(Bloomberg) - BlackRock Inc. clients pulled a net $13 billion from long-term investment funds, the first outflows since the onset of the pandemic in 2020.
The redemptions are a sign that investors have preferred to keep cash on hand in money-market funds or in certain bond strategies while interest rates remain elevated.
The outflows from the firm’s long-term investment funds, including mutual funds and exchange-traded funds, missed by a wide margin the $50 billion of inflows that analysts surveyed by Bloomberg were expecting.
BlackRock shares fell 0.7% to $631.91 at 9:55 a.m. in New York.
“For the first time in nearly two decades, clients are earning a real return in cash and can wait for more policy and market certainty before re-risking,” Chief Executive Officer Larry Fink said in a statement, adding that the dynamic weighed on industry’s flows last quarter.
Clients added $15 billion to the firm’s separate business of cash-management and money-market funds. They put $29 billion into the firm’s ETFs and $13 billion into fixed-income funds. Investors withdrew $7.7 billion from actively managed funds.
Total assets under management fell 3.2% to $9.1 trillion from $9.4 trillion the prior quarter. The total net withdrawals included $49 billion from lower-fee institutional index equity products, including $19 billion from a single international client.
Adjusted net income rose 13% from a year earlier to $1.6 billion, or $10.91 a share, beating Wall Street’s average estimate of $8.20. Revenue rose 5% to $4.5 billion.
Money managers have been navigating a challenging market all year amid shifting inflation expectations and volatility in stock and bond markets. The S&P 500 Index declined 3.7% in the third quarter, while the Bloomberg US Aggregate Bond Index fell 3.2%.
Investors have rushed into money-market funds all year as yields surged above 5% and questions over the financial health of several mid-size US banks sparked a flight to safety.
“We haven’t seen this money redeployed out of cash and put to work on a large scale, and that’s driving muted results in terms of flows into higher-fee generating products like equity and bond funds across the industry,” Kyle Sanders, an analyst at Edward Jones, said in a note before the earnings were released. “There’s still a lot of anxiety in the market about a recession and interest rates, and we’re seeing a lot of investors sitting on the sidelines.”
Shares of BlackRock declined about 10% this year, trailing the S&P 500 Index’s roughly 13% gain.
(Updates shares in fourth paragraph.)
By Silla Brush
