|
|
 | | | |
- close
- close
- close
- close
Suggest other news sources for this topic
WIKI ANALYSIS
BlackRock (NYSE:BLK), Inc. is the world's largest publicly traded investment management and financial service firm.[1] 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".[2] Blackrock does not engage in proprietary trading since it may represent a potential conflict of interest with its clients.[3] In 2010, BlackRock earned a total of $2.1 billion in net income from its total revenues of $8.6 billion.[4]
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.
Company Overview
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.
Business and Financial Metrics
In 2010, BlackRock earned a total of $2.1 billion in net income from its total revenues of $8.6 billion.[4] 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.[5]
Business Segments
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.
Investment advisory and administration fees (90.9% of 2010 Revenues)[6]
BlackRock's Investment advisory and administration earns fees under four sub categories: i) Fixed Income, ii) Equities, iii) Cash Management, and iv) Alternative Investments.
BlackRock Solutions (5.3% of 2010 Revenues)[6]
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.[7]
Distribution Fees (1.3% of 2010 Revenues)[6]
Other Revenue (2.4% of 2010 Revenues)[6]
Other revenue include property management fees, net interest earned on loans, sales commission, and fund accounting services.
Trends and Forces
BlackRock must successfully integrate its operations with Barclays Global 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.[8] 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." [9] 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.
BlackRock's source of revenues have slowly shifted away from fixed income assets toward equities
Roughly half of BlackRock's investment advisory fees were due to equities, and only 20.3% came from fixed income.[10] This signals a change in their sources of revenue, as historically only 33.6% of investment advisory fees came from equities.[11] 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.
Competition
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.[12]
- State Street (STT) is a large investment advisory firm based in Boston, Massachusetts.[13][14]
- Fidelity Investments is the largest mutual fund company in the United States.[15]
References
- ↑ BLK 10-K 2009 Item 1 Pg. 1
- ↑ BLK 10-K 2008 Item 6 Pg. 30
- ↑ BLK 10-K 2009 Consolidated Statements of Income Pg. F-5
- ↑ 4.0 4.1 BLK 10-K 2010 Item 6 Pg. 40
- ↑ BLK 10-K 2009 Item 6 Pg. 38
- ↑ 6.0 6.1 6.2 6.3 BLK 10-K Item 7 Pg. 60
- ↑ BLK 10-K 2008 Item 1 Pg. 2
- ↑
- ↑ Caterpillar Lifts Dow to a Gain. Donna Yesalavich. The Wall Street Journal.
- ↑ BLK 10-K 2008 Item 7 Pg. 44
- ↑ BLK 10-K 2006 Item 7 Pg. 32
- ↑ Pensions & Investments Online. Top 150 managers of international/global assets.
- ↑ STT 10-K 2009 Item 1 Pg. 1
- ↑ STT 10-K 2009 Item 6 Pg. 31
- ↑ Fidelity Investments’ 2009 profit rises 5 percent as fund performance improves. The Associated Press.
| |||||||
