How BlackRock Makes Money? Pros Complete Guide [2024]

BlackRock Inc. (BLK) is a global investment management company. The publicly traded company had a market capitalization of nearly $112.85 billion as of April 18, 2024. BlackRock provides investment and technology services to institutional and retail clients. Clients look to BlackRock for access to mutual funds, investments focused on objectives related to retirement income and college savings, and exchange-traded funds (ETFs).

BlackRock, an investment management giant, had $7.0 trillion in AUM (assets under management) at the end of the third quarter. From 2013 to 2018, the AUM grew at a CAGR (compound annual growth rate) of 7%. The company employs around 14,900 people in more than 30 countries. Meanwhile, BlackRock’s operations are spread over 100 countries. Around 7,500, or half of BlackRock’s employees, are in offices outside the US. The PNC Financial Services Group (PNC) owns around 22% of it’s outstanding shares.

KEY TAKEAWAYS

• It 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.
• It’s competitors include The Vanguard Group, State Street Corp., and T. Rowe Price Group Inc.

BlackRock’s Industry

It generates revenue from five segments: “Investment advisory, administration fees, and securities lending revenue,” “Investment advisory performance fees,” “Technology services revenue,” “Distribution fees,” and “Advisory and other revenue.” It’s competitors include The Vanguard Group, State Street Corp. (STT), and T. Rowe Price Group Inc. (TROW).

• Investment Advisory, Administrative Fees, and Securities Lending: Provides most of BlackRock’s revenue through investment advisory and administration fees based upon percentages of AUM. In FY 2023, this category accounted for $14.4 billion, or about 81% of total revenue.
• Investment Advisory Performance Fees: Performance fees are assessed when performance exceeds a predetermined threshold. Performance fees accounted for $554 million, or about 3% of total revenue in FY 2023.
• Technology Services: It offers investment management technology systems, risk management services, wealth management, and digital distribution tools to various insurance companies, banks, pension funds, and asset manager clients. Technology services accounted for $1.49 billion in revenue for FY 2023 or about 8% of the total.
• Distribution Fees: Revenue associated with the distribution and service of its products. In FY 2023, this category accounted for $1.26 billion, or about 7% of total revenue for the year.
• Advisory and Other Revenue: Revenue derived from its advisory services for global financial institutions, regulators, and governments. In FY 2023, this category accounted for $159 million, or about 1% of total revenue.

Important: BlackRock is the parent company for the iShares group of ETFs, a leader in the global ETF market.

BlackRock’s Financials

BlackRock filed its latest 10-K in Feb. 2024 for the 2023 fiscal year (FY), which ended Dec. 31, 2023, reporting over $10.0 trillion in assets under management (AUM).7 The company reported a net income of $5.5 billion, up 6.26% compared to the previous fiscal year. Revenue shrank by less than 1% year over year (YOY) to $17.86 billion.

The company generated $1.9 trillion of net inflows during the fiscal year. The Americas region led all other regions with long-term net flows of $177.2 billion. The company’s ETF offerings generated $185.9 billion in long-term net inflows, more than the long-term net inflows of retail and institutional investors combined.

History and Leadership

The company boasts a rich history of innovation and growth within the asset management industry. Here’s a breakdown of its journey and the leaders who shaped it:

Founding and Early Days (1988-1999):

• 1988: It began with eight individuals, including Larry Fink, Robert Kapito, and Susan Wagner. Their focus was on providing institutional clients with asset management services, emphasizing risk management.
• 1999: It recognized the potential for broader industry adoption of its risk management technology, Aladdin. They began selling Aladdin as a separate product.
• 1999: It went public, becoming a publicly traded company on the New York Stock Exchange.

Growth and Expansion (2000-Present):

• 2000: It established BlackRock Solutions, with Aladdin as its core technology.
• 2000s & 2010s: It continued to grow through acquisitions and organic expansion, solidifying its position as a leader in asset management.
• Present: Today, It remains a dominant force, managing trillions of dollars in assets for a diverse global client base.

Leadership:

While the company is led by a team of executives, some key figures stand out:

• Larry Fink: A co-founder and the current Chairman and Chief Executive Officer (CEO) of BlackRock. He’s known for his annual letters to CEOs, which address long-term investment horizons and stakeholder capitalism.
• Robert Kapito: Another co-founder and the current President of BlackRock. He plays a vital role in the firm’s overall strategy and leadership.
• Global Executive Committee: This committee comprises senior leaders from various BlackRock business units who oversee key strategic decisions and operational functions.

Additional Resources:

• BlackRock History: https://www.blackrock.com/corporate/about-us/blackrock-history
• BlackRock Leadership: https://www.blackrock.com/corporate/about-us/leadership

How does BlackRock make money?

It had approximately $6.0 trillion and $7.0 trillion of AUM at the end of 2018 and in the third quarter, respectively. These assets were invested in various products. The above chart shows the company’s AUM by product type at the end of 2018. BlackRock earns revenues for various services that it offers including:

• It earns an investment management fee typically as an agreed-upon percentage of the AUM. The company also earns securities lending revenues on some products. The company lends securities on behalf of clients to banks and broker-dealers. BlackRock refers to investment advisory, administration fees, and securities lending revenues collectively as “base fees.”
• The company earns performance fees on certain portfolios relative to a benchmark or return level.
• It offers investment management systems, risk management, outsourcing, and other technology services for a fee. These are offered to institutional investors and wealth management intermediaries. The revenues for these services are based on various criteria like the value of positions, the number of users, or the achievement of deliverables. Technology services clients include banks, insurance companies, official institutions, pension funds, asset managers, and others.
• It advises global financial institutions, regulators, and government entities on a range of risk, regulatory, capital markets, and strategic topics. The company earns a fee for these services.

Assets under management

Another way to look at BlackRock’s AUM is by categorizing it by client type. It’s two types of clients are retail and institutional. iShares ETFs are a component of both institutional and retail client portfolios. So, the company categorizes iShares ETFs as a separate client type. Notably, iShares ETFs accounted for around 29% of BlackRock’s AUM at the end of 2018. In comparison, retail clients accounted for 10%, while institutional clients accounted for 61% of BlackRock’s AUM.

Assets under management (AUM) is a key metric in the financial industry, especially for investment firms like it. It refers to the total market value of all the assets that a company manages on behalf of its clients.

Here’s what we know about BlackRock’s AUM:

• Total AUM: As of July 2024, there isn’t a publicly available, recent figure for it’s AUM specifically by geography. However, estimates suggest they manage trillions of dollars in assets globally.
• Client Breakdown: It’s annual reports might provide a breakdown of AUM by client type (institutional vs. individual) but not necessarily by geography.

Here are some resources to stay updated on BlackRock’s AUM:

• BlackRock Investor Relations: It’s investor relations section might release press releases or filings mentioning their AUM. You can keep an eye on their website for updates: https://ir.blackrock.com/home/default.aspx
• Financial News Sources: Financial news outlets often cover asset management firms like BlackRock. You can search for recent articles mentioning it’s AUM to get an idea of the current figures.

BlackRock’s products and service offerings

BlackRock (BLK) manages its clients’ assets in single and multi-asset portfolios. These include equities, fixed income, alternatives, and money market instruments. It’s products include:

• mutual funds, including open-end and closed-end funds
• ETFs – iShares ETFs
• separate accounts
• collective investment trusts
• other pooled investment vehicles

It offers investment and risk management technology platforms—namely, Aladdin, Aladdin Wealth, Cachematrix, and FutureAdvisor. The company also offers advisory services to institutional and wealth management clients.

It serves a broad range of clients including pension plans, charities, and endowments. The company’s clients include official institutions like central banks, sovereign wealth funds, and supranational bodies. Finally, it serves insurance companies, financial institutions, and corporations. The company also serves retail investors directly.

Institutional clients

It’s institutional clients include pensions, endowments and foundations, and financial institutions. Notably, the company is one of the largest managers of pension plan assets globally. Overall, BlackRock had $2.2 trillion of AUM managed for pension plans for corporations, governments, and unions at the end of 2018.

It’s institutional clients, that the company actively managed assets for, represented 19% of its long-term AUM and contributed 20% of its long-term base fees. In comparison, index-based management for institutional clients accounted for 38% of BlackRock’s long-term AUM, while it contributed 9% of the company’s long-term base fees for 2018.

AUM by geography

For 2018, 66% of BlackRock’s total AUM (for both retail and institutional clients) was managed for clients based in the Americas. The EMEA accounted for 27%, while Asia-Pacific accounted for 7% of the company’s total AUM.

Regional Focus: Look for news articles or press releases mentioning it’s activities in specific regions. This might indicate a strong AUM presence in those areas.

Industry Reports: Research reports from financial institutions or industry analysts might cover AUM distribution for major asset management firms like BlackRock, potentially including regional breakdowns.

Recent Developments

BlackRock and Jio Financial Services formed a joint venture in 2023, boosting it’s presence in India’s financial industry. In 2024, BlackRock acquired Global Infrastructure Partners, an independent infrastructure fund manager, for $3 billion and approximately 12 million shares of BlackRock common stock.

Here are some recent developments for BlackRock as of July 5, 2024:

• Global Real Estate ESG ETF Launch: On July 4th, 2024, it launched a new exchange-traded fund (ETF) focused on global real estate companies that consider environmental, social, and governance (ESG) factors. This highlights BlackRock’s focus on sustainable investing solutions.
• Second Quarter Earnings Upcoming: It is scheduled to report its earnings for the second quarter of 2024 on July 15th, 2024. This will be a key event to watch for insights into the company’s recent financial performance.
• Focus on Client Needs: It recently announced a company transformation to prioritize client needs. This involves restructuring their organization around client needs instead of product structures and creating a dedicated international growth unit.
• Acquisition of SpiderRock Advisors: In May 2024, BlackRock completed the acquisition of SpiderRock Advisors, a leading infrastructure investment advisor. This move strengthens it’s capabilities in delivering infrastructure solutions to clients.

These are just a few of the recent developments surrounding it. You can find more information on their website, investor relations section, and news articles related to the company.

Where Are BlackRock Offices Located?

BlackRock is a global firm with 70 offices in 30 countries.

Over 70 offices: The company boasts over 70 offices spread across more than 30 countries. This extensive network allows them to serve clients worldwide while maintaining a local presence in various regions.Headquarters in New York City: The company’s headquarters are situated in New York City, at 50 Hudson Yards.

Where Are Its Clients Located?

BlackRock manages assets for clients in North and South America, Europe, Asia, Australia, the Middle East, and Africa.

What Corporate Clients Has BlackRock Advised?

It’s corporate clients have included AIG, UBS, the Central Bank of Ireland, and the Federal Reserve Bank of New York.

Client Focus: BlackRock primarily targets institutional clients, such as:

• Defined benefit and defined contribution pension plans
• Charities, foundations, and endowments
• Insurance companies
• Financial institutions
• Corporations
• Third-party fund sponsors
• Global Reach: BlackRock caters to clients in over 100 countries, indicating a diverse range of corporate clients across various industries.

The Bottom Line

BlackRock is a global investment management company with offices located in thirty countries. The company boasted a nearly $112.85 billion market capitalization in Apr. 2024. The company was founded in 1988 and went public in 1999.

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