Why is BlackRock so successful?
BlackRock Inc. BLK is by some measures the biggest investment management company across the globe, with more than $10.0 trillion in assets management (AUM) as of Dec. 31, 2021.1 As a major publicly traded company with a market capitalization of about 11 billion 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 (ETFs).
BlackRock is the parent company for the ishare group of ETFs, the largest global provider of ETFs.1 BlackRock derives the majority of its revenue from investment advisory and administrative fees charged to its clients. Among BlackRock’s major competitors are The Vanguard Group, State Street Corp. (STT), and T. Rowe Price Group Inc.TROW
- 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 said that it has halted purchases of Russian securities amid Russia’s invasion of Ukraine.
BlackRock announced in mid-January financial results for Q4 of its 2021 fiscal year (FY), the three-month period ended March 18, 2021. The company reported a net income of $1.6 billion, up 6.1% compared to the year-ago quarter. Revenue grew 14.0% year over year (YOY) to $5.1 billion. The company’s AUM rose 15.4% YOY to a new high of $10.0 trillion.
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 is typically based upon predetermined percentages of AUM.5 This category of BlackRock’s business includes fees related to the firm’s equity, fixed income, multi-asset alternative, and cash management services. In Q4 FY 2021, this category accounted for $4.0 billion in revenue, or about 78% of total revenue. This was up 16.9% compared to the year-ago quarter.6
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.7 Performance fees accounted for $329 million in revenue, or about 6% of total revenue in Q4 FY 2021. This was down 21.5% compared to the year-ago quarter.6
Technology Services Revenue
BlackRock offers a range of investment management technology systems, risk management services, wealth management, and digital distribution tools to various insurance company, bank, pension fund, and asset manager clients.7 Technology services accounted for $339 million in revenue for Q4 FY 2021, or about 7% of the total. This figure was up 11.1%.6.
BlackRock levies fees associated with the distribution and service of its various products, as well as for support services related to investment portfolios.5 In Q4 FY 2021, this category accounted for $411 million in revenue, or about 8% of total revenue for the year. This was up 30.9% compared to Q4 FY 2020.6
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.8 In Q4 FY 2021, this category accounted for $59 million in revenue, or about 1% of total revenue. This was up 25.5% compared to the year-ago quarter.6
BlackRock’s Recent Developments
On March 3, 2022, BlackRock said that it had halted purchases of all Russian securities in both its active and index funds amid Russia’s recent invasion of Ukraine. Russian securities comprise less than 0.01% of the company’s clients’ assets.9
How BlackRock Reports Diversity and Inclusiveness
As part of our effort to improve the awareness of 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.10
Below is a table of potential diversity measurements. It shows whether Black rock 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.