BlackRock, Inc. (BLK): Fundamentals Strong But Uncertain Global Outlook A Problem

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BlackRock, Inc. (NYSE:BLK) is a forerunner in investment & risk management and advisory services for institutional and retail clients all over the world. The company adopts mostly passive strategies for assets under management.

BlackRock provides investors with a nice dividend yield, and despite industry headwinds, the firm has consistently raised its payout. Over the several months, the firm has mostly recieved positive feedback from analysts. However, the global uncertain scenario makes the future of the company appear a bit uncertain.

BlackRock, Inc. (BLK)

Encouraging Financials

The world’s largest money manager reported a 24% increase in fourth quarter profits amid stronger than expected performance of exchange-traded funds and investment related to bonds. Blackrock reported $690 million or $3.96 per share in the fourth quarter profits on an unadjusted basis. Earnings were better than analysts’ estimates of $3.73 per share.

The company reported net inflows of $31.2 billion in equity, $12.4 in fixed income, and $4.1 billion in multi-asset class product. By the end of the fourth quarter, BlackRock had $3.792 trillion in assets under management, up 7.94% from $3.513 trillion in the same period a year ago.

Legg Mason, Inc. (NYSE:LM) posted its biggest quarterly loss since 2008 for the three months ended Dec. 31. The company reported a loss of $453.9 million, or $3.45 a share, mainly due to redemptions and declining assets forced Legg Mason to write down assets tied to the 2005 takeover of Citigroup asset-management business and to the firm’s Permal hedge-fund unit.

Charles Schwab Corp (NYSE:SCHW) fourth quarter profit increased over last year, reflecting improved revenues and growth in new brokerage accounts. However, the results were adversely affected by lower trading revenues. Brokerage and investment manager posted net income of $189 million or $0.15 per share compared to $163 million or $0.13 per share in the prior-year quarter.

A Good move to Outperform Rivals

Recently, BlackRock announced to cut fees on six iShares funds and introduce four new low-cost funds. Though the cut in fees could hamper the BlackRock’s annual revenue by $35 million to $40 million, but the growth from new ETFs could overtake the losses.

BlackRock cut fees in October for six ETFs and brought a new low-fee exchange-traded fund to compete with Fidelity Investments, Vanguard Group and Charles Schwab, The competitors had been rapidly gaining market share in the ETF world. IShares, the ETF BlackRock purchased from Barclays in 2009, remains the biggest ETF player in the space. Ishares attracted $35.7 billion in new customer funds during the fourth quarter alone.

In BlackRock’s first significant purchase for the firm’s alternative investors unit, set up in 2010: BlackRock announced plans to acquire Swiss Re’s private equity fund. The deal will give BlackRock access to large European investors.

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