With $4tn of assets under management, BlackRock is the world’s largest asset manager. Unlike the biggest banks, it has a simple business model and balance sheet: manage the money of institutional and retail investors, and take a fee for it

January 17, 2014 Leave a comment

January 16, 2014 6:47 pm

BlackRock: being simple is being good

These results will keep the shine on Larry Fink’s wise man halo

In a world of JPMorgan “funding valuation adjustments”, our nation turns its glazed-over eyes to you, BlackRock.

With $4tn of assets under management, BlackRock is the world’s largest asset manager. Unlike the biggest banks, it has a simple business model and balance sheet: manage the money of institutional and retail investors, and take a fee for it. With a majority of client assets in equity, it is unsurprising that its fourth-quarter earnings beat estimates announced on Thursday and that its shares are up 50 per cent since the beginning of 2013.But just as important as this rising tide are the bets that BlackRock has made on various asset classes. In the fourth quarter, BlackRock’s AUM grew more than $40bn. However, 90 per cent of that growth came outside its core institutional business through its iShares ETF segment, that came in the 2009 Barclays Global Investors acquisition, as well as its separate retail segment. Organic growth in retail assets jumped a tenth in 2013, three times what it achieved the year before. BlackRock is increasingly focused on retirement investments. It invented LifePath, the first target date product. It now has more than $500bn in defined-contribution assets.

The risk is that the profitability of these asset classes fails to grow along with volumes. Revenue growth of 9 per cent was less than asset growth of 14 per cent in 2013, and GAAP operating margin barely rose. Still, helped by share buybacks, earnings per share were up a fifth for the year, and BlackRock has boosted its dividend by 15 per cent.

These results will keep the shine on the wise man halo that hovers over boss Larry Fink’s head (never mind BlackRock’s recent settlement with regulators over access to the recommendations of sellside analysts). Keeping it simple has its benefits.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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