 

14

 

 

   Communications

 

9

 

 

 

8

 

 

 

1

 

 

 

10

 

 

 

(1

)

 

 

19

 

 

 

16

 

 

 

3

 

 

   Foreign exchange remeasurement

 

4

 

 

 

5

 

 

 

(1

)

 

 

1

 

 

 

3

 

 

 

5

 

 

 

(6

)

 

 

11

 

 

   Contingent consideration fair value adjustments

 

(1

)

 

 

(4

)

 

 

3

 

 

 

6

 

 

 

(7

)

 

 

5

 

 

 

(8

)

 

 

13

 

 

   Product launch costs

 

-

 

 

 

-

 

 

 

-

 

 

 

11

 

 

 

(11

)

 

 

11

 

 

 

4

 

 

 

7

 

 

   Other general and administration

 

49

 

 

 

42

 

 

 

7

 

 

 

41

 

 

 

8

 

 

 

90

 

 

 

82

 

 

 

8

 

 

      Total general and administration expense

 

393

 

 

 

345

 

 

 

48

 

 

 

383

 

 

 

10

 

 

 

776

 

 

 

641

 

 

 

135

 

 

Amortization of intangible assets

 

11

 

 

 

25

 

 

 

(14

)

 

 

11

 

 

 

-

 

 

 

22

 

 

 

50

 

 

 

(28

)

 

Total operating expense

$

2,165

 

 

$

1,999

 

 

$

166

 

 

$

2,208

 

 

$

(43

)

 

$

4,373

 

 

$

3,948

 

 

$

425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  

Highlights

▪

Employee compensation and benefits expense increased $84 million from the second quarter of 2017, primarily reflecting higher incentive compensation, driven primarily by higher operating income and headcount.

Employee compensation and benefits expense decreased $39 million from the first quarter of 2018, primarily reflecting lower seasonal payroll taxes in the current quarter.

▪

Direct fund expense increased $43 million from the second quarter of 2017, reflecting higher average AUM.  


9

 

INCOME TAX EXPENSE (BENEFIT)

Three

 

 

 

 

 

 

Three

 

 

 

 

 

Six

 

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

Months Ended

 

 

 

 

 

Months Ended

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

March 31,

 

 

 

 

 

June 30,

 

 

 

 

 

 

 (in millions), (unaudited)

2018

 

 

2017*

 

 

Change

 

 

2018

 

Change

 

 

2018

 

 

2017*

 

 

Change

 

 

Income tax expense (benefit)

$

338

 

 

$

374

 

 

$

(36

)

 

 

$

265

 

 

 

$

73

 

 

$

603

 

 

$

642

 

 

$

(39

)

 

Effective tax rate

 

24.0

%

 

 

30.5

%

 

 

(650

) bps

 

 

 

19.6

%

 

 

 

440

bps

 

 

21.8

%

 

 

27.3

%

 

 

(550

) bps

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  

Highlights

▪

Second quarter 2018 income tax expense reflected a reduced tax rate associated with the Tax Cuts and Jobs Act (the “2017 Act”) enacted in the United States.

▪

First quarter 2018 income tax expense reflected a reduced tax rate associated with the 2017 Act and included a discrete tax benefit of $56 million related to stock-based compensation awards that vested.

SUMMARY AND RECONCILIATION OF U.S. GAAP NONOPERATING INCOME (EXPENSE) TO NONOPERATING INCOME (EXPENSE), AS ADJUSTED

 

Three Months

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

Six Months

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

 (in millions), (unaudited)

 

2018

 

 

2017

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017

 

 

Change

 

 

Nonoperating income (expense), GAAP basis

 

$

(24

)

 

$

1

 

 

$

(25

)

 

$

(16

)

 

$

(8

)

 

$

(40

)

 

$

(6

)

 

$

(34

)

 

Less: Net income (loss) attributable to

     noncontrolling interests ("NCI")

 

 

5

 

 

 

10

 

 

 

(5

)

 

 

5

 

 

 

-

 

 

 

10

 

 

 

19

 

 

 

(9

)

 

Nonoperating income (expense), as adjusted(1)(2)

 

$

(29

)

 

$

(9

)

 

$

(20

)

 

$

(21

)

 

$

(8

)

 

$

(50

)

 

$

(25

)

 

$

(25

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

Six Months

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

(in millions), (unaudited)

 

2018

 

 

2017

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017

 

 

Change

 

 

Net gain (loss) on investments(1)(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private equity

 

$

5

 

 

$

8

 

 

$

(3

)

 

$

1

 

 

$

4

 

 

$

6

 

 

$

14

 

 

$

(8

)

 

Real assets

 

 

9

 

 

 

-

 

 

 

9

 

 

 

5

 

 

 

4

 

 

 

14

 

 

 

1

 

 

 

13

 

 

Other alternatives(3)

 

 

1

 

 

 

9

 

 

 

(8

)

 

 

3

 

 

 

(2

)

 

 

4

 

 

 

23

 

 

 

(19

)

 

Other investments(4)

 

 

(18

)

 

 

4

 

 

 

(22

)

 

 

1

 

 

 

(19

)

 

 

(17

)

 

 

25

 

 

 

(42

)

 

Subtotal

 

 

(3

)

 

 

21

 

 

 

(24

)

 

 

10

 

 

 

(13

)

 

 

7

 

 

 

63

 

 

 

(56

)

 

Other gains

 

 

1

 

 

 

5

 

 

 

(4

)

 

 

-

 

 

 

1

 

 

 

1

 

 

 

5

 

 

 

(4

)

 

Total net gain (loss) on investments(1)(2)

 

 

(2

)

 

 

26

 

 

 

(28

)

 

 

10

 

 

 

(12

)

 

 

8

 

 

 

68

 

 

 

(60

)

 

Interest and dividend income

 

 

19

 

 

 

13

 

 

 

6

 

 

 

15

 

 

 

4

 

 

 

34

 

 

 

20

 

 

 

14

 

 

Interest expense

 

 

(46

)

 

 

(48

)

 

 

2

 

 

 

(46

)

 

 

-

 

 

 

(92

)

 

 

(113

)

 

 

21

 

 

Net interest expense

 

 

(27

)

 

 

(35

)

 

 

8

 

 

 

(31

)

 

 

4

 

 

 

(58

)

 

 

(93

)

 

 

35

 

 

Nonoperating income (expense), as adjusted(1)(2)

 

$

(29

)

 

$

(9

)

 

$

(20

)

 

$

(21

)

 

$

(8

)

 

$

(50

)

 

$

(25

)

 

$

(25

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Net of net income (loss) attributable to NCI.  

(2)

Management believes nonoperating income (expense), as adjusted, is an effective measure for reviewing BlackRock’s nonoperating contribution to results. For more information on other as adjusted items and the reconciliation to GAAP see notes (1) through (3) to the condensed consolidated statements of income and supplemental information on pages 11 and 12.

(3)

Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions.

(4)

Amounts primarily include net gains (losses) related to equity and fixed income investments.


10

 

 

RECONCILIATION OF U.S. GAAP OPERATING INCOME AND OPERATING MARGIN TO OPERATING INCOME AND OPERATING MARGIN, AS ADJUSTED

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

June 30,

 

 

March 31,

 

 

June 30,

 

 

(in millions), (unaudited)

 

2018

 

 

2017*

 

 

2018

 

 

2018

 

 

2017*

 

 

Operating income, GAAP basis

 

$

1,440

 

 

$

1,237

 

 

$

1,375

 

 

$

2,815

 

 

$

2,380

 

 

Non-GAAP expense adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PNC LTIP funding obligation

 

 

3

 

 

 

4

 

 

 

3

 

 

 

6

 

 

 

8

 

 

Operating income, as adjusted

 

 

1,443

 

 

 

1,241

 

 

 

1,378

 

 

 

2,821

 

 

 

2,388

 

 

Product launch costs and commissions

 

 

-

 

 

 

-

 

 

 

12

 

 

 

12

 

 

 

-

 

 

Operating income used for operating margin measurement

 

$

1,443

 

 

$

1,241

 

 

$

1,390

 

 

$

2,833

 

 

$

2,388

 

 

Revenue, GAAP basis

 

$

3,605

 

 

$

3,236

 

 

$

3,583

 

 

$

7,188

 

 

$

6,328

 

 

Non-GAAP adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution and servicing costs

 

 

(415

)

 

 

(410

)

 

 

(432

)

 

 

(847

)

 

 

(811

)

 

Revenue used for operating margin measurement

 

$

3,190

 

 

$

2,826

 

 

$

3,151

 

 

$

6,341

 

 

$

5,517

 

 

Operating margin, GAAP basis

 

 

39.9

%

 

 

38.2

%

 

 

38.4

%

 

 

39.2

%

 

 

37.6

%

 

Operating margin, as adjusted

 

 

45.2

%

 

 

43.9

%

 

 

44.1

%

 

 

44.7

%

 

 

43.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See note (1) to the condensed consolidated statements of income and supplemental information on page 12 for more information on as adjusted items and the reconciliation to GAAP.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*      Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form

      8-K furnished on March 22, 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF U.S. GAAP NET INCOME ATTRIBUTABLE TO BLACKROCK TO NET INCOME ATTRIBUTABLE TO BLACKROCK, AS ADJUSTED

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

June 30,

 

 

March 31,

 

 

June 30,

 

 

  (in millions, except per share data), (unaudited)

 

2018

 

 

2017*

 

 

2018

 

 

2018

 

 

2017*

 

 

Net income attributable to BlackRock, Inc., GAAP basis

 

$

1,073

 

 

$

854

 

 

$

1,089

 

 

$

2,162

 

 

$

1,713

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PNC LTIP funding obligation, net of tax

 

 

3

 

 

 

3

 

 

 

3

 

 

 

6

 

 

 

6

 

 

Income tax matters

 

 

4

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

-

 

 

Net income attributable to BlackRock, Inc., as adjusted (2)

 

$

1,080

 

 

$

857

 

 

$

1,092

 

 

$

2,172

 

 

$

1,719

 

 

Diluted weighted-average common shares outstanding (3)

 

 

162.2

 

 

 

164.1

 

 

 

162.9

 

 

 

162.5

 

 

 

164.5

 

 

Diluted earnings per common share, GAAP basis (3)

 

$

6.62

 

 

$

5.20

 

 

$

6.68

 

 

$

13.30

 

 

$

10.41

 

 

Diluted earnings per common share, as adjusted (2) (3)

 

$

6.66

 

 

$

5.22

 

 

$

6.70

 

 

$

13.36

 

 

$

10.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes (2) and (3) to the condensed consolidated statements of income and supplemental information on page 12 for more information on as adjusted items and the reconciliation to GAAP.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*      Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form

      8-K furnished on March 22, 2018.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION (unaudited)

BlackRock reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”); however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be helpful, for both management and investors, in evaluating BlackRock’s financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include all of BlackRock’s revenue and expense. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock’s financial performance.  Adjustments to GAAP financial measures (“non-GAAP adjustments”) include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

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Computations for all periods are derived from the condensed consolidated statements of income as follows:

(1) Operating income, as adjusted, and operating margin, as adjusted: Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock’s financial performance over time and, therefore, provide useful disclosure to investors.

 

▪

Operating income, as adjusted, includes non-GAAP expense adjustments. The portion of compensation expense associated with certain long-term incentive plans (“LTIP”) funded, or to be funded, through share distributions to participants of BlackRock stock held by The PNC Financial Services Group, Inc. (“PNC”) has been excluded because it ultimately does not impact BlackRock’s book value.

 

 

▪

Operating income used for measuring operating margin, as adjusted, is equal to operating income, as adjusted, excluding the impact of product launch costs (e.g. closed-end fund launch costs) and related commissions. Management believes the exclusion of such costs and related commissions is useful because these costs can fluctuate considerably and revenue associated with the expenditure of these costs will not fully impact BlackRock’s results until future periods.

 

Revenue used for operating margin, as adjusted, excludes distribution and servicing costs paid to third parties. Management believes such costs represent a benchmark for the amount of revenue passed through to external parties who distribute the Company’s products. BlackRock excludes from revenue used for operating margin, as adjusted, the costs related to distribution and servicing costs as a proxy for such offsetting revenue.

(2) Net income attributable to BlackRock, Inc., as adjusted: Management believes net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock’s profitability and financial performance. Net income attributable to BlackRock, Inc., as adjusted, equals net income attributable to BlackRock, Inc., GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

See aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation.

For each period presented, the non-GAAP adjustment related to the PNC LTIP funding obligation was tax effected at the respective blended rates applicable to the adjustments. Amounts for income tax matters represent net noncash (benefits) expense primarily associated with the revaluation of certain deferred tax liabilities related to intangible assets and goodwill. Amounts have been excluded from the as adjusted results as these items will not have a cash flow impact and to ensure comparability among periods presented.

Per share amounts reflect net income attributable to BlackRock, Inc., as adjusted divided by diluted weighted average common shares outstanding.

(3) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.


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FORWARD-LOOKING STATEMENTS

This earnings release, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions.

BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

BlackRock has previously disclosed risk factors in its Securities and Exchange Commission (“SEC”) reports. These risk factors and those identified elsewhere in this earnings release, among others, could cause actual results to differ materially from forward-looking statements or historical performance and include: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; (3) the relative and absolute investment performance of BlackRock’s investment products; (4) the impact of increased competition; (5) the impact of future acquisitions or divestitures; (6) the unfavorable resolution of legal proceedings; (7) the extent and timing of any share repurchases; (8) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (9) the potential for human error in connection with BlackRock’s operational systems; (10) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or PNC; (11) changes in law and policy and uncertainty pending any such changes; (12) terrorist activities, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (13) the ability to attract and retain highly talented professionals; (14) fluctuations in the carrying value of BlackRock’s economic investments; (15) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (16) BlackRock’s success in negotiating distribution arrangements and maintaining distribution channels for its products; (17) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (18) any disruption to the operations of third parties whose functions are integral to BlackRock’s exchange-traded funds platform; (19) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (20) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.

BlackRock’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and BlackRock’s subsequent filings with the SEC, accessible on the SEC’s website at www.sec.gov and on BlackRock’s website at www.blackrock.com, discuss these factors in more detail and identify additional factors that can affect forward-looking statements. The information contained on the Company’s website is not a part of this earnings release.

PERFORMANCE NOTES

Past performance is not indicative of future results. Except as specified, the performance information shown is as of June 30, 2018 and is based on preliminary data available at that time. The performance data shown reflects information for all actively and passively managed equity and fixed income accounts, including U.S. registered investment companies, European-domiciled retail funds and separate accounts for which performance data is available, including performance data for high net worth accounts available as of May 31, 2018. The performance data does not include accounts terminated prior to June 30, 2018 and accounts for which data has not yet been verified. If such accounts had been included, the performance data provided may have substantially differed from that shown.

Performance comparisons shown are gross-of-fees for institutional and high net worth separate accounts, and net-of-fees for retail funds. The performance tracking shown for index accounts is based on gross-of-fees performance and includes all institutional accounts and all iShares funds globally using an index strategy. AUM information is based on AUM available as of June 30, 2018 for each account or fund in the asset class shown without adjustment for overlapping management of the same account or fund. Fund performance reflects the reinvestment of dividends and distributions.

Performance shown is derived from applicable benchmarks or peer median information, as selected by BlackRock, Inc. Peer medians are based in part on data either from Lipper, Inc. or Morningstar, Inc. for each included product.

 

13