BlackRock Inc. (BLK) is by some measures the biggest investment management company across the globe, with more than $7.8 trillion in assets under management (AUM) as of September 30, 2020. As a major publicly traded company with a market capitalization of more than $109 billion, BlackRock provides investment and technology services to both institutional and retail clients around the world.
The firm offers a variety of funds and portfolios investing in vehicles such as equities, money market instruments, and fixed income. Clients look to BlackRock for access to mutual funds, investments focused on objectives related to retirement income and college savings, and exchange traded funds.
- BlackRock is one of the world's largest investment management companies by AUM.
- The company operates as a single business segment.
- The firm derives most of its revenue from investment advisory and administration fees.
- BlackRock announced in November that it had entered an agreement to acquire personalized indexing firm Aperio for $1.05 billion.
BlackRock is the parent company for the iShares group of ETFs, the largest global provider of ETFs. BlackRock reports as a single business segment, deriving the majority of its revenue from investment advisory and administrative fees charged to its clients. Among BlackRock's major competitors are The Vanguard Group and T. Rowe Price Group Inc. (TROW).
In Q3 2020 (ended September 30, 2020), BlackRock earned $1.5 billion in net income on $4.4 billion of total revenue. As compared with Q3 2019, this represents a year-over-year (YOY) increase in net income of 35.6%. Operating income for Q3 2020 was $1.8 billion, up 17.0% YOY. Revenue grew 18.3% in Q3 2020 compared to the same quarter a year ago.
While BlackRock experienced robust YOY gains in revenue, operating income, and net income, its operating margin of 40.2% in Q3 declined slightly from 40.7% in the year-ago quarter. Total AUM climbed 12.1% YOY compared to the same three-month period a year ago.
BlackRock's Business Segments
As indicated above, BlackRock operates as a single business segment and does not report on income for individual parts of its business. However, it does divide its revenue according to categories for "Investment advisory, administration fees, and securities lending revenue," for "Investment advisory performance fees," for "Technology services revenue," for "Distribution fees," and for "Advisory and other revenue."
Investment Advisory, Administration Fees, and Securities Lending Revenue
BlackRock derives the majority of its revenue from investment advisory and administration fees levied over time and typically based upon predetermined percentages of AUM. This category of BlackRock's business includes fees related to the firm's equity, fixed income, multi-asset alternative, and cash management services. In Q3 2020, this category accounted for $3.2 billion in revenue, or about 74% of total revenue. This was up 8.2% YOY.
Investment Advisory Performance Fees
In contrast with administrative fees, performance fees are assessed to certain types of BlackRock accounts when performance exceeds a predetermined threshold. Performance fees accounted for $532 million in revenue, or more than 12% of total revenue in Q3 2020. This was up 339.7% YOY, making it the fastest-growing part of BlackRock's business by far.
Technology Services Revenue
BlackRock offers a range of technology systems, risk management, and other digital distribution tools to select insurance company, bank, pension fund, and asset manager clients. Technology services accounted for $282 million in revenue for Q3 2020, or about 6% of the total. This figure was up 8.9% YOY.
BlackRock levies fees associated with the distribution and service of its various products, as well as for support services related to investment portfolios. In Q3 2020, this category accounted for $288 million in revenue, or nearly 7% of total revenue for the quarter. This was up 6.7% YOY.
Advisory and Other Revenue
BlackRock also separates out a category of revenue associated with its advisory services for global financial institutions, regulators, and governments. These fees are set at a fixed rate. In Q3 2020, this category accounted for $42 million in revenue, or about 1% of total revenue. This was down 32.3% YOY.
BlackRock's Recent Developments
On November 23, 2020, BlackRock announced that it had entered into an agreement to acquire Aperio from Golden Gate Capital for $1.05 billion in an all-cash transaction. Aperio specializes in offering personalised index investing to high net worth clients. Its services take into account each client's unique risk, tax, and personal values preferences.
In late March, the U.S. Federal Reserve tasked BlackRock with helping to carry out the central bank's bond-purchasing program as part of its broader response to the COVID-19 pandemic. BlackRock was instructed to purchase agency commercial mortgage-backed securities on behalf of the New York Federal Reserve. BlackRock was also tasked with managing two large bond-buying programs: a Fed-backed facility for purchasing new investment-grade bonds from U.S. companies; and another facility for purchasing investment-grade bonds that have already been issued.
BlackRock has also been a major beneficiary of the Fed's ETF-buying program. The Fed bought $1.58 billion in investment grade and high-yield ETFs between May 12 and May 19. Almost half of the Fed's purchases went into BlackRock funds, as BlackRock operates many of the largest investment grade and high-yield ETFs.
How BlackRock Reports Diversity & Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of BlackRock and its commitment to diversity, inclusiveness, and social responsibility. We examined the data BlackRock releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether BlackRock discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether BlackRock breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
|BlackRock Diversity & Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors||✔|
|Employees||✔ (U.S. Only)||✔|
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BlackRock, Inc. "Form 10-K for the fiscal year ended December 31, 2018," Page 43. Accessed Feb. 3, 2020.
BlackRock Inc. "Form 10-Q for the quarterly period ended September 30, 2020," Page 2. Accessed Dec. 3, 2020.
BlackRock Inc. "Form 10-Q for the quarterly period ended September 30, 2020," Page 43. Accessed Dec. 3, 2020.
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Financial Times. "BlackRock aims for wealthy business with $1.05bn Aperio deal." Accessed Dec. 3, 2020.
BlackRock Inc. "BlackRock to Acquire Aperio - Leading Provider of Personalized Index Equity Solutions." Accessed Dec. 3, 2020.
The Wall Street Journal. "Federal Reserve Taps BlackRock to Purchase Bonds for the Government." Accessed Aug. 17, 2020.
Barron's. "BlackRock Is Biggest Beneficiary of Fed Purchases of Corporate Bond ETFs." Accessed Aug. 17, 2020.