(Recasts throughout)
By Trevor Hunnicutt and Amrutha Gayathri
Jan 15 (Reuters) - Investors drove $54 billion into
BlackRock Inc (N:BLK) BLK.N funds during a weak and turbulent fourth
quarter for financial markets, driving profits higher, but the
company nonetheless missed Wall Street analysts' forecasts.
Net income grew by 6 percent at the world's largest asset
manager to $861 million in the quarter, or $5.11 per share, on
stronger-than-expected revenue from managing investors' money.
The company said it would increase its quarterly
cash dividend by 5 percent.
Those investors piled into the New York-based company's
iShares brand exchange-traded funds. BlackRock ETFs took in
$60.22 billion in new money in the latest quarter, up from
$44.19 billion a year earlier.
The lion's share invested in ETFs went into equities, driven
by demand for U.S. stocks.
Yet higher headcount, performance fees and other expenses,
which Chief Executive Officer Laurence D. Fink credited to
compensation and other one-time costs from acquisitions, weighed
on BlackRock's income. Expenses were 5 percent higher during the
quarter than the prior year.
Excluding factors that the company said do not affect its
value, BlackRock earned $4.75 per share, falling short of the
average analyst estimate of $4.80, according to Thomson Reuters
I/B/E/S.
INVESTING TO GROW
BlackRock's purchases this year have included FutureAdvisor,
which builds a digital investment-advice product;
Infraestructura Institucional, a Mexican infrastructure company;
and Bank of America (N:BAC) Corp's BAC.N money-market fund business.
"We're investing continually to grow, and we're going to
continue to do that," BlackRock CEO Fink told Reuters.
Fink, who warned that financial markets may get worse before
they get better, said his company's decisions to invest, rather
than to cut costs, helped it attract money even in a turbulent
market.
The company's 2009 acquisition of its iShares business from
Barclays BARC.L , for instance, brought BlackRock a business
unit now responsible for a quarter of its "long-term" assets and
the majority of such inflows this quarter.
Speaking on CNBC, Fink said he saw a borderline bear market
but warned that markets may sink an additional 10 percent before
rallying higher again.
BlackRock's stock slumped about 5 percent in midday trading
Friday in New York, compared with the benchmark S&P 500 .SPX
index, which was off about 2.6 percent.
The shares are down 13.5 percent since the start of the
year, a bit less than the 14 percent drop in the Dow Jones U.S.
Asset Managers Index .DJUSAG over the same period.
INFLOWS
BlackRock attracted total "long-term" net flows of $53.87
billion in the three months ended Dec. 31, down from $87.82
billion in the same quarter of 2014.
The company said those quarterly inflows were its third
highest on record. And in a year that has shifted money from
mutual funds whose managers pick stocks and bonds to index
funds, BlackRock brought $61 billion into its "actively managed"
funds.
Across all of its products, BlackRock attracted a net $53.47
billion in long-term equity investments. Net investment in fixed
income was $158 million, while $464 million went into
alternative investments.
The company's institutional business, where it charges
relatively low fees, saw outflows of $13.34 billion during the
quarter.
"Clients who had benefited one way or another by success -
whether it's success in commodity markets or success in foreign
trade - had built up large reserves," said Fink. "Some of those
clients are still buying and some of those clients are still
seeing a need for domestic purposes," and are spending down
reserves.
BlackRock ended the quarter with $4.65 trillion in assets
under management, virtually unchanged from a year earlier.