BlackRock (NYSE:BLK), Inc. is the world's largest publicly traded investment management and financial service firm. BlackRock's main source of revenue comes from its investment advisory fees generated by managing financial asset types including fixed income, equity, real estate, and alternative investments as well as fees generated from "BlackRock Solutions". Blackrock does not engage in proprietary trading since it may represent a potential conflict of interest with its clients. In 2010, BlackRock earned a total of $2.1 billion in net income from its total revenues of $8.6 billion.
BlackRock's financial performance depends heavily upon the stock and bond markets. It also depends on the risk appetite of its clients, as higher risk investments generally earn much more advisory and performance fees for BlackRock than less risky ones. Also, how successfully BlackRock is able to integrate its operations with Barclays Global Investors, which it acquired in the past may play a big role in its future success.
Headquartered in New York, BlackRock manages assets for both large institutional clients and private individual investors internationally, although the majority of its business is conducted in North America and Europe. BlackRock offers a breadth of financial investment products, including fixed income, equities, cash management, and alternative investments. BlackRock's revenue comes primarily from advisory and administration fees for managing and advising assets for its clients.
In 2010, BlackRock earned a total of $2.1 billion in net income from its total revenues of $8.6 billion. This was a significant increase from 2009, when BlackRock had total revenues of $4.70 billion, operating income of $1.28 billion, and net income of $875 million.
BlackRock operates the company as a single business. However, its revenues can be broken down into its revenue sources: Investment advisory and administration fees, BlackRock Solutions, Distribution Fees, and Other Revenue.
Under the BlackRock Solutions name, the company has developed an operating platform called Alladin to support its investment and risk management operations. BlackRock offers Alladin, along with other services, to institutional investors.
After BlackRock acquired Barclays Global Investors, it began merging and integrating its operations. Early signs have shown significant gains from the acquisition and a relatively smooth transition, as BlackRock's earnings increased five fold compared to the previous year. However, things have not gone as smoothly as many expected, as BlackRock's CEO Laurence Fink admitted that BlackRock "experienced some significant merger-related outflows in the quarter."  Whether BlackRock can successfully continue to integrate Barcalys Global Investors operations into its own without losing investors will make an impact of its future earnings.
Roughly half of BlackRock's investment advisory fees were due to equities, and only 20.3% came from fixed income. This signals a change in their sources of revenue, as historically only 33.6% of investment advisory fees came from equities. Also, in the past assets allocated to equities as a percentage of total AUM has consistently been less than fixed income, suggesting a higher margin for equities since their earnings are higher despite less total AUM. Therefore, the gradual shift away from fixed income and into equities may help BlackRock earn high investment advisory fees. However, because BlackRock earns revenues based on the total AUM, large fluctuations in the stock market may impact their earnings. For instance, during stock market downturns, the total value of equities will decline, thereby reducing BlackRock's earnings.
BlackRock faces competition from other companies that offer investment management services to both retail and institutional clients, including Barclays Global Investors, State Street (STT), and Fidelity Investments (privately held). BlackRock was ranked fourth worldwide in terms of global AUM in 2008, behind Barclays Global Investors, State Street, and Fidelity Investments.