EX-99.1 2 blk-ex991_6.htm EARNINGS RELEASE DATED OCTOBER 16, 2018 blk-ex991_6.htm

Exhibit 99.1

 

 

 

 

 

 

 

 

INVESTOR RELATIONS:

Samantha Tortora      212.810.5397

 

MEDIA RELATIONS:

Brian Beades    212.810.5596

 

 

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

 

BlackRock Reports Third Quarter 2018 Diluted EPS of $7.54, or $7.52 as adjusted

 

 

 

$6.4 trillion of AUM, up 8% year-over-year, including $28 billion of net AUM added from strategic transactions

 

$11 billion of quarterly long-term net inflows, led by iShares®, active multi-asset and illiquid alternatives

 

2% growth in revenue year-over-year driven by 4% base fee growth and 18% technology services revenue growth, partially offset by lower performance fees

 

1% increase in operating income year-over-year also reflects $42 million of transaction-related expense

 

31% diluted EPS growth (27% as adjusted) driven by higher nonoperating income and a lower effective tax rate

 

$500 million of share repurchases in the current quarter and $3.13 dividend per share

Laurence D. Fink, Chairman and CEO:

 

“BlackRock’s third quarter results highlight the resilience of our differentiated platform and our ability to generate organic growth, even in the face of significant industry headwinds. Our holistic, client-centric approach brings together our global product breadth, portfolio construction capabilities, digital tools and industry-leading technology, and positions us well to deliver long-term value to clients and shareholders.

 

“BlackRock generated $11 billion of long-term net inflows in the third quarter, despite more than $30 billion of institutional non-ETF index equity outflows that resulted from de-risking associated with ongoing divergent monetary policy and geopolitical uncertainty. Over the last twelve months, total net inflows of $177 billion reflect continued growth in key areas of our business, including iShares, multi-asset solutions, illiquid alternatives and Aladdin.

 

“We continue to build and evolve our business in order to stay ahead of clients’ needs and industry disruption, and completed several strategic transactions during the quarter to accelerate future growth. We are more confident than ever before in our ability to be a strategic partner to clients as a result of our broad array of integrated investment and technology offerings.”

 

 

FINANCIAL RESULTS

 

Q3

 

Q3

 

 

 

 

 

(in millions, except per share data)

2018

 

2017*

 

Change

 

 

AUM

$

6,444,100

 

$

5,976,892

 

 

8

%

 

Total net flows

$

(3,105

)

$

96,112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP basis:

 

 

 

 

 

 

 

 

 

 

Revenue

$

3,576

 

$

3,508

 

 

2

%

 

Operating income

$

1,396

 

$

1,389

 

 

1

%

 

Operating margin

 

39.0

%

 

39.6

%

 

(60

) bps

 

Net income(1)

$

1,216

 

$

944

 

 

29

%

 

Diluted EPS

$

7.54

 

$

5.76

 

 

31

%

 

Weighted average

  diluted shares

 

161.4

 

 

163.8

 

 

(1

)%

 

 

 

 

 

 

 

 

 

 

 

 

As Adjusted:

 

 

 

 

 

 

 

 

 

 

Operating income(2)

$

1,400

 

$

1,393

 

 

1

%

 

Operating margin(2)

 

44.2

%

 

45.1

%

 

(90

) bps

 

Net income(1) (2)

$

1,214

 

$

966

 

 

26

%

 

Diluted EPS(2)

$

7.52

 

$

5.90

 

 

27

%

 

 

 

*

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 $10.6 billion by region:

 

 

 

Americas:

$

18.2

 

 billion

 

EMEA:

$

(9.7

)

 billion

 

APAC:

$

2.1

 

 billion

 

Long-term net inflows of $10.6 billion by client type:

 

 

 

Retail:

$

1.7

 

 billion

 

U.S.:

$

2.5

 

 billion

 

 

International:

$

(0.8

)

 billion

 

iShares:

$

33.7

 

 billion

 

Core:

$

20.3

 

 billion

 

 

Non-Core:

$

13.4

 

 billion

 

Institutional:

$

(24.8

)

 billion

 

Index:

$

(23.6

)

 billion

 

Active:

$

(1.2

)

 billion

 

Cash management net outflows of $(14.6) billion

 

1

 

BUSINESS RESULTS

 

 

 

 

 

 

 

 

 

 

September 30, 2018

 

Q3 2018

 

 

 

Q3 2018

 

September 30, 2018

 

Q3 2018

 

AUM

 

Base fees(1)

 

 

(in millions), (unaudited)

Net flows

 

AUM

 

Base fees(1)

 

% of Total

 

% of Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESULTS BY CLIENT TYPE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

$

1,697

 

$

663,261

 

$

860

 

 

10

%

 

30

%

 

iShares ETFs

 

33,673

 

 

1,853,188

 

 

1,113

 

 

29

%

 

39

%

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

(1,204

)

 

1,130,921

 

 

504

 

 

18

%

 

17

%

 

Index

 

(23,554

)

 

2,351,785

 

 

252

 

 

36

%

 

9

%

 

Total institutional

 

(24,758

)

 

3,482,706

 

 

756

 

 

54

%

 

26

%

 

Long-term

 

10,612

 

 

5,999,155

 

 

2,729

 

 

93

%

 

95

%

 

Cash management

 

(14,570

)

 

443,185

 

 

154

 

 

7

%

 

5

%

 

Advisory

 

853

 

 

1,760

 

 

-

 

 

-

 

 

-

 

 

Total

$

(3,105

)

$

6,444,100

 

$

2,883

 

 

100

%

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESULTS BY INVESTMENT STYLE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

$

(1,109

)

$

1,713,576

 

$

1,346

 

 

26

%

 

47

%

 

Index and iShares ETFs

 

11,721

 

 

4,285,579

 

 

1,383

 

 

67

%

 

48

%

 

Long-term

 

10,612

 

 

5,999,155

 

 

2,729

 

 

93

%

 

95

%

 

Cash management

 

(14,570

)

 

443,185

 

 

154

 

 

7

%

 

5

%

 

Advisory

 

853

 

 

1,760

 

 

-

 

 

-

 

 

-

 

 

Total

$

(3,105

)

$

6,444,100

 

$

2,883

 

 

100

%

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESULTS BY PRODUCT TYPE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

(17,264

)

$

3,482,687

 

$

1,459

 

 

54

%

 

52

%

 

Fixed income

 

22,908

 

 

1,883,806

 

 

763

 

 

29

%

 

26

%

 

Multi-asset

 

3,228

 

 

492,810

 

 

298

 

 

8

%

 

10

%

 

Alternatives

 

1,740

 

 

139,852

 

 

209

 

 

2

%

 

7

%

 

Long-term

 

10,612

 

 

5,999,155

 

 

2,729

 

 

93

%

 

95

%

 

Cash management

 

(14,570

)

 

443,185

 

 

154

 

 

7

%

 

5

%

 

Advisory

 

853

 

 

1,760

 

 

-

 

 

-

 

 

-

 

 

Total

$

(3,105

)

$

6,444,100

 

$

2,883

 

 

100

%

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

 

INVESTMENT PERFORMANCE AT SEPTEMBER 30, 2018(1)

One-year period

Three-year period

Five-year period

  Fixed income:

 

 

 

  Actively managed AUM above benchmark or peer median

 

 

 

Taxable

66%

72%

84%

Tax-exempt

74%

74%

78%

  Index AUM within or above applicable tolerance

98%

99%

100%

  Equity:

 

 

 

  Actively managed AUM above benchmark or peer median

 

 

 

Fundamental

66%

70%

80%

Systematic

74%

85%

92%

  Index AUM within or above applicable tolerance

97%

99%

98%

(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 Tuesday, October 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 4488387). 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 Tuesday, October 16, 2018 and ending at midnight on Tuesday, October 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 4488387. 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 September 30, 2018, the firm managed approximately $6.44 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

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2018

 

 

2017*

 

 

Change

 

 

2018

 

 

Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and

  securities lending revenue

$

2,883

 

 

$

2,781

 

 

$

102

 

 

$

2,944

 

 

$

(61

)

Investment advisory performance fees

 

151

 

 

 

191

 

 

 

(40

)

 

 

91

 

 

 

60

 

Technology services revenue

 

200

 

 

 

169

 

 

 

31

 

 

 

198

 

 

 

2

 

Distribution fees

 

279

 

 

 

298

 

 

 

(19

)

 

 

294

 

 

 

(15

)

Advisory and other revenue

 

63

 

 

 

69

 

 

 

(6

)

 

 

78

 

 

 

(15

)

Total revenue

 

3,576

 

 

 

3,508

 

 

 

68

 

 

 

3,605

 

 

 

(29

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

1,097

 

 

 

1,087

 

 

 

10

 

 

 

1,082

 

 

 

15

 

Distribution and servicing costs

 

408

 

 

 

419

 

 

 

(11

)

 

 

415

 

 

 

(7

)

Direct fund expense

 

249

 

 

 

231

 

 

 

18

 

 

 

264

 

 

 

(15

)

General and administration

 

413

 

 

 

355

 

 

 

58

 

 

 

393

 

 

 

20

 

Amortization of intangible assets

 

13

 

 

 

27

 

 

 

(14

)

 

 

11

 

 

 

2

 

Total expense

 

2,180

 

 

 

2,119

 

 

 

61

 

 

 

2,165

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

1,396

 

 

 

1,389

 

 

 

7

 

 

 

1,440

 

 

 

(44

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on investments

 

50

 

 

 

41

 

 

 

9

 

 

 

3

 

 

 

47

 

Interest and dividend income

 

29

 

 

 

15

 

 

 

14

 

 

 

19

 

 

 

10

 

Interest expense

 

(46

)

 

 

(46

)

 

 

-

 

 

 

(46

)

 

 

-

 

Total nonoperating income (expense)

 

33

 

 

 

10

 

 

 

23

 

 

 

(24

)

 

 

57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

1,429

 

 

 

1,399

 

 

 

30

 

 

 

1,416

 

 

 

13

 

Income tax expense (benefit)

 

226

 

 

 

443

 

 

 

(217

)

 

 

338

 

 

 

(112

)

Net income

 

1,203

 

 

 

956

 

 

 

247

 

 

 

1,078

 

 

 

125

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling

  interests

 

(13

)

 

 

12

 

 

 

(25

)

 

 

5

 

 

 

(18

)

Net income attributable to BlackRock, Inc.

$

1,216

 

 

$

944

 

 

$

272

 

 

$

1,073

 

 

$

143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

160,141,506

 

 

 

161,872,716

 

 

 

(1,731,210

)

 

 

160,980,960

 

 

 

(839,454

)

Diluted

 

161,378,217

 

 

 

163,773,546

 

 

 

(2,395,329

)

 

 

162,161,937

 

 

 

(783,720

)

Earnings per share attributable to BlackRock, Inc.

   common stockholders (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

7.59

 

 

$

5.83

 

 

$

1.76

 

 

$

6.67

 

 

$

0.92

 

Diluted

$

7.54

 

 

$

5.76

 

 

$

1.78

 

 

$

6.62

 

 

$

0.92

 

Cash dividends declared and paid per share

$

3.13

 

 

$

2.50

 

 

$

0.63

 

 

$

2.88

 

 

$

0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM (end of period)

$

6,444,100

 

 

$

5,976,892

 

 

$

467,208

 

 

$

6,299,706

 

 

$

144,394

 

Shares outstanding (end of period)

 

159,804,364

 

 

 

161,597,770

 

 

 

(1,793,406

)

 

 

160,779,596

 

 

 

(975,232

)

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

39.0

%

 

 

39.6

%

 

 

(60

) bps

 

 

39.9

%

 

 

(90

) bps

Effective tax rate

 

15.7

%

 

 

31.9

%

 

 

(1,620

) bps

 

 

24.0

%

 

 

(830

) bps

As adjusted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (1)

$

1,400

 

 

$

1,393

 

 

$

7

 

 

$

1,443

 

 

$

(43

)

Operating margin (1)

 

44.2

%

 

 

45.1

%

 

 

(90

) bps

 

 

45.2

%

 

 

(100

) bps

Nonoperating income (expense), less net income

     (loss) attributable to noncontrolling interests

$

46

 

 

$

(2

)

 

$

48

 

 

$

(29

)

 

$

75

 

Net income attributable to BlackRock, Inc. (2)

$

1,214

 

 

$

966

 

 

$

248

 

 

$

1,080

 

 

$

134

 

Diluted earnings attributable to BlackRock, Inc.

     common stockholders per share (2) (3)

$

7.52

 

 

$

5.90

 

 

$

1.62

 

 

$

6.66

 

 

$

0.86

 

Effective tax rate

 

16.0

%

 

 

30.6

%

 

 

(1,460

) bps

 

 

23.7

%

 

 

(770

) 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2018

 

 

2017*

 

 

Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and securities

      lending revenue

$

8,774

 

 

$

7,971

 

 

$

803

 

Investment advisory performance fees

 

312

 

 

 

309

 

 

 

3

 

Technology services revenue

 

582

 

 

 

481

 

 

 

101

 

Distribution fees

 

884

 

 

 

877

 

 

 

7

 

Advisory and other revenue

 

212

 

 

 

198

 

 

 

14

 

Total revenue

 

10,764

 

 

 

9,836

 

 

 

928

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

3,300

 

 

 

3,106

 

 

 

194

 

Distribution and servicing costs

 

1,255

 

 

 

1,230

 

 

 

25

 

Direct fund expense

 

774

 

 

 

658

 

 

 

116

 

General and administration

 

1,189

 

 

 

996

 

 

 

193

 

Amortization of intangible assets

 

35

 

 

 

77

 

 

 

(42

)

Total expense

 

6,553

 

 

 

6,067

 

 

 

486

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

4,211

 

 

 

3,769

 

 

 

442

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on investments

 

68

 

 

 

128

 

 

 

(60

)

Interest and dividend income

 

63

 

 

 

35

 

 

 

28

 

Interest expense

 

(138

)

 

 

(159

)

 

 

21

 

Total nonoperating income (expense)

 

(7

)

 

 

4

 

 

 

(11

)

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

4,204

 

 

 

3,773

 

 

 

431

 

Income tax expense

 

829

 

 

 

1,085

 

 

 

(256

)

Net income

 

3,375

 

 

 

2,688

 

 

 

687

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interests

 

(3

)

 

 

31

 

 

 

(34

)

Net income attributable to BlackRock, Inc.

$

3,378

 

 

$

2,657

 

 

$

721

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

160,786,768

 

 

 

162,459,737

 

 

 

(1,672,969

)

Diluted

 

162,140,879

 

 

 

164,289,042

 

 

 

(2,148,163

)

Earnings per share attributable to BlackRock, Inc.

   common stockholders (3)

 

 

 

 

 

 

 

 

 

 

 

Basic

$

21.01

 

 

$

16.35

 

 

$

4.66

 

Diluted

$

20.83

 

 

$

16.17

 

 

$

4.66

 

Cash dividends declared and paid per share

$

8.89

 

 

$

7.50

 

 

$

1.39

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM (end of period)

$

6,444,100

 

 

$

5,976,892

 

 

$

467,208

 

Shares outstanding (end of period)

 

159,804,364

 

 

 

161,597,770

 

 

 

(1,793,406

)

GAAP:

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

39.1

%

 

 

38.3

%

 

 

80

  bps

Effective tax rate

 

19.7

%

 

 

29.0

%

 

 

(930

) bps

As adjusted:

 

 

 

 

 

 

 

 

 

 

 

Operating income (1)

$

4,221

 

 

$

3,781

 

 

$

440

 

Operating margin (1)

 

44.5

%

 

 

43.9

%

 

 

60

  bps

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

     attributable to noncontrolling interests

$

(4

)

 

$

(27

)

 

$

23

 

Net income attributable to BlackRock, Inc. (2)

$

3,386

 

 

$

2,685

 

 

$

701

 

Diluted earnings attributable to BlackRock, Inc.

     common stockholders per share (2) (3)

$

20.88

 

 

$

16.34

 

 

$

4.54

 

Effective tax rate

 

19.7

%

 

 

28.5

%

 

 

(880

) 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

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2018

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

232,617

 

 

$

(2,889

)

 

$

2,137

 

 

$

6,362

 

 

$

(683

)

 

$

237,544

 

 

$

235,327

 

Fixed income

 

266,987

 

 

 

3,141

 

 

 

14,070

 

 

 

(1,066

)

 

 

(253

)

 

 

282,879

 

 

 

271,896

 

Multi-asset

 

119,299

 

 

 

789

 

 

 

2,519

 

 

 

1,799

 

 

 

(102

)

 

 

124,304

 

 

 

121,557

 

Alternatives

 

17,922

 

 

 

656

 

 

 

7

 

 

 

(22

)

 

 

(29

)

 

 

18,534

 

 

 

18,164

 

Retail subtotal

 

636,825

 

 

 

1,697

 

 

 

18,733

 

 

 

7,073

 

 

 

(1,067

)

 

 

663,261

 

 

 

646,944

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,346,288

 

 

 

21,215

 

 

 

-

 

 

 

46,621

 

 

 

(199

)

 

 

1,413,925

 

 

 

1,388,881

 

Fixed income

 

401,731

 

 

 

12,914

 

 

 

-

 

 

 

(2,094

)

 

 

(208

)

 

 

412,343

 

 

 

408,384

 

Multi-asset

 

3,767

 

 

 

(9

)

 

 

-

 

 

 

55

 

 

 

1

 

 

 

3,814

 

 

 

3,803

 

Alternatives

 

24,979

 

 

 

(447

)

 

 

-

 

 

 

(1,435

)

 

 

9

 

 

 

23,106

 

 

 

24,152

 

iShares ETFs subtotal

 

1,776,765

 

 

 

33,673

 

 

 

-

 

 

 

43,147

 

 

 

(397

)

 

 

1,853,188

 

 

 

1,825,220

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

134,986

 

 

 

(4,745

)

 

 

(4,296

)

 

 

3,564

 

 

 

(534

)

 

 

128,975

 

 

 

131,834

 

Fixed income

 

550,444

 

 

 

(398

)

 

 

2,417

 

 

 

722

 

 

 

(1,594

)

 

 

551,591

 

 

 

552,157

 

Multi-asset

 

350,545

 

 

 

2,471

 

 

 

(1,593

)

 

 

5,932

 

 

 

(468

)

 

 

356,887

 

 

 

353,321

 

Alternatives

 

87,413

 

 

 

1,468

 

 

 

4,995

 

 

 

(164

)

 

 

(244

)

 

 

93,468

 

 

 

90,308

 

Active subtotal

 

1,123,388

 

 

 

(1,204

)

 

 

1,523

 

 

 

10,054

 

 

 

(2,840

)

 

 

1,130,921

 

 

 

1,127,620

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,652,589

 

 

 

(30,845

)

 

 

4,749

 

 

 

80,833

 

 

 

(5,083

)

 

 

1,702,243

 

 

 

1,689,785

 

Fixed income

 

639,447

 

 

 

7,251

 

 

 

2,051

 

 

 

(6,660

)

 

 

(5,096

)

 

 

636,993

 

 

 

640,079

 

Multi-asset

 

8,055

 

 

 

(23

)

 

 

(243

)

 

 

110

 

 

 

(94

)

 

 

7,805

 

 

 

7,914

 

Alternatives

 

4,673

 

 

 

63

 

 

 

1

 

 

 

39

 

 

 

(32

)

 

 

4,744

 

 

 

4,680

 

Index subtotal

 

2,304,764

 

 

 

(23,554

)

 

 

6,558

 

 

 

74,322

 

 

 

(10,305

)

 

 

2,351,785

 

 

 

2,342,458

 

Institutional subtotal

 

3,428,152

 

 

 

(24,758

)

 

 

8,081

 

 

 

84,376

 

 

 

(13,145

)

 

 

3,482,706

 

 

 

3,470,078

 

Long-term

 

5,841,742

 

 

 

10,612

 

 

 

26,814

 

 

 

134,596

 

 

 

(14,609

)

 

 

5,999,155

 

 

 

5,942,242

 

Cash management

 

457,054

 

 

 

(14,570

)

 

 

686

 

 

 

630

 

 

 

(615

)

 

 

443,185

 

 

 

455,852

 

Advisory (4)

 

910

 

 

 

853

 

 

 

-

 

 

 

(10

)

 

 

7

 

 

 

1,760

 

 

 

1,308

 

Total

$

6,299,706

 

 

$

(3,105

)

 

$

27,500

 

 

$

135,216

 

 

$

(15,217

)

 

$

6,444,100

 

 

$

6,399,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2018

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

304,098

 

 

$

(7,737

)

 

$

(2,160

)

 

$

7,729

 

 

$

(881

)

 

$

301,049

 

 

$

302,744

 

Fixed income

 

803,515

 

 

 

1,244

 

 

 

16,487

 

 

 

(199

)

 

 

(1,715

)

 

 

819,332

 

 

 

809,629

 

Multi-asset

 

469,845

 

 

 

3,260

 

 

 

926

 

 

 

7,731

 

 

 

(570

)

 

 

481,192

 

 

 

474,878

 

Alternatives

 

105,336

 

 

 

2,124

 

 

 

5,002

 

 

 

(186

)

 

 

(273

)

 

 

112,003

 

 

 

108,472

 

Active subtotal

 

1,682,794

 

 

 

(1,109

)

 

 

20,255

 

 

 

15,075

 

 

 

(3,439

)

 

 

1,713,576

 

 

 

1,695,723

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,346,288

 

 

 

21,215

 

 

 

-

 

 

 

46,621

 

 

 

(199

)

 

 

1,413,925

 

 

 

1,388,881

 

Fixed income

 

401,731

 

 

 

12,914

 

 

 

-

 

 

 

(2,094

)

 

 

(208

)

 

 

412,343

 

 

 

408,384

 

Multi-asset

 

3,767

 

 

 

(9

)

 

 

-

 

 

 

55

 

 

 

1

 

 

 

3,814

 

 

 

3,803

 

Alternatives

 

24,979

 

 

 

(447

)

 

 

-

 

 

 

(1,435

)

 

 

9

 

 

 

23,106

 

 

 

24,152

 

iShares ETFs subtotal

 

1,776,765

 

 

 

33,673

 

 

 

-

 

 

 

43,147

 

 

 

(397

)

 

 

1,853,188

 

 

 

1,825,220

 

Non-ETF Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,716,094

 

 

 

(30,742

)

 

 

4,750

 

 

 

83,030

 

 

 

(5,419

)

 

 

1,767,713

 

 

 

1,754,202

 

Fixed income

 

653,363

 

 

 

8,750

 

 

 

2,051

 

 

 

(6,805

)

 

 

(5,228

)

 

 

652,131

 

 

 

654,503

 

Multi-asset

 

8,054

 

 

 

(23

)

 

 

(243

)

 

 

110

 

 

 

(94

)

 

 

7,804

 

 

 

7,914

 

Alternatives

 

4,672

 

 

 

63

 

 

 

1

 

 

 

39

 

 

 

(32

)

 

 

4,743

 

 

 

4,680

 

Non-ETF Index subtotal

 

2,382,183

 

 

 

(21,952

)

 

 

6,559

 

 

 

76,374

 

 

 

(10,773

)

 

 

2,432,391

 

 

 

2,421,299

 

Index & iShares ETFs subtotal

 

4,158,948

 

 

 

11,721

 

 

 

6,559

 

 

 

119,521

 

 

 

(11,170

)

 

 

4,285,579

 

 

 

4,246,519

 

Long-term

$

5,841,742

 

 

$

10,612

 

 

$

26,814

 

 

$

134,596

 

 

$

(14,609

)

 

$

5,999,155

 

 

$

5,942,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2018

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Equity

$

3,366,480

 

 

$

(17,264

)

 

$

2,590

 

 

$

137,380

 

 

$

(6,499

)

 

$

3,482,687

 

 

$

3,445,827

 

Fixed income

 

1,858,609

 

 

 

22,908

 

 

 

18,538

 

 

 

(9,098

)

 

 

(7,151

)

 

 

1,883,806

 

 

 

1,872,516

 

Multi-asset

 

481,666

 

 

 

3,228

 

 

 

683

 

 

 

7,896

 

 

 

(663

)

 

 

492,810

 

 

 

486,595

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

102,768

 

 

 

2,092

 

 

 

4,995

 

 

 

(162

)

 

 

(228

)

 

 

109,465

 

 

 

105,918

 

Currency and commodities(5)

 

32,219

 

 

 

(352

)

 

 

8

 

 

 

(1,420

)

 

 

(68

)

 

 

30,387

 

 

 

31,386

 

Alternatives subtotal

 

134,987

 

 

 

1,740

 

 

 

5,003

 

 

 

(1,582

)

 

 

(296

)

 

 

139,852

 

 

 

137,304

 

Long-term

$

5,841,742

 

 

$

10,612

 

 

$

26,814

 

 

$

134,596

 

 

$

(14,609

)

 

$

5,999,155

 

 

$

5,942,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amounts include net AUM from the acquisitions of Tennenbaum Capital Partners in August 2018 (“TCP Transaction”) and the asset management business of Citibanamex in September 2018 (“Citibanamex Transaction”), AUM reclassifications and net dispositions related to the transfer of BlackRock’s UK Defined Contribution Administration and Platform business to Aegon N.V. in July 2018 (“Aegon Transaction”), and net AUM dispositions related to the sale of BlackRock’s minority interest in DSP BlackRock Investment Managers Pvt. Ltd. to The DSP Group in August 2018 (“DSP Transaction”).

(2)

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

(3)

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

(4)

Advisory AUM represents long-term portfolio liquidation assignments.

(5)

Amounts include commodity iShares ETFs.

5

 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

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

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

233,218

 

 

$

(205

)

 

$

2,137

 

 

$

4,760

 

 

$

(2,366

)

 

$

237,544

 

 

$

236,413

 

Fixed income

 

257,571

 

 

 

19,425

 

 

 

14,070

 

 

 

(6,684

)

 

 

(1,503

)

 

 

282,879

 

 

 

267,050

 

Multi-asset

 

120,855

 

 

 

2,744

 

 

 

2,519

 

 

 

(1,407

)

 

 

(407

)

 

 

124,304

 

 

 

121,965

 

Alternatives

 

16,733

 

 

 

1,916

 

 

 

7

 

 

 

(14

)

 

 

(108

)

 

 

18,534

 

 

 

17,623

 

Retail subtotal

 

628,377

 

 

 

23,880

 

 

 

18,733

 

 

 

(3,345

)

 

 

(4,384

)

 

 

663,261

 

 

 

643,051

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,329,610

 

 

 

52,308

 

 

 

-

 

 

 

37,177

 

 

 

(5,170

)

 

 

1,413,925

 

 

 

1,375,039

 

Fixed income

 

395,252

 

 

 

32,072

 

 

 

-

 

 

 

(12,415

)

 

 

(2,566

)

 

 

412,343

 

 

 

401,309

 

Multi-asset

 

3,761

 

 

 

62

 

 

 

-

 

 

 

(5

)

 

 

(4

)

 

 

3,814

 

 

 

3,789

 

Alternatives

 

23,616

 

 

 

1,691

 

 

 

-

 

 

 

(2,156

)

 

 

(45

)

 

 

23,106

 

 

 

24,886

 

iShares ETFs subtotal

 

1,752,239

 

 

 

86,133

 

 

 

-

 

 

 

22,601

 

 

 

(7,785

)

 

 

1,853,188

 

 

 

1,805,023

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

137,185

 

 

 

(6,255

)

 

 

(4,296

)

 

 

4,170

 

 

 

(1,829

)

 

 

128,975

 

 

 

136,050

 

Fixed income

 

570,050

 

 

 

(7,387

)

 

 

2,417

 

 

 

(9,490

)

 

 

(3,999

)

 

 

551,591

 

 

 

558,285

 

Multi-asset

 

347,825

 

 

 

6,270

 

 

 

(1,593

)

 

 

8,795

 

 

 

(4,410

)

 

 

356,887

 

 

 

349,495

 

Alternatives

 

84,248

 

 

 

3,734

 

 

 

4,995

 

 

 

1,396

 

 

 

(905

)

 

 

93,468

 

 

 

87,890

 

Active subtotal

 

1,139,308

 

 

 

(3,638

)

 

 

1,523

 

 

 

4,871

 

 

 

(11,143

)

 

 

1,130,921

 

 

 

1,131,720

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,671,628

 

 

 

(58,973

)

 

 

4,749

 

 

 

98,283

 

 

 

(13,444

)

 

 

1,702,243

 

 

 

1,683,996

 

Fixed income

 

632,592

 

 

 

31,901

 

 

 

2,051

 

 

 

(14,976

)

 

 

(14,575

)

 

 

636,993

 

 

 

642,648

 

Multi-asset

 

7,837

 

 

 

541

 

 

 

(243

)

 

 

(262

)

 

 

(68

)

 

 

7,805

 

 

 

8,106

 

Alternatives

 

4,750

 

 

 

(108

)

 

 

1

 

 

 

154

 

 

 

(53

)

 

 

4,744

 

 

 

4,751

 

Index subtotal

 

2,316,807

 

 

 

(26,639

)

 

 

6,558

 

 

 

83,199

 

 

 

(28,140

)

 

 

2,351,785

 

 

 

2,339,501

 

Institutional subtotal

 

3,456,115

 

 

 

(30,277

)

 

 

8,081

 

 

 

88,070

 

 

 

(39,283

)

 

 

3,482,706

 

 

 

3,471,221

 

Long-term

 

5,836,731

 

 

 

79,736

 

 

 

26,814

 

 

 

107,326

 

 

 

(51,452

)

 

 

5,999,155

 

 

 

5,919,295

 

Cash management

 

449,949

 

 

 

(6,167

)

 

 

686

 

 

 

1,043

 

 

 

(2,326

)

 

 

443,185

 

 

 

456,017

 

Advisory (4)

 

1,515

 

 

 

288

 

 

 

-

 

 

 

(2

)

 

 

(41

)

 

 

1,760

 

 

 

1,267

 

Total

$

6,288,195

 

 

$

73,857

 

 

$

27,500

 

 

$

108,367

 

 

$

(53,819

)

 

$

6,444,100

 

 

$

6,376,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

311,209

 

 

$

(11,127

)

 

$

(2,160

)

 

$

6,268

 

 

$

(3,141

)

 

$

301,049

 

 

$

309,669

 

Fixed income

 

815,135

 

 

 

8,754

 

 

 

16,487

 

 

 

(15,985

)

 

 

(5,059

)

 

 

819,332

 

 

 

811,651

 

Multi-asset

 

468,679

 

 

 

9,014

 

 

 

926

 

 

 

7,388

 

 

 

(4,815

)

 

 

481,192

 

 

 

471,460

 

Alternatives

 

100,982

 

 

 

5,650

 

 

 

5,002

 

 

 

1,383

 

 

 

(1,014

)

 

 

112,003

 

 

 

105,513

 

Active subtotal

 

1,696,005

 

 

 

12,291

 

 

 

20,255

 

 

 

(946

)

 

 

(14,029

)

 

 

1,713,576

 

 

 

1,698,293

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,329,610

 

 

 

52,308

 

 

 

-

 

 

 

37,177

 

 

 

(5,170

)

 

 

1,413,925

 

 

 

1,375,039

 

Fixed income

 

395,252

 

 

 

32,072

 

 

 

-

 

 

 

(12,415

)

 

 

(2,566

)

 

 

412,343

 

 

 

401,309

 

Multi-asset

 

3,761

 

 

 

62

 

 

 

-

 

 

 

(5

)

 

 

(4

)

 

 

3,814

 

 

 

3,789

 

Alternatives

 

23,616

 

 

 

1,691

 

 

 

-

 

 

 

(2,156

)

 

 

(45

)

 

 

23,106

 

 

 

24,886

 

iShares ETFs subtotal

 

1,752,239

 

 

 

86,133

 

 

 

-

 

 

 

22,601

 

 

 

(7,785

)

 

 

1,853,188

 

 

 

1,805,023

 

Non-ETF Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,730,822

 

 

 

(54,306

)

 

 

4,750

 

 

 

100,945

 

 

 

(14,498

)

 

 

1,767,713

 

 

 

1,746,790

 

Fixed income

 

645,078

 

 

 

35,185

 

 

 

2,051

 

 

 

(15,165

)

 

 

(15,018

)

 

 

652,131

 

 

 

656,332

 

Multi-asset

 

7,838

 

 

 

541

 

 

 

(243

)

 

 

(262

)

 

 

(70

)

 

 

7,804

 

 

 

8,106

 

Alternatives

 

4,749

 

 

 

(108

)

 

 

1

 

 

 

153

 

 

 

(52

)

 

 

4,743

 

 

 

4,751

 

Non-ETF Index subtotal

 

2,388,487

 

 

 

(18,688

)

 

 

6,559

 

 

 

85,671

 

 

 

(29,638

)

 

 

2,432,391

 

 

 

2,415,979

 

Index & iShares ETFs subtotal

 

4,140,726

 

 

 

67,445

 

 

 

6,559

 

 

 

108,272

 

 

 

(37,423

)

 

 

4,285,579

 

 

 

4,221,002

 

Long-term

$

5,836,731

 

 

$

79,736

 

 

$

26,814

 

 

$

107,326

 

 

$

(51,452

)

 

$

5,999,155

 

 

$

5,919,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Equity

$

3,371,641

 

 

$

(13,125

)

 

$

2,590

 

 

$

144,390

 

 

$

(22,809

)

 

$

3,482,687

 

 

$

3,431,498

 

Fixed income

 

1,855,465

 

 

 

76,011

 

 

 

18,538

 

 

 

(43,565

)

 

 

(22,643

)

 

 

1,883,806

 

 

 

1,869,292

 

Multi-asset

 

480,278

 

 

 

9,617

 

 

 

683

 

 

 

7,121

 

 

 

(4,889

)

 

 

492,810

 

 

 

483,355

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

98,533

 

 

 

5,529

 

 

 

4,995

 

 

 

1,407

 

 

 

(999

)

 

 

109,465

 

 

 

102,928

 

Currency and commodities(5)

 

30,814

 

 

 

1,704

 

 

 

8

 

 

 

(2,027

)

 

 

(112

)

 

 

30,387

 

 

 

32,222

 

Alternatives subtotal

 

129,347

 

 

 

7,233

 

 

 

5,003

 

 

 

(620

)

 

 

(1,111

)

 

 

139,852

 

 

 

135,150

 

Long-term

$

5,836,731

 

 

$

79,736

 

 

$

26,814

 

 

$

107,326

 

 

$

(51,452

)

 

$

5,999,155

 

 

$

5,919,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amounts include net AUM impact from the TCP Transaction, the Citibanamex Transaction, the Aegon Transaction and the DSP Transaction.

(2)

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

(3)

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

(4)

Advisory AUM represents long-term portfolio liquidation assignments.

(5)

Amounts include commodity iShares ETFs.

 

6

 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

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

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

225,668

 

 

$

930

 

 

$

2,137

 

 

$

10,465

 

 

$

(1,656

)

 

$

237,544

 

 

$

234,570

 

Fixed income

 

248,348

 

 

 

27,430

 

 

 

14,070

 

 

 

(6,032

)

 

 

(937

)

 

 

282,879

 

 

 

263,376

 

Multi-asset

 

118,062

 

 

 

4,734

 

 

 

2,519

 

 

 

(726

)

 

 

(285

)

 

 

124,304

 

 

 

121,297

 

Alternatives

 

16,443

 

 

 

2,176

 

 

 

7

 

 

 

(31

)

 

 

(61

)

 

 

18,534

 

 

 

17,364

 

Retail subtotal

 

608,521

 

 

 

35,270

 

 

 

18,733

 

 

 

3,676

 

 

 

(2,939

)

 

 

663,261

 

 

 

636,607

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,228,395

 

 

 

97,196

 

 

 

-

 

 

 

92,086

 

 

 

(3,752

)

 

 

1,413,925

 

 

 

1,350,595

 

Fixed income

 

386,267

 

 

 

40,744

 

 

 

-

 

 

 

(13,023

)

 

 

(1,645

)

 

 

412,343

 

 

 

398,421

 

Multi-asset

 

3,491

 

 

 

324

 

 

 

-

 

 

 

3

 

 

 

(4

)

 

 

3,814

 

 

 

3,755

 

Alternatives

 

22,284

 

 

 

2,669

 

 

 

-

 

 

 

(1,815

)

 

 

(32

)

 

 

23,106

 

 

 

24,365

 

iShares ETFs subtotal

 

1,640,437

 

 

 

140,933

 

 

 

-

 

 

 

77,251

 

 

 

(5,433

)

 

 

1,853,188

 

 

 

1,777,136

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

130,366

 

 

 

(7,491

)

 

 

(4,296

)

 

 

11,829

 

 

 

(1,433

)

 

 

128,975

 

 

 

135,167

 

Fixed income

 

562,027

 

 

 

(5,073

)

 

 

2,417

 

 

 

(4,658

)

 

 

(3,122

)

 

 

551,591

 

 

 

559,446

 

Multi-asset

 

327,733

 

 

 

9,180

 

 

 

(1,593

)

 

 

24,431

 

 

 

(2,864

)

 

 

356,887

 

 

 

345,708

 

Alternatives

 

85,098

 

 

 

1,934

 

 

 

4,995

 

 

 

2,146

 

 

 

(705

)

 

 

93,468

 

 

 

87,097

 

Active subtotal

 

1,105,224

 

 

 

(1,450

)

 

 

1,523

 

 

 

33,748

 

 

 

(8,124

)

 

 

1,130,921

 

 

 

1,127,418

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,588,036

 

 

 

(67,979

)

 

 

4,749

 

 

 

188,093

 

 

 

(10,656

)

 

 

1,702,243

 

 

 

1,669,668

 

Fixed income

 

591,778

 

 

 

55,861

 

 

 

2,051

 

 

 

(1,141

)

 

 

(11,556

)

 

 

636,993

 

 

 

633,159

 

Multi-asset

 

7,741

 

 

 

301

 

 

 

(243

)

 

 

67

 

 

 

(61

)

 

 

7,805

 

 

 

8,040

 

Alternatives

 

7,146

 

 

 

(2,623

)

 

 

1

 

 

 

254

 

 

 

(34

)

 

 

4,744

 

 

 

4,952

 

Index subtotal

 

2,194,701

 

 

 

(14,440

)

 

 

6,558

 

 

 

187,273

 

 

 

(22,307

)

 

 

2,351,785

 

 

 

2,315,819

 

Institutional subtotal

 

3,299,925

 

 

 

(15,890

)

 

 

8,081

 

 

 

221,021

 

 

 

(30,431

)

 

 

3,482,706

 

 

 

3,443,237

 

Long-term

 

5,548,883

 

 

 

160,313

 

 

 

26,814

 

 

 

301,948

 

 

 

(38,803

)

 

 

5,999,155

 

 

 

5,856,980

 

Cash management

 

425,423

 

 

 

17,239

 

 

 

686

 

 

 

1,432

 

 

 

(1,595

)

 

 

443,185

 

 

 

450,862

 

Advisory (4)

 

2,586

 

 

 

(769

)

 

 

-

 

 

 

(18

)

 

 

(39

)

 

 

1,760

 

 

 

1,494

 

Total

$

5,976,892

 

 

$

176,783

 

 

$

27,500

 

 

$

303,362

 

 

$

(40,437

)

 

$

6,444,100

 

 

$

6,309,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

300,176

 

 

$

(12,158

)

 

$

(2,160

)

 

$

17,436

 

 

$

(2,245

)

 

$

301,049

 

 

$

308,300

 

Fixed income

 

797,840

 

 

 

19,387

 

 

 

16,487

 

 

 

(10,687

)

 

 

(3,695

)

 

 

819,332

 

 

 

809,440

 

Multi-asset

 

445,795

 

 

 

13,914

 

 

 

926

 

 

 

23,705

 

 

 

(3,148

)

 

 

481,192

 

 

 

467,005

 

Alternatives

 

101,541

 

 

 

4,110

 

 

 

5,002

 

 

 

2,115

 

 

 

(765

)

 

 

112,003

 

 

 

104,461

 

Active subtotal

 

1,645,352

 

 

 

25,253

 

 

 

20,255

 

 

 

32,569

 

 

 

(9,853

)

 

 

1,713,576

 

 

 

1,689,206

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,228,395

 

 

 

97,196

 

 

 

-

 

 

 

92,086

 

 

 

(3,752

)

 

 

1,413,925

 

 

 

1,350,595

 

Fixed income

 

386,267

 

 

 

40,744

 

 

 

-

 

 

 

(13,023

)

 

 

(1,645

)

 

 

412,343

 

 

 

398,421

 

Multi-asset

 

3,491

 

 

 

324

 

 

 

-

 

 

 

3

 

 

 

(4

)

 

 

3,814

 

 

 

3,755

 

Alternatives

 

22,284

 

 

 

2,669

 

 

 

-

 

 

 

(1,815

)

 

 

(32

)

 

 

23,106

 

 

 

24,365

 

iShares ETFs subtotal

 

1,640,437

 

 

 

140,933

 

 

 

-

 

 

 

77,251

 

 

 

(5,433

)

 

 

1,853,188

 

 

 

1,777,136

 

Non-ETF Index

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,643,894

 

 

 

(62,382

)

 

 

4,750

 

 

 

192,951

 

 

 

(11,500

)

 

 

1,767,713

 

 

 

1,731,105

 

Fixed income

 

604,313

 

 

 

58,831

 

 

 

2,051

 

 

 

(1,144

)

 

 

(11,920

)

 

 

652,131

 

 

 

646,541

 

Multi-asset

 

7,741

 

 

 

301

 

 

 

(243

)

 

 

67

 

 

 

(62

)

 

 

7,804

 

 

 

8,040

 

Alternatives

 

7,146

 

 

 

(2,623

)

 

 

1

 

 

 

254

 

 

 

(35

)

 

 

4,743

 

 

 

4,952

 

Non-ETF Index subtotal

 

2,263,094

 

 

 

(5,873

)

 

 

6,559

 

 

 

192,128

 

 

 

(23,517

)

 

 

2,432,391

 

 

 

2,390,638

 

Index & iShares ETFs subtotal

 

3,903,531

 

 

 

135,060

 

 

 

6,559

 

 

 

269,379

 

 

 

(28,950

)

 

 

4,285,579

 

 

 

4,167,774

 

Long-term

$

5,548,883

 

 

$

160,313

 

 

$

26,814

 

 

$

301,948

 

 

$

(38,803

)

 

$

5,999,155

 

 

$

5,856,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Equity

$

3,172,465

 

 

$

22,656

 

 

$

2,590

 

 

$

302,473

 

 

$

(17,497

)

 

$

3,482,687

 

 

$

3,390,000

 

Fixed income

 

1,788,420

 

 

 

118,962

 

 

 

18,538

 

 

 

(24,854

)

 

 

(17,260

)

 

 

1,883,806

 

 

 

1,854,402

 

Multi-asset

 

457,027

 

 

 

14,539

 

 

 

683

 

 

 

23,775

 

 

 

(3,214

)

 

 

492,810

 

 

 

478,800

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

99,168

 

 

 

3,958

 

 

 

4,995

 

 

 

2,092

 

 

 

(748

)

 

 

109,465

 

 

 

101,921

 

Currency and commodities(5)

 

31,803

 

 

 

198

 

 

 

8

 

 

 

(1,538

)

 

 

(84

)

 

 

30,387

 

 

 

31,857

 

Alternatives subtotal

 

130,971

 

 

 

4,156

 

 

 

5,003

 

 

 

554

 

 

 

(832

)

 

 

139,852

 

 

 

133,778

 

Long-term

$

5,548,883

 

 

$

160,313

 

 

$

26,814

 

 

$

301,948

 

 

$

(38,803

)

 

$

5,999,155

 

 

$

5,856,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amounts include net AUM impact from the TCP Transaction, the Citibanamex Transaction, the Aegon Transaction and the DSP Transaction.

(2)

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

(3)

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

(4)

Advisory AUM represents long-term portfolio liquidation assignments.

(5)

Amounts include commodity iShares ETFs.

7

 

SUMMARY OF REVENUE

 

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

(in millions), (unaudited)

2018

 

 

2017*

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017*

 

 

Change

 

 

Investment advisory, administration fees

   and securities lending revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

$

405

 

 

$

418

 

 

$

(13

)

 

$

426

 

 

$

(21

)

 

$

1,269

 

 

$

1,229

 

 

$

40

 

 

iShares ETFs

 

885

 

 

 

835

 

 

 

50

 

 

 

911

 

 

 

(26

)

 

 

2,722

 

 

 

2,332

 

 

 

390

 

 

Non-ETF Index

 

169

 

 

 

168

 

 

 

1

 

 

 

187

 

 

 

(18

)

 

 

532

 

 

 

503

 

 

 

29

 

 

Equity subtotal

 

1,459

 

 

 

1,421

 

 

 

38

 

 

 

1,524

 

 

 

(65

)

 

 

4,523

 

 

 

4,064

 

 

 

459

 

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

460

 

 

 

437

 

 

 

23

 

 

 

458

 

 

 

2

 

 

 

1,374

 

 

 

1,268

 

 

 

106

 

 

iShares ETFs

 

205

 

 

 

210

 

 

 

(5

)

 

 

207

 

 

 

(2

)

 

 

620

 

 

 

595

 

 

 

25

 

 

Non-ETF Index

 

98

 

 

 

88

 

 

 

10

 

 

 

101

 

 

 

(3

)

 

 

292

 

 

 

257

 

 

 

35

 

 

Fixed income subtotal

 

763

 

 

 

735

 

 

 

28

 

 

 

766

 

 

 

(3

)

 

 

2,286

 

 

 

2,120

 

 

 

166

 

 

Multi-asset

 

298

 

 

 

289

 

 

 

9

 

 

 

295

 

 

 

3

 

 

 

889

 

 

 

843

 

 

 

46

 

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

185

 

 

 

169

 

 

 

16

 

 

 

176

 

 

 

9

 

 

 

539

 

 

 

469

 

 

 

70

 

 

Currency and commodities

 

24

 

 

 

23

 

 

 

1

 

 

 

26

 

 

 

(2

)

 

 

75

 

 

 

67

 

 

 

8

 

 

Alternatives subtotal

 

209

 

 

 

192

 

 

 

17

 

 

 

202

 

 

 

7

 

 

 

614

 

 

 

536

 

 

 

78

 

 

Long-term

 

2,729

 

 

 

2,637

 

 

 

92

 

 

 

2,787

 

 

 

(58

)

 

 

8,312

 

 

 

7,563

 

 

 

749

 

 

Cash management

 

154

 

 

 

144

 

 

 

10

 

 

 

157

 

 

 

(3

)

 

 

462

 

 

 

408

 

 

 

54

 

 

Total base fees

 

2,883

 

 

 

2,781

 

 

 

102

 

 

 

2,944

 

 

 

(61

)

 

 

8,774

 

 

 

7,971

 

 

 

803

 

 

Investment advisory performance fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

7

 

 

 

30

 

 

 

(23

)

 

 

43

 

 

 

(36

)

 

 

68

 

 

 

57

 

 

 

11

 

 

Fixed income

 

-

 

 

 

9

 

 

 

(9

)

 

 

(1

)

 

 

1

 

 

 

2

 

 

 

20

 

 

 

(18

)

 

Multi-asset

 

1

 

 

 

2

 

 

 

(1

)

 

 

9

 

 

 

(8

)

 

 

15

 

 

 

14

 

 

 

1

 

 

Alternatives

 

143

 

 

 

150

 

 

 

(7

)

 

 

40

 

 

 

103

 

 

 

227

 

 

 

218

 

 

 

9

 

 

Total performance fees

 

151

 

 

 

191

 

 

 

(40

)

 

 

91

 

 

 

60

 

 

 

312

 

 

 

309

 

 

 

3

 

 

Technology services revenue

 

200

 

 

 

169

 

 

 

31

 

 

 

198

 

 

 

2

 

 

 

582

 

 

 

481

 

 

 

101

 

 

Distribution fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrocessions

 

168

 

 

 

175

 

 

 

(7

)

 

 

181

 

 

 

(13

)

 

 

541

 

 

 

490

 

 

 

51

 

 

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

 

102

 

 

 

113

 

 

 

(11

)

 

 

103

 

 

 

(1

)

 

 

313

 

 

 

356

 

 

 

(43

)

 

Other

 

9

 

 

 

10

 

 

 

(1

)

 

 

10

 

 

 

(1

)

 

 

30

 

 

 

31

 

 

 

(1

)

 

Total distribution fees

 

279

 

 

 

298

 

 

 

(19

)

 

 

294

 

 

 

(15

)

 

 

884

 

 

 

877

 

 

 

7

 

 

Advisory and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

 

26

 

 

 

25

 

 

 

1

 

 

 

33

 

 

 

(7

)

 

 

80

 

 

 

74

 

 

 

6

 

 

Other

 

37

 

 

 

44

 

 

 

(7

)

 

 

45

 

 

 

(8

)

 

 

132

 

 

 

124

 

 

 

8

 

 

Total advisory and other revenue

 

63

 

 

 

69

 

 

 

(6

)

 

 

78

 

 

 

(15

)

 

 

212

 

 

 

198

 

 

 

14

 

 

Total revenue

$

3,576

 

 

$

3,508

 

 

$

68

 

 

$

3,605

 

 

$

(29

)

 

$

10,764

 

 

$

9,836

 

 

$

928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

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 $102 million from the third quarter of 2017, reflecting the impact of higher markets and organic growth on average AUM. The increase lagged the growth in average AUM as a result of the impact of divergent beta and previously announced pricing changes to select investment products. Securities lending revenue of $160 million in the current quarter compared with $150 million in the third quarter of 2017.

Investment advisory, administration fees and securities lending revenue decreased $61 million from the second quarter of 2018, despite growth in average AUM and one additional day in the current quarter, reflecting the impact of divergent beta, previously announced pricing changes to select investment products and seasonally lower securities lending revenue. Securities lending revenue of $160 million in the current quarter compared with $183 million in the second quarter of 2018.

▪

Performance fees decreased $40 million from the third quarter of 2017, primarily reflecting lower fees from liquid alternative and long-only products, and increased $60 million from the second quarter of 2018, primarily reflecting strong performance from a single hedge fund with an annual performance measurement period that ends in the third quarter.

▪

Technology services revenue increased $31 million from the third quarter of 2017 and $2 million from the second quarter of 2018, primarily reflecting higher revenue from institutional Aladdin®.


8

 

SUMMARY OF OPERATING EXPENSE

 

Three

 

 

 

 

 

 

Three

 

 

 

 

 

 

Nine

 

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

(in millions), (unaudited)

2018

 

 

2017*

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017*

 

 

Change

 

 

Operating expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

$

1,097

 

 

$

1,087

 

 

$

10

 

 

$

1,082

 

 

$

15

 

 

$

3,300

 

 

$

3,106

 

 

$

194

 

 

Distribution and servicing costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrocessions

 

168

 

 

 

175

 

 

 

(7

)

 

 

181

 

 

 

(13

)

 

 

541

 

 

 

490

 

 

 

51

 

 

12b-1 costs

 

100

 

 

 

111

 

 

 

(11

)

 

 

101

 

 

 

(1

)

 

 

307

 

 

 

349

 

 

 

(42

)

 

Other

 

140

 

 

 

133

 

 

 

7

 

 

 

133

 

 

 

7

 

 

 

407

 

 

 

391

 

 

 

16

 

 

Total distribution and servicing costs

 

408

 

 

 

419

 

 

 

(11

)

 

 

415

 

 

 

(7

)

 

 

1,255

 

 

 

1,230

 

 

 

25

 

 

Direct fund expense

 

249

 

 

 

231

 

 

 

18

 

 

 

264

 

 

 

(15

)

 

 

774

 

 

 

658

 

 

 

116

 

 

General and administration:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing and promotional

 

77

 

 

 

76

 

 

 

1

 

 

 

91

 

 

 

(14

)

 

 

253

 

 

 

231

 

 

 

22

 

 

Occupancy and office related

 

73

 

 

 

68

 

 

 

5

 

 

 

73

 

 

 

-

 

 

 

220

 

 

 

202

 

 

 

18

 

 

Portfolio services

 

60

 

 

 

60

 

 

 

-

 

 

 

73

 

 

 

(13

)

 

 

203

 

 

 

175

 

 

 

28

 

 

Technology

 

61

 

 

 

51

 

 

 

10

 

 

 

58

 

 

 

3

 

 

 

172

 

 

 

145

 

 

 

27

 

 

Professional services

 

42

 

 

 

37

 

 

 

5

 

 

 

37

 

 

 

5

 

 

 

111

 

 

 

92

 

 

 

19

 

 

Communications

 

9

 

 

 

8

 

 

 

1

 

 

 

9

 

 

 

-

 

 

 

28

 

 

 

24

 

 

 

4

 

 

Foreign exchange remeasurement

 

7

 

 

 

3

 

 

 

4

 

 

 

4

 

 

 

3

 

 

 

12

 

 

 

(3

)

 

 

15

 

 

Contingent consideration fair value adjustments

 

29

 

 

 

7

 

 

 

22

 

 

 

(1

)

 

 

30

 

 

 

34

 

 

 

(1

)

 

 

35

 

 

Product launch costs

 

1

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

1

 

 

 

12

 

 

 

4

 

 

 

8

 

 

Other general and administration

 

54

 

 

 

45

 

 

 

9

 

 

 

49

 

 

 

5

 

 

 

144

 

 

 

127

 

 

 

17

 

 

Total general and administration expense

 

413

 

 

 

355

 

 

 

58

 

 

 

393

 

 

 

20

 

 

 

1,189

 

 

 

996

 

 

 

193

 

 

Amortization of intangible assets

 

13

 

 

 

27

 

 

 

(14

)

 

 

11

 

 

 

2

 

 

 

35

 

 

 

77

 

 

 

(42

)

 

Total operating expense

$

2,180

 

 

$

2,119

 

 

$

61

 

 

$

2,165

 

 

$

15

 

 

$

6,553

 

 

$

6,067

 

 

$

486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

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

▪

General and administration expense increased $58 million from the third quarter of 2017 and $20 million from the second quarter of 2018, respectively, primarily due to $42 million of transaction-related expense recorded in the current quarter, consisting of contingent consideration fair value adjustments, other general and administration expense, and professional services.

 

INCOME TAX EXPENSE (BENEFIT)

 

Three

 

 

 

 

 

Three

 

 

 

 

 

 

Nine

 

 

 

 

 

 

 

Months Ended

 

 

 

 

 

Months Ended

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

June 30,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

(in millions), (unaudited)

2018

 

 

2017*

 

 

Change

 

2018

 

 

Change

 

 

2018

 

 

2017*

 

 

Change

 

 

Income tax expense (benefit)

$

226

 

 

$

443

 

 

$

(217

)

 

$

338

 

 

$

(112

)

 

$

829

 

 

$

1,085

 

 

$

(256

)

 

Effective tax rate

 

15.7

%

 

 

31.9

%

 

 

(1,620

) bps

 

 

24.0

%

 

 

(830

) bps

 

 

19.7

%

 

 

29.0

%

 

 

(930

) 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

▪

Third quarter 2018 income tax expense benefited from $90 million of discrete items.

▪

Both third and second quarter 2018 income tax expense reflected a reduced tax rate associated with the Tax Cuts and Jobs Act enacted in the United States.

▪

Third quarter 2018 and 2017 income tax expense included a $5 million net noncash tax benefit and a $19 million net noncash tax expense, respectively, related to the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes.

 

9

 

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

 

Three Months

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

Nine Months

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

(in millions), (unaudited)

 

2018

 

 

2017

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017

 

 

Change

 

 

Nonoperating income (expense), GAAP basis

 

$

33

 

 

$

10

 

 

$

23

 

 

$

(24

)

 

$

57

 

 

$

(7

)

 

$

4

 

 

$

(11

)

 

Less: Net income (loss) attributable to

     noncontrolling interests ("NCI")

 

 

(13

)

 

 

12

 

 

 

(25

)

 

 

5

 

 

 

(18

)

 

 

(3

)

 

 

31

 

 

 

(34

)

 

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

 

$

46

 

 

$

(2

)

 

$

48

 

 

$

(29

)

 

$

75

 

 

$

(4

)

 

$

(27

)

 

$

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

Nine Months

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

(in millions), (unaudited)

 

2018

 

 

2017

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017

 

 

Change

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private equity

 

$

4

 

 

$

7

 

 

$

(3

)

 

$

5

 

 

$

(1

)

 

$

10

 

 

$

21

 

 

$

(11

)

 

Real assets

 

 

10

 

 

 

1

 

 

 

9

 

 

 

9

 

 

 

1

 

 

 

24

 

 

 

2

 

 

 

22

 

 

Other alternatives(3)

 

 

1

 

 

 

11

 

 

 

(10

)

 

 

1

 

 

 

-

 

 

 

5

 

 

 

34

 

 

 

(29

)

 

Other investments(4)

 

 

(3

)

 

 

10

 

 

 

(13

)

 

 

(18

)

 

 

15

 

 

 

(20

)

 

 

35

 

 

 

(55

)

 

Subtotal

 

 

12

 

 

 

29

 

 

 

(17

)

 

 

(3

)

 

 

15

 

 

 

19

 

 

 

92

 

 

 

(73

)

 

Other gains(5)

 

 

51

 

 

 

-

 

 

 

51

 

 

 

1

 

 

 

50

 

 

 

52

 

 

 

5

 

 

 

47

 

 

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

 

 

63

 

 

 

29

 

 

 

34

 

 

 

(2

)

 

 

65

 

 

 

71

 

 

 

97

 

 

 

(26

)

 

Interest and dividend income

 

 

29

 

 

 

15

 

 

 

14

 

 

 

19

 

 

 

10

 

 

 

63

 

 

 

35

 

 

 

28

 

 

Interest expense

 

 

(46

)

 

 

(46

)

 

 

-

 

 

 

(46

)

 

 

-

 

 

 

(138

)

 

 

(159

)

 

 

21

 

 

Net interest expense

 

 

(17

)

 

 

(31

)

 

 

14

 

 

 

(27

)

 

 

10

 

 

 

(75

)

 

 

(124

)

 

 

49

 

 

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

 

$

46

 

 

$

(2

)

 

$

48

 

 

$

(29

)

 

$

75

 

 

$

(4

)

 

$

(27

)

 

$

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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.

(5)

Amount for the third quarter of 2018 primarily includes a $40 million pre-tax gain related to the DSP Transaction and a $10 million noncash pre-tax gain related to the revaluation of another strategic investment.


10

 

 

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

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

(in millions), (unaudited)

 

2018

 

 

2017*

 

 

2018

 

 

2018

 

 

2017*

 

 

Operating income, GAAP basis

 

$

1,396

 

 

$

1,389

 

 

$

1,440

 

 

$

4,211

 

 

$

3,769

 

 

Non-GAAP expense adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PNC LTIP funding obligation

 

 

4

 

 

 

4

 

 

 

3

 

 

 

10

 

 

 

12

 

 

Operating income, as adjusted (1)

 

 

1,400

 

 

 

1,393

 

 

 

1,443

 

 

 

4,221

 

 

 

3,781

 

 

Product launch costs and commissions

 

 

1

 

 

 

-

 

 

 

-

 

 

 

13

 

 

 

-

 

 

Operating income used for operating margin measurement

 

$

1,401

 

 

$

1,393

 

 

$

1,443

 

 

$

4,234

 

 

$

3,781

 

 

Revenue, GAAP basis

 

$

3,576

 

 

$

3,508

 

 

$

3,605

 

 

$

10,764

 

 

$

9,836

 

 

Non-GAAP adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution and servicing costs

 

 

(408

)

 

 

(419

)

 

 

(415

)

 

 

(1,255

)

 

 

(1,230

)

 

Revenue used for operating margin measurement

 

$

3,168

 

 

$

3,089

 

 

$

3,190

 

 

$

9,509

 

 

$

8,606

 

 

Operating margin, GAAP basis

 

 

39.0

%

 

 

39.6

%

 

 

39.9

%

 

 

39.1

%

 

 

38.3

%

 

Operating margin, as adjusted (1)

 

 

44.2

%

 

 

45.1

%

 

 

45.2

%

 

 

44.5

%

 

 

43.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Nine Months Ended

 

 

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

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

 

2018

 

 

2017*

 

 

2018

 

 

2018

 

 

2017*

 

 

Net income attributable to BlackRock, Inc., GAAP basis

 

$

1,216

 

 

$

944

 

 

$

1,073

 

 

$

3,378

 

 

$

2,657

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PNC LTIP funding obligation, net of tax

 

 

3

 

 

 

3

 

 

 

3

 

 

 

9

 

 

 

9

 

 

Income tax matters

 

 

(5

)

 

 

19

 

 

 

4

 

 

 

(1

)

 

 

19

 

 

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

 

$

1,214

 

 

$

966

 

 

$

1,080

 

 

$

3,386

 

 

$

2,685

 

 

Diluted weighted-average common shares outstanding (3)

 

 

161.4

 

 

 

163.8

 

 

 

162.2

 

 

 

162.1

 

 

 

164.3

 

 

Diluted earnings per common share, GAAP basis (3)

 

$

7.54

 

 

$

5.76

 

 

$

6.62

 

 

$

20.83

 

 

$

16.17

 

 

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

 

$

7.52

 

 

$

5.90

 

 

$

6.66

 

 

$

20.88

 

 

$

16.34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

11

 

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.


12

 

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 September 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 August 31, 2018. The performance data does not include accounts terminated prior to September 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 September 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