UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|
x |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2015
or
|
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File No. 001-33099
BlackRock, Inc.
(Exact name of registrant as specified in its charter)
|
Delaware |
32-0174431 |
|
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
55 East 52nd Street, New York, NY 10055
(Address of Principal Executive Offices)
(212) 810-5300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Name of each exchange on which registered |
|
Common Stock, $.01 par value 1.250% Notes due 2025
|
New York Stock Exchange New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known, seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)
|
Large accelerated filer |
x |
Accelerated filer |
o |
|
Non-accelerated filer |
o (Do not check if a smaller reporting company) |
Smaller reporting company |
o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate market value of the voting common stock and nonvoting common stock equivalents held by nonaffiliates of the registrant as of June 30, 2015 was approximately $56.3 billion.
As of January 31, 2016, there were 163,941,835 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference herein:
Portions of the definitive Proxy Statement of BlackRock, Inc. to be filed pursuant to Regulation 14A of the general rules and regulations under the Securities Exchange Act of 1934, as amended, for the 2016 annual meeting of stockholders to be held on May 25, 2016 (“Proxy Statement”) are incorporated by reference into Part III of this Form 10-K.
Table of Contents
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PART I |
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Item 1 |
1 |
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Item 1A |
18 |
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Item 1B |
26 |
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Item 2 |
26 |
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Item 3 |
26 |
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Item 4 |
27 |
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PART II |
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Item 5 |
27 |
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Item 6 |
28 |
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Item 7 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
30 |
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Item 7A |
54 |
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Item 8 |
55 |
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Item 9 |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
55 |
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Item 9A |
55 |
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Item 9B |
58 |
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PART III |
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Item 10 |
58 |
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Item 11 |
58 |
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Item 12 |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
58 |
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Item 13 |
Certain Relationships and Related Transactions, and Director Independence |
58 |
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Item 14 |
58 |
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PART IV |
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Item 15 |
58 |
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61 |
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Overview
BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, “BlackRock” or the “Company”) is a leading publicly traded investment management firm with $4.645 trillion of assets under management (“AUM”) at December 31, 2015. With employees in more than 30 countries who serve clients in over 100 countries across the globe, BlackRock provides a broad range of investment and risk management services to institutional and retail clients worldwide.
Our diverse platform of active (alpha) and index (beta) investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Our product offerings include single- and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares® exchange-traded funds (“ETFs”), separate accounts, collective investment funds and other pooled investment vehicles. We also offer our BlackRock Solutions® (“BRS”) investment and risk management technology platform, Aladdin®, risk analytics and advisory services and solutions to a broad base of institutional investors. The Company is highly regulated and serves its clients as a fiduciary. We do not engage in proprietary trading activities that could conflict with the interests of our clients.
BlackRock serves a diverse mix of institutional and retail clients across the globe. Clients include tax-exempt institutions, such as defined benefit and defined contribution pension plans, charities, foundations and endowments; official institutions, such as central banks, sovereign wealth funds, supranationals and other government entities; taxable institutions, including insurance companies, financial institutions, corporations and third-party fund sponsors, and retail investors.
BlackRock maintains a significant global sales and marketing presence that is focused on establishing and maintaining retail and institutional investment management relationships by marketing its services to investors directly and through financial professionals and pension consultants, and establishing third-party distribution relationships.
BlackRock is an independent, publicly traded company, with no single majority shareholder and over two-thirds of its Board of Directors consisting of independent directors. At December 31, 2015, The PNC Financial Services Group, Inc. (“PNC”) held 21.1% of BlackRock’s voting common stock and 22.2% of BlackRock’s capital stock, which includes outstanding common stock and nonvoting preferred stock.
Management seeks to achieve attractive returns for stockholders over time by, among other things, capitalizing on the following factors:
|
|
• |
the Company’s focus on strong performance providing alpha for active products and limited or no tracking error for index products; |
|
|
• |
the Company’s global reach and commitment to best practices around the world, with approximately 48% of employees outside the United States supporting local investment capabilities and serving clients, and approximately 42% of total AUM managed for clients domiciled outside the United States; |
|
|
• |
the Company’s diversified active and index product offerings, which enhance its ability to offer a variety of traditional and alternative investment products across the risk spectrum and to tailor single- and multi-asset investment solutions to address specific client needs; |
|
|
• |
the Company’s differentiated client relationships and fiduciary focus, which enable effective positioning toward changing client needs and macro trends including the secular shift to passive investing and ETFs, a focus on income and retirement, and barbelling of risk using index and active products, including alternatives; and |
|
|
• |
the Company’s longstanding commitment to risk management and the continued development of, and increased interest in, BRS products and services. |
BlackRock operates in a global marketplace characterized by a high degree of market volatility and economic uncertainty, factors that can significantly affect earnings and stockholder returns in any given period.
The Company’s ability to increase revenue, earnings and stockholder value over time is predicated on its ability to generate new business, including business in BRS products and services. New business efforts depend on BlackRock’s ability to achieve clients’ investment objectives in a manner consistent with their risk preferences and to deliver excellent client service. All of these efforts require the commitment and contributions of BlackRock employees. Accordingly, the ability to attract, develop and retain talented professionals is critical to the Company’s long-term success.
1
|
(in millions, except per share data) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
5-Year CAGR(4) |
|
||||||
|
Total revenue |
|
$ |
11,401 |
|
|
$ |
11,081 |
|
|
$ |
10,180 |
|
|
$ |
9,337 |
|
|
$ |
9,081 |
|
|
|
6 |
% |
|
Operating income |
|
$ |
4,664 |
|
|
$ |
4,474 |
|
|
$ |
3,857 |
|
|
$ |
3,524 |
|
|
$ |
3,249 |
|
|
|
9 |
% |
|
Operating margin |
|
|
40.9 |
% |
|
|
40.4 |
% |
|
|
37.9 |
% |
|
|
37.7 |
% |
|
|
35.8 |
% |
|
|
3 |
% |
|
Nonoperating income (expense)(1) |
|
$ |
(69 |
) |
|
$ |
(49 |
) |
|
$ |
97 |
|
|
$ |
(36 |
) |
|
$ |
(116 |
) |
|
N/A |
|
|
|
Net income attributable to BlackRock, Inc. |
|
$ |
3,345 |
|
|
$ |
3,294 |
|
|
$ |
2,932 |
|
|
$ |
2,458 |
|
|
$ |
2,337 |
|
|
|
10 |
% |
|
Diluted earnings per common share |
|
$ |
19.79 |
|
|
$ |
19.25 |
|
|
$ |
16.87 |
|
|
$ |
13.79 |
|
|
$ |
12.37 |
|
|
|
13 |
% |
|
(in millions, except per share data) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
5-Year CAGR(4) |
|
||||||
|
As adjusted(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
4,695 |
|
|
$ |
4,563 |
|
|
$ |
4,024 |
|
|
$ |
3,574 |
|
|
$ |
3,392 |
|
|
|
8 |
% |
|
Operating margin(2) |
|
|
42.9 |
% |
|
|
42.9 |
% |
|
|
41.4 |
% |
|
|
40.4 |
% |
|
|
39.7 |
% |
|
|
2 |
% |
|
Nonoperating income (expense)(1) |
|
$ |
(70 |
) |
|
$ |
(56 |
) |
|
$ |
7 |
|
|
$ |
(42 |
) |
|
$ |
(113 |
) |
|
N/A |
|
|
|
Net income attributable to BlackRock, Inc.(3) |
|
$ |
3,313 |
|
|
$ |
3,310 |
|
|
$ |
2,882 |
|
|
$ |
2,438 |
|
|
$ |
2,239 |
|
|
|
9 |
% |
|
Diluted earnings per common share(3) |
|
$ |
19.60 |
|
|
$ |
19.34 |
|
|
$ |
16.58 |
|
|
$ |
13.68 |
|
|
$ |
11.85 |
|
|
|
12 |
% |
|
N/A |
— not applicable |
|
(1) |
Net of net income (loss) attributable to noncontrolling interests (“NCI”) (redeemable and nonredeemable). |
|
(2) |
BlackRock reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”); however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. |
See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures, for further information on non-GAAP financial measures and for as adjusted items for 2015, 2014, and 2013. In 2012, operating income, as adjusted, included an adjustment related to estimated lease exit costs initially recorded in 2011 and the contribution to certain of the Company’s bank-managed short-term investment funds (“STIFs”). In 2011, operating income, as adjusted, included U.K. lease exit costs which represent costs to exit two locations in London and restructuring charges. In 2012 and 2011, the portion of compensation expense associated with certain long-term incentive plans (“LTIP”) funded, or to be funded, through share distributions to participants of BlackRock stock held by PNC has been excluded because it ultimately did not impact BlackRock’s book value. Compensation expense associated with appreciation (depreciation) on investments related to certain BlackRock deferred compensation plans has been excluded as returns on investments set aside for these plans, which substantially offset this expense, are reported in nonoperating income (expense).
|
(3) |
Net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted exclude the after-tax impact of the items listed above and also include the effect on deferred income tax expense resulting from certain income tax matters. |
|
(4) |
Percentage represents compounded annual growth rate (“CAGR”) over a five-year period (2010-2015). |
Assets Under Management
The Company’s AUM by product type for the years 2011 through 2015 is presented below.
|
|
|
December 31, |
|
|||||||||||||||||||||
|
(in millions) |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
5-Year CAGR(1) |
|
||||||
|
Equity |
|
$ |
2,423,772 |
|
|
$ |
2,451,111 |
|
|
$ |
2,317,695 |
|
|
$ |
1,845,501 |
|
|
$ |
1,560,106 |
|
|
|
7 |
% |
|
Fixed income |
|
|
1,422,368 |
|
|
|
1,393,653 |
|
|
|
1,242,186 |
|
|
|
1,259,322 |
|
|
|
1,247,722 |
|
|
|
5 |
% |
|
Multi-asset |
|
|
376,336 |
|
|
|
377,837 |
|
|
|
341,214 |
|
|
|
267,748 |
|
|
|
225,170 |
|
|
|
15 |
% |
|
Alternatives |
|
|
112,839 |
|
|
|
111,240 |
|
|
|
111,114 |
|
|
|
109,795 |
|
|
|
104,948 |
|
|
|
1 |
% |
|
Long-term |
|
|
4,335,315 |
|
|
|
4,333,841 |
|
|
|
4,012,209 |
|
|
|
3,482,366 |
|
|
|
3,137,946 |
|
|
|
7 |
% |
|
Cash management |
|
|
299,884 |
|
|
|
296,353 |
|
|
|
275,554 |
|
|
|
263,743 |
|
|
|
254,665 |
|
|
|
1 |
% |
|
Advisory |
|
|
10,213 |
|
|
|
21,701 |
|
|
|
36,325 |
|
|
|
45,479 |
|
|
|
120,070 |
|
|
|
(42 |
%) |
|
Total |
|
$ |
4,645,412 |
|
|
$ |
4,651,895 |
|
|
$ |
4,324,088 |
|
|
$ |
3,791,588 |
|
|
$ |
3,512,681 |
|
|
|
5 |
% |
|
(1) |
Percentage represents CAGR over a five-year period (2010-2015). |
Component changes in AUM by product type for the five years ended December 31, 2015 are presented below.
|
(in millions) |
|
December 31, 2010 |
|
|
Net Inflows (Outflows) |
|
|
Adjustment/ Acquisitions(1) |
|
|
Market Change |
|
|
FX Impact |
|
|
December 31, 2015 |
|
|
5-Year CAGR(2) |
|
|||||||
|
Equity |
|
$ |
1,694,467 |
|
|
$ |
252,591 |
|
|
$ |
(16,112 |
) |
|
$ |
605,577 |
|
|
$ |
(112,751 |
) |
|
$ |
2,423,772 |
|
|
|
7 |
% |
|
Fixed income |
|
|
1,141,324 |
|
|
|
122,375 |
|
|
|
2,968 |
|
|
|
230,218 |
|
|
|
(74,517 |
) |
|
|
1,422,368 |
|
|
|
5 |
% |
|
Multi-asset |
|
|
185,587 |
|
|
|
146,838 |
|
|
|
6,442 |
|
|
|
62,110 |
|
|
|
(24,641 |
) |
|
|
376,336 |
|
|
|
15 |
% |
|
Alternatives |
|
|
109,738 |
|
|
|
(6,541 |
) |
|
|
21,345 |
|
|
|
(6,310 |
) |
|
|
(5,393 |
) |
|
|
112,839 |
|
|
|
1 |
% |
|
Long-term |
|
|
3,131,116 |
|
|
|
515,263 |
|
|
|
14,643 |
|
|
|
891,595 |
|
|
|
(217,302 |
) |
|
|
4,335,315 |
|
|
|
7 |
% |
|
Cash management |
|
|
279,175 |
|
|
|
25,411 |
|
|
|
— |
|
|
|
3,487 |
|
|
|
(8,189 |
) |
|
|
299,884 |
|
|
|
1 |
% |
|
Advisory |
|
|
150,677 |
|
|
|
(134,686 |
) |
|
|
— |
|
|
|
1,676 |
|
|
|
(7,454 |
) |
|
|
10,213 |
|
|
|
(42 |
%) |
|
Total |
|
$ |
3,560,968 |
|
|
$ |
405,988 |
|
|
$ |
14,643 |
|
|
$ |
896,758 |
|
|
$ |
(232,945 |
) |
|
$ |
4,645,412 |
|
|
|
5 |
% |
2
|
client investment manager concentration limits and the scientific active equity performance, outflows were expected to occur for a period of time subsequent to the close of the transaction. |
|
(2) |
Percentage represents CAGR over a five-year period (2010-2015). |
AUM represents the broad range of financial assets we manage for clients on a discretionary basis pursuant to investment management agreements that are expected to continue for at least 12 months. In general, reported AUM reflects the valuation methodology that corresponds to the basis used for billing (for example, net asset value). Reported AUM does not include assets for which we provide risk management or other forms of nondiscretionary advice, or assets that we are retained to manage on a short-term, temporary basis.
Investment management fees are typically expressed as a percentage of AUM. We also earn performance fees on certain portfolios relative to an agreed-upon benchmark or return hurdle. On some products, we also may earn securities lending revenue. In addition, BlackRock offers its proprietary Aladdin investment system as well as risk management, outsourcing and advisory services, to institutional investors under the BRS name. Revenue for these services may be based on several criteria including value of positions, number of users, accomplishment of specific deliverables or other objectives.
At December 31, 2015, total AUM was $4.645 trillion, representing a CAGR of 5% over the last five years. AUM growth during the period was achieved through the combination of net market valuation gains, net inflows and acquisitions, including Claymore and SRPEP, which collectively added $13.7 billion of AUM in 2012, Credit Suisse and MGPA, which collectively added $26.9 billion of AUM in 2013 and BKCA, Infraestructura Institucional and FutureAdvisor, which collectively added $2.2 billion of AUM in 2015. Our AUM mix encompasses a broadly diversified product range, as described below.
The Company considers the categorization of its AUM by client type, product type, investment style and client region useful to understanding its business. The following discussion of the Company’s AUM will be organized as follows:
|
Client Type |
Product Type |
Client Region |
|
¨ Retail |
¨ Equity |
¨ Americas |
|
¨ iShares |
¨ Fixed Income |
¨ Europe, the Middle East and Africa (“EMEA”) |
|
¨ Institutional |
¨ Multi-asset |
¨ Asia-Pacific |
|
|
¨ Alternatives |
|
|
|
¨ Cash Management |
|
Client Type
Our organizational structure was designed to ensure that strong investment performance is our highest priority, and that we best align with our clients’ needs to capitalize on broader industry trends. Furthermore, our structure facilitates strong teamwork globally across both functions and regions in order to enhance our ability to leverage best practices to serve our clients and continue to develop our talent. Specifically, our investments functions are split into distinct strategies: Active Equity and Fixed Income, Beta, Multi-Asset, Alternatives and Trading/Liquidity.
We serve a diverse mix of institutional and retail clients across the globe. Clients include tax-exempt institutions, such as defined benefit and defined contribution pension plans, charities, foundations and endowments; official institutions, such as central banks, sovereign wealth funds, supranationals and other government entities; taxable institutions, including insurance companies, financial institutions, corporations and third-party fund sponsors, and retail investors. iShares is presented as a separate client type below, with investments in iShares by institutions and retail clients excluded from figures and discussions in their respective sections below.
AUM by investment style and client type at December 31, 2015 is presented below.
|
(in millions) |
|
Retail |
|
|
iShares |
|
|
Institutional |
|
|
Total |
|
||||
|
Active |
|
$ |
499,820 |
|
|
$ |
— |
|
|
$ |
962,852 |
|
|
$ |
1,462,672 |
|
|
Non-ETF Index |
|
|
41,305 |
|
|
|
— |
|
|
|
1,738,777 |
|
|
|
1,780,082 |
|
|
iShares |
|
|
— |
|
|
|
1,092,561 |
|
|
|
— |
|
|
|
1,092,561 |
|
|
Long-term |
|
|
541,125 |
|
|
|
1,092,561 |
|
|
|
2,701,629 |
|
|
|
4,335,315 |
|
|
Cash management |
|
|
27,406 |
|
|
|
— |
|
|
|
272,478 |
|
|
|
299,884 |
|
|
Advisory |
|
|
— |
|
|
|
— |
|
|
|
10,213 |
|
|
|
10,213 |
|
|
Total AUM |
|
$ |
568,531 |
|
|
$ |
1,092,561 |
|
|
$ |
2,984,320 |
|
|
$ |
4,645,412 |
|
Retail
BlackRock serves retail investors globally through a wide array of vehicles across the active and passive spectrum, including separate accounts, open-end and closed-end funds, unit trusts and private investment funds. Retail investors are served principally through intermediaries, including broker-dealers, banks, trust companies, insurance companies and independent financial advisors. Clients invest primarily in mutual funds, which totaled $446.4 billion, or 83%, of retail long-term AUM at year-end, with the remainder invested in private investment funds and separately managed accounts (“SMAs”). The majority (92%) of long-term retail AUM is invested in active products, although this is impacted by iShares being shown separately. Retail represented 13% of long-term AUM at December 31, 2015 and 35% of long-term base fees for 2015.
3
Component changes in retail long-term AUM for 2015 are presented below.
|
(in millions) |
|
December 31, 2014 |
|
|
Net Inflows |
|
|
Acquisitions(1) |
|
|
Market Change |
|
|
FX Impact |
|
|
December 31, 2015 |
|
||||||
|
Equity |
|
$ |
200,445 |
|
|
$ |
8,543 |
|
|
$ |
— |
|
|
$ |
(10,040 |
) |
|
$ |
(5,193 |
) |
|
$ |
193,755 |
|
|
Fixed income |
|
|
189,820 |
|
|
|
31,114 |
|
|
|
— |
|
|
|
(5,691 |
) |
|
|
(2,590 |
) |
|
|
212,653 |
|
|
Multi-asset class |
|
|
125,341 |
|
|
|
(1,307 |
) |
|
|
366 |
|
|
|
(8,108 |
) |
|
|
(985 |
) |
|
|
115,307 |
|
|
Alternatives |
|
|
18,723 |
|
|
|
162 |
|
|
|
1,293 |
|
|
|
(177 |
) |
|
|
(591 |
) |
|
|
19,410 |
|
|
Total Retail |
|
$ |
534,329 |
|
|
$ |
38,512 |
|
|
$ |
1,659 |
|
|
$ |
(24,016 |
) |
|
$ |
(9,359 |
) |
|
$ |
541,125 |
|
|
(1) |
Amounts represent $1.3 billion of AUM acquired in the BKCA acquisition in March 2015 and $366 million of AUM acquired in the FutureAdvisor acquisition in October 2015. The FutureAdvisor acquisition amount does not include AUM that was held in iShares holdings. |
The retail client base is diversified geographically, with 70% of long-term AUM managed for investors based in the Americas, 24% in EMEA and 6% in Asia-Pacific at year-end 2015.
|
|
• |
U.S. retail long-term net inflows of $18.7 billion, or 5% organic growth, were led by fixed income net inflows of $20.9 billion. Fixed income net inflows were diversified across exposures and products, with strong flows into our unconstrained, high yield and core bond offerings. Equity net inflows of $1.3 billion were driven by flows into our index mutual funds, and we continued to make progress on the reinvigoration and globalization of our fundamental active equity business. Multi-asset class net outflows of $2.5 billion were primarily due to a large single-client transition out of mutual funds into a series of iShares across asset classes. |
|
|
• |
International retail long-term net inflows of $19.8 billion, representing 12% organic growth, were positive across major regions and diversified across asset classes. Fixed income products generated net inflows of $10.3 billion, led by short duration and unconstrained strategies as investors looked to manage duration and generate yield in their portfolios. Multi-asset class net inflows of $1.2 billion were driven by flows into managed volatility strategies and the cross-border version of our Multi-Asset Income fund. Equity net inflows of $7.2 billion reflected strong flows into international equities. Alternatives net inflows totaled $1.2 billion, and we remain committed to broadening the distribution of alternatives funds to bring institutional quality alternatives to retail investors. |
iShares
iShares is the leading ETF provider in the world, with $1.1 trillion of AUM at December 31, 2015 and was the top asset gatherer globally in 20151 with $129.9 billion of net inflows for an organic growth rate of 13%. Equity net inflows of $78.4 billion were driven by flows into the Core Series and into funds with broad developed market equity exposures, partially offset by outflows from emerging market products. Record fixed income net inflows of $50.3 billion were diversified across exposures and product lines, led by flows into core, corporate and high yield bond funds. iShares multi-asset class and alternatives funds contributed a combined $1.2 billion of net inflows, primarily into core allocation funds. iShares represented 25% of long-term AUM at December 31, 2015 and 35% of long-term base fees for 2015.
Component changes in iShares AUM for 2015 are presented below.
|
(in millions) |
|
December 31, 2014 |
|
|
Net Inflows |
|
|
Market Change |
|
|
FX Impact |
|
|
December 31, 2015 |
|
|||||
|
Equity |
|
$ |
790,067 |
|
|
$ |
78,408 |
|
|
$ |
(32,349 |
) |
|
$ |
(12,970 |
) |
|
$ |
823,156 |
|
|
Fixed income |
|
|
217,671 |
|
|
|
50,309 |
|
|
|
(7,508 |
) |
|
|
(6,282 |
) |
|
|
254,190 |
|
|
Multi-asset class |
|
|
1,773 |
|
|
|
1,074 |
|
|
|
(90 |
) |
|
|
(27 |
) |
|
|
2,730 |
|
|
Alternatives(1) |
|
|
14,717 |
|
|
|
61 |
|
|
|
(2,160 |
) |
|
|
(133 |
) |
|
|
12,485 |
|
|
Total iShares |
|
$ |
1,024,228 |
|
|
$ |
129,852 |
|
|
$ |
(42,107 |
) |
|
$ |
(19,412 |
) |
|
$ |
1,092,561 |
|
|
(1) |
Amounts include commodity iShares. |
Our broad iShares product range offers investors a precise, transparent and efficient way to tap market returns and gain access to a full range of asset classes and global markets that have been difficult for many investors to access, as well as the liquidity required to make adjustments to their exposures quickly and cost-efficiently.
|
|
• |
U.S. iShares AUM ended 2015 at $811.4 billion with $97.2 billion of net inflows driven by strong demand for the Core Series and broad developed market equities as well as a diverse range of fixed income products.2 In 2015, we saw increased investor focus on risk-aware, “smart beta” products, with our minimum volatility funds raising $8.3 billion. |
|
|
• |
International iShares AUM ended 2015 at $281.1 billion with net inflows of $32.7 billion led by fixed income net inflows of $19.2 billion, primarily into yield-focused categories including high yield and investment grade corporate debt.2 Our international Core Series ranges in Canada and Europe demonstrated solid results in their second year, raising a combined $14.1 billion in net inflows as we continue to expand our international presence among buy-and-hold investors. |
Institutional
BlackRock’s institutional AUM is well diversified by both product and region, and we serve institutional investors on six continents in sub-categories including: pensions, endowments and foundations, official institutions, and financial institutions.
|
1 |
Source: BlackRock; Bloomberg |
|
2 |
Regional iShares amounts based on jurisdiction of product, not underlying client |
4
Component changes in Institutional long-term AUM for 2015 are presented below.
|
(in millions) |
|
December 31, 2014 |
|
|
Net Inflows (Outflows) |
|
|
Acquisition(1) |
|
|
Market Change |
|
|
FX Impact |
|
|
December 31, 2015 |
|
||||||
|
Active: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
$ |
125,143 |
|
|
$ |
(462 |
) |
|
$ |
— |
|
|
$ |
960 |
|
|
$ |
(4,199 |
) |
|
$ |
121,442 |
|
|
Fixed income |
|
|
518,590 |
|
|
|
5,690 |
|
|
|
— |
|
|
|
(1,220 |
) |
|
|
(8,632 |
) |
|
|
514,428 |
|
|
Multi-asset class |
|
|
242,913 |
|
|
|
18,409 |
|
|
|
— |
|
|
|
1,074 |
|
|
|
(10,355 |
) |
|
|
252,041 |
|
|
Alternatives |
|
|
72,514 |
|
|
|
3,109 |
|
|
|
560 |
|
|
|
(175 |
) |
|
|
(1,067 |
) |
|
|
74,941 |
|
|
Active subtotal |
|
|
959,160 |
|
|
|
26,746 |
|
|
|
560 |
|
|
|
639 |
|
|
|
(24,253 |
) |
|
|
962,852 |
|
|
Index: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
1,335,456 |
|
|
|
(33,711 |
) |
|
|
— |
|
|
|
6,157 |
|
|
|
(22,483 |
) |
|
|
1,285,419 |
|
|
Fixed income |
|
|
467,572 |
|
|
|
(10,169 |
) |
|
|
— |
|
|
|
2,317 |
|
|
|
(18,623 |
) |
|
|
441,097 |
|
|
Multi-asset class |
|
|
7,810 |
|
|
|
(1,009 |
) |
|
|
— |
|
|
|
(289 |
) |
|
|
(254 |
) |
|
|
6,258 |
|
|
Alternatives |
|
|
5,286 |
|
|
|
1,793 |
|
|
|
— |
|
|
|
(924 |
) |
|
|
(152 |
) |
|
|
6,003 |
|
|
Index subtotal |
|
|
1,816,124 |
|
|
|
(43,096 |
) |
|
|
— |
|
|
|
7,261 |
|
|
|
(41,512 |
) |
|
|
1,738,777 |
|
|
Total Institutional |
|
$ |
2,775,284 |
|
|
$ |
(16,350 |
) |
|
$ |
560 |
|
|
$ |
7,900 |
|
|
$ |
(65,765 |
) |
|
$ |
2,701,629 |
|
|
(1) |
Amounts represent $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015. |
Institutional active AUM ended 2015 at $962.9 billion, reflecting $26.8 billion of net inflows. Institutional active represented 22% of long-term AUM and 20% of long-term base fees. Growth in AUM reflected continued strength in multi-asset class products with net inflows of $18.4 billion reflecting ongoing demand for solutions offerings and the LifePath® target-date suite. Our top-performing fixed income platform generated net inflows of $5.7 billion, diversified across exposures. Alternatives net inflows of $3.1 billion were led by inflows into infrastructure and alternatives solutions offerings. In addition, 2015 was another strong fundraising year for illiquid alternatives, and we raised over $5 billion in new commitments, which will be a source of future net inflows. Equity net outflows of $0.5 billion reflected fundamental net outflows of $2.2 billion, which were partially offset by scientific net inflows of $1.7 billion.
Institutional index AUM totaled $1.739 trillion at December 31, 2015, reflecting net outflows of $43.1 billion. Equity net outflows of $33.7 billion were primarily due to low-fee global and regional index equity outflows as clients looked to re-allocate, re-balance or meet their cash needs. Fixed income net outflows of $10.2 billion were concentrated in local currency mandates, linked to outflows from liability management strategies. Institutional index represented 40% of long-term AUM at December 31, 2015 and accounted for 10% of long-term base fees for 2015.
The Company’s institutional clients consist of the following:
|
|
• |
Pensions, Foundations and Endowments. BlackRock is among the world’s largest managers of pension plan assets with $1.847 trillion, or 68%, of long-term institutional AUM managed for defined benefit, defined contribution and other pension plans for corporations, governments and unions at December 31, 2015. The market landscape is shifting from defined benefit to defined contribution, driving strong flows in our defined contribution channel, which had $36.2 billion of long-term net inflows for the year, or 6% organic growth, driven by continued demand for our LifePath target-date suite. Defined contribution represented $630.9 billion of total pension AUM, and we remain well positioned to capitalize on the on-going evolution of the defined contribution market and demand for outcome-oriented investments. An additional $52.8 billion, or 2% of long-term institutional AUM, was managed for other tax-exempt investors, including charities, foundations and endowments. |
|
|
• |
Official Institutions. We also managed $185.0 billion, or 7%, of long-term institutional AUM for official institutions, including central banks, sovereign wealth funds, supranationals, multilateral entities and government ministries and agencies at year-end 2015. These clients often require specialized investment advice, the use of customized benchmarks and training support. |
|
|
• |
Financial and Other Institutions. BlackRock is a top independent manager of assets for insurance companies, which accounted for $237.7 billion, or 9%, of institutional long-term AUM at year-end 2015. Assets managed for other taxable institutions, including corporations, banks and third-party fund sponsors for which we provide sub-advisory services, totaled $379.4 billion, or 14%, of long-term institutional AUM at year-end. |
5
Component changes in AUM by product type and investment style for 2015 are presented below.
|
(in millions) |
|
December 31, 2014 |
|
|
Net Inflows (Outflows) |
|
|
Acquisitions(1) |
|
|
Market Change |
|
|
FX Impact |
|
|
December 31, 2015 |
|
||||||
|
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
$ |
292,802 |
|
|
$ |
4,210 |
|
|
$ |
— |
|
|
$ |
(7,738 |
) |
|
$ |
(7,955 |
) |
|
$ |
281,319 |
|
|
iShares |
|
|
790,067 |
|
|
|
78,408 |
|
|
|
— |
|
|
|
(32,349 |
) |
|
|
(12,970 |
) |
|
|
823,156 |
|
|
Non-ETF index |
|
|
1,368,242 |
|
|
|
(29,840 |
) |
|
|
— |
|
|
|
4,815 |
|
|
|
(23,920 |
) |
|
|
1,319,297 |
|
|
Equity subtotal |
|
|
2,451,111 |
|
|
|
52,778 |
|
|
|
— |
|
|
|
(35,272 |
) |
|
|
(44,845 |
) |
|
|
2,423,772 |
|
|
Fixed income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
|
701,324 |
|
|
|
35,928 |
|
|
|
— |
|
|
|
(6,907 |
) |
|
|
(10,692 |
) |
|
|
719,653 |
|
|
iShares |
|
|
217,671 |
|
|
|
50,309 |
|
|
|
— |
|
|
|
(7,508 |
) |
|
|
(6,282 |
) |
|
|
254,190 |
|
|
Non-ETF index |
|
|
474,658 |
|
|
|
(9,293 |
) |
|
|
— |
|
|
|
2,313 |
|
|
|
(19,153 |
) |
|
|
448,525 |
|
|
Fixed income subtotal |
|
|
1,393,653 |
|
|
|
76,944 |
|
|
|
— |
|
|
|
(12,102 |
) |
|
|
(36,127 |
) |
|
|
1,422,368 |
|
|
Multi-asset class |
|
|
377,837 |
|
|
|
17,167 |
|
|
|
366 |
|
|
|
(7,413 |
) |
|
|
(11,621 |
) |
|
|
376,336 |
|
|
Alternatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core |
|
|
88,006 |
|
|
|
4,080 |
|
|
|
1,853 |
|
|
|
(213 |
) |
|
|
(1,641 |
) |
|
|
92,085 |
|
|
Currency and commodities |
|
|
23,234 |
|
|
|
1,045 |
|
|
|
— |
|
|
|
(3,223 |
) |
|
|
(302 |
) |
|
|
20,754 |
|
|
Alternatives subtotal |
|
|
111,240 |
|
|
|
5,125 |
|
|
|
1,853 |
|
|
|
(3,436 |
) |
|
|
(1,943 |
) |
|
|
112,839 |
|
|
Long-term |
|
|
4,333,841 |
|
|
|
152,014 |
|
|
|
2,219 |
|
|
|
(58,223 |
) |
|
|
(94,536 |
) |
|
|
4,335,315 |
|
|
Cash management |
|
|
296,353 |
|
|
|
7,510 |
|
|
|
— |
|
|
|
267 |
|
|
|
(4,246 |
) |
|
|
299,884 |
|
|
Advisory |
|
|
21,701 |
|
|
|
(9,629 |
) |
|
|
— |
|
|
|
461 |
|
|
|
(2,320 |
) |
|
|
10,213 |
|
|
Total AUM |
|
$ |
4,651,895 |
|
|
$ |
149,895 |
|
|
$ |
2,219 |
|
|
$ |
(57,495 |
) |
|
$ |
(101,102 |
) |
|
$ |
4,645,412 |
|
|
(1) |
Amounts represent $1.3 billion of AUM acquired in the BKCA acquisition in March 2015, $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015 and $366 million of AUM acquired in the FutureAdvisor acquisition in October 2015. The FutureAdvisor acquisition amount does not include AUM that was held in iShares holdings. |
Long-term product offerings include active and index strategies. Our active strategies seek to earn attractive returns in excess of a market benchmark or performance hurdle while maintaining an appropriate risk profile. We offer two types of active strategies: those that rely primarily on fundamental research and those that utilize primarily quantitative models to drive portfolio construction. In contrast, index strategies seek to closely track the returns of a corresponding index, generally by investing in substantially the same underlying securities within the index or in a subset of those securities selected to approximate a similar risk and return profile of the index. Index strategies include both our non-ETF index products and iShares ETFs.
Although many clients use both active and index strategies, the application of these strategies may differ. For example, clients may use index products to gain exposure to a market or asset class. In addition, institutional non-ETF index assignments tend to be very large (multi-billion dollars) and typically reflect low fee rates. This has the potential to exaggerate the significance of net flows in institutional index products on BlackRock’s revenues and earnings.
Equity
Year-end 2015 equity AUM totaled $2.424 trillion, reflecting net inflows of $52.8 billion. Net inflows included $78.4 billion and $4.2 billion into iShares and active products, respectively. iShares net inflows were driven by the Core Series and flows into broad developed market equity exposures, and active net inflows reflected demand for international equities. iShares and active net inflows were partially offset by non-ETF index net outflows of $29.8 billion.
BlackRock’s effective fee rates fluctuate due to changes in AUM mix. Approximately half of BlackRock’s equity AUM is tied to international markets, including emerging markets, which tend to have higher fee rates than U.S. equity strategies. Accordingly, fluctuations in international equity markets, which do not consistently move in tandem with U.S. markets, may have a greater impact on BlackRock’s effective equity fee rates and revenues.
Fixed Income
Fixed income AUM ended 2015 at $1.422 trillion, increasing $28.7 billion, or 2%, from December 31, 2014. The increase in AUM reflected $76.9 billion in net inflows, partially offset by $48.2 billion in net market depreciation and foreign exchange movements. In 2015, active net inflows of $35.9 billion were diversified across fixed income offerings, with strong flows into our unconstrained, total return and high yield strategies. Flagship funds in these product areas include our unconstrained Strategic Income Opportunities and Fixed Income Strategies funds, with net inflows of $7.0 billion and $3.7 billion, respectively; our Total Return fund with net inflows of $2.7 billion; and our High Yield Bond fund with net inflows of $3.5 billion. Fixed income iShares net inflows of $50.3 billion were led by flows into core, corporate and high yield bond funds. Active and iShares net inflows were partially offset by non-ETF index net outflows of $9.3 billion.
Multi-Asset Class
BlackRock’s multi-asset class team manages a variety of balanced funds and bespoke mandates for a diversified client base that leverages our broad investment expertise in global equities, bonds, currencies and commodities, and our extensive risk management capabilities. Investment solutions might include a combination of long-only portfolios and alternative investments as well as tactical asset allocation overlays.
6
Component changes in multi-asset class AUM for 2015 are presented below.
|
(in millions) |
|
December 31, 2014 |
|
|
Net Inflows (Outflows) |
|
|
Acquisition(1) |
|
|
Market Change |
|
|
FX Impact |
|
|
December 31, 2015 |
|
||||||
|
Asset allocation and balanced |
|
$ |
183,032 |
|
|
$ |
12,926 |
|
|
$ |
— |
|
|
$ |
(6,731 |
) |
|
$ |
(3,391 |
) |
|
$ |
185,836 |
|
|
Target date/risk |
|
|
128,611 |
|
|
|
218 |
|
|
|
— |
|
|
|
(1,308 |
) |
|
|
(1,857 |
) |
|
|
125,664 |
|
|
Fiduciary |
|
|
66,194 |
|
|
|
3,985 |
|
|
|
— |
|
|
|
627 |
|
|
|
(6,373 |
) |
|
|
64,433 |
|
|
FutureAdvisor |
|
|
— |
|
|
|
38 |
|
|
|
366 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
403 |
|
|
Multi-asset |
|
$ |
377,837 |
|
|
$ |
17,167 |
|
|
$ |
366 |
|
|
$ |
(7,413 |
) |
|
$ |
(11,621 |
) |
|
$ |
376,336 |
|
|
(1) |
Amounts represent $366 million of AUM acquired in the FutureAdvisor acquisition in October 2015. The FutureAdvisor acquisition amount does not include AUM that was held in iShares holdings. |
Multi-asset class net inflows reflected ongoing institutional demand for our solutions-based advice with $17.4 billion of net inflows coming from institutional clients. Defined contribution plans of institutional clients remained a significant driver of flows, and contributed $7.3 billion to institutional multi-asset class net new business in 2015, primarily into target date and target risk product offerings. Retail net outflows of $1.3 billion were primarily due to a large single-client transition out of mutual funds into a series of iShares across asset classes. Notwithstanding this transition, retail flows reflected demand for our Multi-Asset Income fund family, which raised $4.6 billion in 2015.
The Company’s multi-asset class strategies include the following:
|
|
• |
Asset allocation and balanced products represented 49% of multi-asset class AUM at year-end, with growth in AUM driven by net new business of $12.9 billion. These strategies combine equity, fixed income and alternative components for investors seeking a tailored solution relative to a specific benchmark and within a risk budget. In certain cases, these strategies seek to minimize downside risk through diversification, derivatives strategies and tactical asset allocation decisions. Flagship products in this category include our Global Allocation and Multi-Asset Income suites. |
|
|
• |
Target date and target risk product flows were impacted by a large single-client transition out of mutual funds into a series of iShares across asset classes. Institutional investors represented 95% of target date and target risk AUM, with defined contribution plans accounting for over 88% of AUM. Flows were driven by defined contribution investments in our LifePath and LifePath Retirement Income® offerings. LifePath products utilize a proprietary asset allocation model that seeks to balance risk and return over an investment horizon based on the investor’s expected retirement timing. |
|
|
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Fiduciary management services are complex mandates in which pension plan sponsors or endowments and foundations retain BlackRock to assume responsibility for some or all aspects of plan management. These customized services require strong partnership with the clients’ investment staff and trustees in order to tailor investment strategies to meet client-specific risk budgets and return objectives. |
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FutureAdvisor is a leading digital wealth management platform, acquired by BlackRock in October 2015. FutureAdvisor operates as a service within BRS, providing financial institutions with high quality, technology-enabled advice capabilities to improve their clients’ investment experience. As consumers increasingly engage with technology to invest, BlackRock and FutureAdvisor are positioned to empower distribution partners to better serve their clients by combining FutureAdvisor’s high-quality technology-enabled advice with BlackRock’s multi-asset investment capabilities, proprietary technology and risk analytics |
Alternatives
BlackRock Alternative Investors (“BAI”) focuses on sourcing and managing high-alpha investments with lower correlation to public markets and developing a holistic approach to address client needs in alternatives investing. Our alternatives products fall into two main categories — 1) core, and 2) currency and commodities. Core includes alternative solutions, direct hedge funds, hedge fund and private equity solutions (funds of funds), opportunistic private equity and credit, real estate and infrastructure offerings. The products offered under the BAI umbrella are described below.
In 2015, BlackRock returned $3.3 billion of capital to investors, which is included in outflows. In addition, we raised $5.7 billion of new commitments in 2015 across a variety of strategies, including private equity solutions, opportunistic credit, alternative solutions, real estate and infrastructure. At year-end, we had $10.9 billion of non-fee paying, unfunded commitments, which are expected to be deployed in future years; these commitments are not included in AUM until they are invested.
We believe that as alternatives become more conventional and investors adapt their asset allocation strategies, investors will further increase their use of alternative investments to complement core holdings. As a top ten alternative provider3 our highly diversified $112.8 billion alternatives franchise is well positioned to meet growing demand from both institutional and retail investors.
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3 |
Source: Towers Watson, July 2015 |
7
Component changes in alternatives AUM for 2015 are presented in the table below.
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(in millions) |
|
December 31, 2014 |
|
|
Net Inflows (Outflows) |
|
|
Acquisitions(1) |
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|
Market Change |
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|
FX Impact |
|
|
December 31, 2015 |
|
|
Memo: Return of Capital(2) |
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Core: |
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|
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|
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|
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Alternative solutions |
|
$ |
528 |
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|
$ |
1,367 |
|
|
$ |
— |
|
|
$ |
(9 |
) |
|
$ |
— |
|
|
$ |
1,886 |
|
|
$ |
(127 |
) |
|
Hedge funds: |
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