BlackRock rebounds as clients move from cash to fixed income

The world's largest asset manager saw $65 billion in net inflows in Q1.

BlackRock Inc. rebounded from a rocky end of last year, as customers jumped into its fixed-income products and showed interest in illiquid alternatives.

The world’s largest asset manager saw $65 billion in net inflows in the first quarter, the strongest total since 2017. The results Tuesday helped lift the New York-based company’s assets under management above $6 trillion again after a drop amid market turmoil at the end of 2018.

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BlackRock saw clients put money to work, moving from cash to fixed income, Chief Executive Larry Fink said in an interview on CNBC after the earnings report.

“We’re seeing huge excitement in fixed income,” Mr. Fink said.

BlackRock’s fixed income products took in $80 billion in the first quarter, driving the company’s $59 billion in long-term net flows. Investors have shown renewed interest in bonds since the Federal Reserve officials signaled this year that an increase in rates is on hold. The pause came after many traders were instead positioning for a stretch of hikes.

The strength in BlackRock’s fixed income business and $6.8 billion in alternatives flows helped mute the impact of investors pulling $26 billion out of BlackRock’s equity products in the period.

Mr. Fink commented in the CNBC interview that investors haven’t rushed back into equities even as the stock market bounced back this year.

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“There are huge pools of money sitting on the sidelines,” Mr. Fink said on an earnings conference call later Tuesday.

BlackRock’s iShares division is the largest global issuer of exchange-traded funds and a key piece of its business.

The asset manager often points to fixed-income ETFs as a source of future growth for the industry. Its fixed-income exchange-traded products brought in $32 billion in the first quarter, offsetting $1.6 billion in outflows from its equity ETFs. iShares saw flows of $30.7 billion overall in the period, down from a record $81 billion in the fourth quarter.

BlackRock is recovering from 2018, when the firm saw its share price drop about 24% and confronted three straight quarters of institutional outflows. In the first quarter, the company reversed that trend and gathered institutional inflows of $29.1 billion.

BlackRock shares were up about 2% Tuesday in early trading. It reported earnings per share of $6.61, beating estimates of $6.13 per share, according to analysts surveyed by Bloomberg. Revenue of $3.3 billion fell 7% from the same period a year earlier, and was in line with analyst estimates.

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“We’ve had a significantly better market tone than we saw in the second half of the year,” said Gary Shedlin, the company’s chief financial officer, in an interview. Quarterly net flows were driven by key businesses the company’s invested in, he said.

“We feel those investments are paying off,” Mr. Shedlin added.

Other Highlights

The company’s assets under management rose to $6.52 trillion in the period.

In the Asia-Pacific region, where BlackRock is seeking to expand its presence, the company saw $2.9 billion in outflows from the region.

BlackRock recently announced some big management changes. In an effort to be more global, it transferred oversight of institutional client businesses to regional leaders.

The company reported an 11% growth in technology services year-over-year.

To further its technology focus, in March BlackRock agreed to acquire French software provider eFront for $1.3 billion.