Updated Version 2 - BlackRock profits surge as robust market performance drives management fee growth

The full text contains added details

Reuters, October 14 - BlackRock (BLK.N) reported a sharp increase in third-quarter profits on Wednesday, as the world's largest asset manager earned higher management fee income by overseeing client funds.

The company's shares rose nearly 4% in pre-market trading.

In the three months ended September 30, BlackRock's profit rose to $1.66 billion, or $10.57 per share, compared with $1.32 billion, or $8.43 per share, in the same period last year.

Assets under management—a key metric that largely determines the company's profitability—rose from $13.46 trillion a year earlier to $15.49 trillion.

This growth was mainly driven by two factors: first, BlackRock's flagship iShares exchange-traded funds (ETFs) attracted $134.5 billion in new inflows; second, strong stock market performance pushed portfolio valuations higher.

CEO Larry Fink said in a statement, “Market fundamentals are strong and well-supported, and new technologies are driving improved margins and enhanced earnings momentum.”

Fueled by the rise of AI-related stocks, the benchmark S&P 500 Index traded near historic highs and continued its steady upward momentum this quarter, with investors showing continued willingness to allocate funds to asset managers like BlackRock.

Despite market resilience, surging bond yields and market expectations that the Federal Reserve's recent rate hikes signal the beginning of a tightening cycle have raised doubts about how long the rally can last.

If yields remain elevated for an extended period, it could put pressure on the market, as investors may move funds to safer assets to lock in better risk-adjusted returns.

In the latest quarter, BlackRock’s bond products saw net inflows of $78.2 billion, indicating robust investor demand despite the recent heavy sell-off of US Treasuries.

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Private markets accelerate

In recent years, BlackRock has accelerated its push into the private credit market. Fees in this asset class are typically higher than the company’s main profit driver—its ETF product line, which depends on hefty inflows to boost returns.

The company has made clear plans to achieve more than $35 billion in revenue by the end of this decade, with over 30% coming from private markets and technology-related areas.

The private credit sector is facing scrutiny from investors, who worry about lenders' exposures to software companies—which are seen as particularly vulnerable to AI-driven disruption—as well as concerns over opaque valuations in the private markets.

These worries have led to a surge in investor redemption requests over the past few quarters. However, the backlog appears to be easing, as most large private credit fund managers have reported slower growth in redemption requests during Q3.

Redemption requests for BlackRock’s HPS Corporate Loan Fund dropped to about 11.5% of fund shares in the most recent quarter, down from 13.3% in Q2.

While BlackRock does not disclose revenues from its private markets business separately, net inflows for the category reached $15.31 billion for the quarter.

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