BlackRock’s iShares ETF Unit Shines in Rough Third Quarter

Soaring inflows unable to offset declining assets under management.

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Reviewed by: Shubham Saharan
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Edited by: Shubham Saharan

While BlackRock Inc.’s third quarter earnings and revenue slid in a difficult investing environment, the firm’s iShares exchange-traded fund business provided a measure of relief.  

New York-based BlackRock’s revenues fell 15% to $4.31 billion, missing the $4.33 billion expected from analysts surveyed by Bloomberg News. Assets under management dropped 16% to $7.96 trillion in the three months ending Sept. 30.  

However, the stall in revenue growth was partially offset by net inflows from ETFs, with third quarter inflows coming in at $22 billion. While that wasn’t quite half of last year’s $58 billion, the unit collected more fees than expected. 

Inflows were primarily driven by bond ETFs, which generated $37 billion of net inflows—the second best quarter in the firm’s history—as continued market volatility from inflation, rising rates and geopolitical uncertainty forced investors into the asset class. Nearly $1.5 billion was brought in from credit and active fixed income flows.

Inflows into fixed income funds is a lasting trend, BlackRock President Rob Kapito said on an earnings call. 

“Infrastructure and sustainability stimulus in the U.S. is going to create significant opportunities for long-term investors and infrastructure to add returns to portfolios,” he said, according to a transcript. “The combination of bonds and infrastructure is going to present some great fixed income outcomes for our investors.” 

Investment advisory fees for equities from iShares came in at nearly $1.1 billion, beating analyst expectations of $992 million. Fixed income advisory fees remained relatively steady, at $273 million. 

In the last quarter, the iShares 20+ Year Treasury Bond ETF (TLT), the iShares U.S. Treasury Bond ETF (GOVT) and the iShares 7-10 Year Treasury Bond ETF (IEF) pulled in more than $16.2 billion alone, according to ETF.com data. “We're going to see dramatic and large inflows into fixed income over the next year as interest rates rise,” Kapito said.  

Meanwhile, the New York-based firm, which has $700 billion in AUM across 300 ETFs, saw net outflows for equity-based active and passive products topping $10 billion.  

 

Contact Shubham Saharanat[email protected]

Shubham Saharan is a markets reporter at etf.com. Before joining the company, she reported for Bloomberg and the Financial Times. Saharan is a graduate of Barnard College of Columbia University.