Analyzing Carl Icahn's Allegations about BlackRock: Is He Right?
About BlackRock
BlackRock (BLK) is the largest asset management firm in the world. It has AUM (assets under management) of $4.7 trillion. It’s far ahead of its competitors like Vanguard and State Street (STT). Apart from the US, BlackRock has a strong presence in Europe, Asia, Canada, and Latin America. The total BlackRock ETF assets outside of the US are about 36% of the company’s total ETF assets. The company is popular for its iShares family of ETFs. These ETFs generated 36% of its total fees as of 2Q15.
BlackRock bought the iShares family of ETFs from Barclays Global Investors in 2009. The company’s 700 funds manage more than $1 trillion in assets. They own 40% of the US ETF industry’s $2.1 trillion in assets.
The iShares business
BlackRock generated $10.9 billion of inflows in the iShares ETF segment in 2Q15—an 11% rise compared to last year. This constituted equity inflows of $8.8 billion and fixed income inflows of $1.5 billion.
Equity inflows were driven by demand for international developed market exposure. Fixed income flows were directed into investment grade corporate bonds, US aggregate, and emerging market bonds.
It has nearly tripled the size of its iShares business since 2009—mainly by selling huge chunks to institutional investors.
In the second quarter, BlackRock reported revenue from investment advisory, administration, and securities lending of $2.5 billion. The iShares equities segment accounts for 29% of the revenue. The iShares fixed income segment accounts for 5% of the revenue from investment advisory.
Peers like State Street, Franklin Resources (BEN), Northern Trust (NTRS), and Bank of New York Mellon (BK) haven’t reported their second quarter earnings yet.
Asset management firms have a weight of ~15% in the Financial Select Sector SPDR ETF (XLF).
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