By Dawn Lim 

BlackRock Inc.'s quarterly profit rose 49% as the giant asset manager benefited from surging markets and investors' willingness to bet on an economic recovery.

The firm posted a first-quarter profit of $1.2 billion, or $7.77 a share, up from $806 million, or $5.15 a share, a year earlier. BlackRock's revenue rose 19% to $4.4 billion from $3.7 billion in the year ago period when panicked investors fled to cash while a pandemic rippled through the globe.

The firm's adjusted per-share profit of $7.77 slightly beat analysts' expectations.

The world's largest money manager scaled a new milestone, with assets under management rising to $9 trillion.

BlackRock's record inflows across all its strategies combined showed investors are emboldened to make new market wagers -- even in the face of an uneven economic recovery, the risk of inflation and vaccine bottlenecks that threaten to prolong a world-wide pandemic.

In an interview, BlackRock Chief Executive Larry Fink said the speed of vaccine rollouts will be the key to determining the pace and breadth of an economic recovery. Parts of the economy from the hotel industry to New York City's small businesses are still distressed, he said.

"The broader issue is if the world is vaccinated much slower, how can we open up the world again?" he said. "I do believe the light is still close by, but it's just delayed."

The exchange-traded funds business BlackRock is best known for -- a lineup of funds that trade on exchanges and track all kinds of markets -- took in $68 billion in net flows in the first quarter. That is a bigger haul than last year, when its iShares exchange-traded funds attracted $13.8 billion in new money.

Banks, pension funds, hedge funds and traders often turn to BlackRock's exchange-traded funds to get quick and broad exposure to markets. New darlings such as Cathie Wood's ARK Investment Management LLC are stealing the spotlight from entrenched firms. Many index providers have slashed fees near zero and reached deeper into niche corners of the market to stay relevant.

Mr. Fink's challenge is making sure that BlackRock stays ahead of these and other rivals.

Across all strategies, BlackRock took in $171.6 billion in net new money, up from roughly $35 billion in the year-ago quarter. Central banks' efforts to keep interest rates low buoyed equities, heated up pockets of the markets and prompted investors to seek higher-returning investments like private equity and other alternatives.

"There's a lot of money in motion today," Mr. Fink told analysts Thursday. "But many investors continue to keep significant amounts of cash on the sideline."

Rising equity markets as well as money moving into more lucrative, actively managed strategies boosted BlackRock's revenue. The biggest chunk of revenue -- fees from managing investments and administration fees -- rose 20%.

Rising markets helped to offset revenue BlackRock gave up to undercut rivals on price. In addition, low interest rates have challenged BlackRock's money-market funds. Yields of these funds, a way for investors to park cash safely while earning some pocket change, have plunged. BlackRock had to waive what it charges investors to keep their yields from falling below zero for investors this quarter, and expects to in the months going forward. The firm's securities-lending revenue also fell in the quarter.

After Mr. Fink helped usher in a revolution in ETFs, his next big bet is riding on investors' interest in companies with higher environmental, social and corporate-governance rankings.

BlackRock already provides technology to help banks and investors account for environmental risks and is aggressively adding to ESG-themed funds. Technology-services revenue -- which includes fees from the firm's software suite known as Aladdin -- rose by 12%.

BlackRock recently cut a deal with a group of banks to link its own corporate-lending costs more closely to achieving goals such as women in senior leadership and boosting assets in sustainability-themed funds. The move signaled BlackRock's view to Wall Street that it is possible to measure the financial consequences of environmental or workplace goals.

BlackRock's push to brand itself as an advocate of environmental disclosure from companies dovetails with the Biden administration's plans to be more vigilant about monitoring risks to financial stability posed by climate change.

Mr. Fink has inserted himself and the firm into some political and broader national debates. He recently joined other CEOs in signing a new statement to "defend the right to vote and oppose any discriminatory legislation," the latest corporate response to voting bills advanced by Republicans in various states.

"That statement is on principles, not politics," Mr. Fink said. "Our democracy is based on equal access."

As of Wednesday, BlackRock shares have increased about 150% on a total return basis since their last low on March 23 last year, when markets lurched from the pandemic. The Federal Reserve's interventions calmed markets and placed a BlackRock advisory unit in the high-profile role of assisting the central bank in bond-buying programs.

On Thursday, BlackRock stock rose more than 2% in late morning trading. The firm's quarterly report begins what us expected to be a strong earnings season for other asset managers.

"You're seeing a lot of money move off the sidelines into all types of products out there," said Credit Suisse analyst Craig Siegenthaler. "This backdrop is a rising tide that is lifting all boats."

Write to Dawn Lim at dawn.lim@wsj.com

 

(END) Dow Jones Newswires

April 15, 2021 12:21 ET (16:21 GMT)

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