BlackRock is an American multinational investment management corporation based in New York, US. It was founded in 1988 as a risk management and fixed income institutional asset manager. It is the world’s largest asset management company with $7.81 trillion in assets under management as of the end of 2020.
BlackRock has a market capitalization of $109 billion and provides investment and technology services to both institutional and retail clients worldwide. BlackRock operates in 30 countries with 70 offices and clients in 100 countries. The company is among the big three, including Vanguard and State Street, in index funds, which dominates America’s corporate sector. In early 2020 BlackRock announced that it would begin divestment from thermal coal and make its assets more sustainable and environmentally friendly. Their purpose is to help more and more people experience financial well-being. They are dedicated to helping their clients, employees, shareholders, and communities achieve financial security, economic mobility, and financial freedom.
The firm offers various funds and portfolios investing in vehicles such as equities, money market instruments, and fixed income. Clients look to BlackRock for access to mutual funds investments focused on objectives related to retirement income and college savings, and exchange-traded funds. BlackRock is the parent company for the iShares group of ETFs, the largest global provider of ETFs. BlackRock reports as a single business segment, deriving most of its revenue from investment advisory and administrative fees charged to its clients. In Quarter 3 of 2020, BlackRock earned $1.5 billion in net income on $4.4 billion of total revenue. As compared with Quarter 3 of 2019, this represents a year-over-year increase in net income of 35.6%. Operating income for Quarter 3 of 2020 was $1.8 billion, up 17.0% YOY. Revenue grew 18.3% in Quarter 3 of 2020 compared to the same quarter a year ago.
BlackRock derives most of its revenue from investment advisory and administration fees levied over time and typically based upon Asset under Management (AUM) predetermined percentages. BlackRock’s business category includes fees related to the firm’s equity, fixed income, multi-asset alternative, and cash management services. In Quarter 3 of 2020, this category accounted for $3.2 billion in revenue or about 74% of total revenue. This was up 8.2% YOY. In contrast with administrative fees, performance fees are assessed to certain types of BlackRock accounts when performance exceeds a predetermined threshold. Performance fees accounted for $532 million in revenue or more than 12% of total revenue in Quarter 3 of 2020. This was up 339.7% YOY, making it the fastest-growing part of BlackRock’s business by far.
BlackRock offers a range of technology systems, risk management, and other digital distribution tools to select insurance companies, banks, pension funds, and asset manager, clients. Technology services accounted for $282 million in revenue for Quarter 3 of 2020 or about 6% of the total. This figure was up 8.9% YOY. BlackRock levies fees associated with the distribution and service of its various products and support services related to investment portfolios. In Quarter 3 of 2020, this category accounted for $288 million in revenue or nearly 7% of total revenue for the quarter. This was up 6.7% YOY.
BlackRock also separates a category of revenue associated with its advisory services for global financial institutions, regulators, and governments. These fees are set at a fixed rate. In Quarter 3 of 2020, this category accounted for $42 million in revenue or about 1% of total revenue. This was down 32.3% YOY. In late March, the U.S. Federal Reserve tasked BlackRock with helping to carry out the central bank’s bond-purchasing program as part of its broader response to the COVID-19 pandemic. BlackRock was instructed to purchase agency commercial mortgage-backed securities on behalf of the New York Federal Reserve. BlackRock was also tasked with managing two large bond-buying programs: a Fed-backed facility for purchasing new investment-grade bonds from U.S. companies; and another facility for purchasing investment-grade bonds that have already been issued.
BlackRock has also been a significant beneficiary of the Fed’s ETF-buying program. The Fed bought $1.58 billion in investment-grade and high-yield ETFs between May 12 and May 19. Almost half of the Fed’s purchases went into BlackRock funds, as BlackRock operates many of the largest investment-grade and high-yield ETFs.
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