ETF fund inflows surged, BlackRock's asset management scale reached a record high of $10.6 trillion｜Financial Report Vision

Over the past few months, due to the increasing expectations of a soft landing for the U.S. economy and the investment frenzy surrounding AI-related stocks, the U.S. stock market has continuously hit record highs. Benefiting from the active market and strong inflow of client funds, BlackRock, the world's largest asset management company, has also reached a new high in asset under management.

Record High AUM with ETF Inflows Taking the Lead

On July 15th, BlackRock announced its second-quarter performance, revealing that its long-term investment funds attracted $51 billion in client funds, driving its AUM to $10.6 trillion, setting a historical record higher than the $9.43 trillion in the same period last year and the $10.5 trillion in the first quarter.

According to the financial report, BlackRock's total net inflows in the second quarter were $81.57 billion, slightly higher than the $80.16 billion in the same period last year but lower than the expected $112 billion. Equity inflows decreased to $6 billion as institutional clients rebalanced, dragging down fund inflows. Additionally, fixed income fund inflows fell short of expectations due to a large client withdrawing $20 billion.

BlackRock stated that ETFs accounted for the majority of fund inflows in the second quarter, reaching $83 billion, marking the best start to a year ever. Furthermore, clients added $35 billion to fixed income overall, with long-term investment fund net inflows falling below analysts' average expectations of $86 billion.

BlackRock CEO Larry Fink stated in a release that the private market, active retail fixed income assets, and the surge in ETF inflows have driven organic growth. Additionally, the strong interest in Bitcoin products has boosted ETF inflows. The company also recorded $30 billion in net inflows for cash management and money market funds during the period.

The company is optimistic about debt inflows, expecting investors to shift from currently high-yield cash to higher-risk fixed income products as the Fed begins to cut rates. Fink said, "We see clients globally recalibrating their risks."

In terms of performance, BlackRock also showed steady results. Second-quarter revenue was $48.1 billion, an 8% year-on-year increase but slightly below analysts' expectations of $48.4 billion. Investment advisory and management fee revenue grew by 8.6% to $3.72 billion. Technology services revenue increased by 10% to $395 million, reflecting continued demand for its investment risk management platform Aladdin.

Improved profit margins drove its net profit to grow by 9% year-on-year to $1.5 billion, adjusted to $1.56 billion, exceeding the expected $1.47 billion. Adjusted earnings per share increased by 12% year-on-year to $10.36, surpassing the Wall Street average expectation of $9.93.

Bullish on Energy Transition and AI Data Center Investments

Larry Fink stated during a conference call, "We are incredibly excited about the growth opportunities for clients and shareholders in 2024 and beyond." He also mentioned that he sees tremendous potential in energy transition and investments in artificial intelligence data centers. He said, "With more and more clients using infrastructure debt, we are very optimistic about this area."

It is worth noting that two weeks ago, BlackRock announced the acquisition of private market data provider Preqin for nearly USD 3.2 billion. Currently, the company is continuing to expand into alternative assets and technology fields. Analysts believe that this acquisition, following BlackRock's USD 12.5 billion acquisition of Global Infrastructure Partners earlier this year, is a bet on alternative assets that will position the company at the core of global infrastructure project investments.

BlackRock expects to complete two acquisitions in the second half of this year, strengthening its position in infrastructure investments and the private market, both of which are key growth areas.

In response to this, Kyle Sanders, Senior Equity Research Analyst at Edward Jones, said:

"The private market is growing... but more importantly, the fees you can charge on private assets are much higher than iShares ETFs. They want to get into high-profit, high-fee products, and alternative assets will be the preferred choice."

Although BlackRock's long-term trading P/E ratio is much higher than that of its traditional asset management peers, its stock performance has been relatively lagging. As of Monday's trading session, BlackRock's stock price rose by 0.54% to USD 832.70. The company's stock price has risen by about 4% this year, lagging behind the S&P 500 index's 18% increase during the same period. Cathy Seifert, Vice President of CFRA Research, maintains a "buy" recommendation on BlackRock, stating that the company's lackluster stock performance on Monday may be due to investors expecting higher revenue growth from BlackRock given its high valuation.