By Arasu Kannagi Basil and Davide Barbuscia
(Reuters) - Assets managed by BlackRock hit a record $10.65 trillion in the second quarter thanks to rising client asset values and as investors pumped money into the company's exchange-traded funds, the world's largest asset manager said on Monday.
Stock markets have scaled record highs in the last few months amid rising expectations of a soft landing for the U.S. economy and an investor frenzy around artificial intelligence-linked stocks.
The benchmark S&P 500 index jumped about 4% in the reported quarter, boosting BlackRock's assets under management to $10.65 trillion, up from $9.43 trillion a year earlier and $10.5 trillion in the first quarter.
BlackRock expects to close in the second half of the year two acquisitions that will bolster its presence in infrastructure investments and in private markets, two key areas of growth.
"We see unbelievable growth opportunities for our clients and shareholders for 2024 and beyond," BlackRock's chairman and CEO Larry Fink said in a conference call, adding he saw great potential for investments into the energy transition and artificial intelligence (AI) data centers.
"We are wildly bullish as more and more clients are going to be using infrastructure debt," he said.
Last month the company agreed to buy private markets data provider Preqin in a deal valued at nearly $3.2 billion. The acquisition follows BlackRock's $12.5-billion deal this year to buy Global Infrastructure Partners, a bet on alternative assets that will put the firm at the heart of investing in infrastructure projects around the globe.
"There's growth in private markets ... but more importantly you can charge much, much higher fees on private assets than you can on an iShares ETF," said Kyle Sanders, senior equity research analyst at Edward Jones.
"They want to move into higher-margin, higher-fee products, and alternatives would be at the top of the list," he said.
BlackRock registered total net inflows of $81.57 billion in the quarter, slightly above $80.16 billion a year earlier. Exchange-traded funds captured the majority of flows, at $83 billion, their best start to a year on record, BlackRock said.
The company was optimistic on debt inflows, with investors expected to move out of currently high-yielding cash and into riskier fixed income products as the Federal Reserve starts cutting interest rates.
"We're seeing clients around the world re-calibrate their risks," said Fink.
BlackRock's shares turned slightly higher after dropping in early trade. The stock has risen about 2% this year, underperforming the 18% gain of the S&P 500 index.
Cathy Seifert, vice president at CFRA Research, who has a "buy" recommendation on BlackRock, said the flat performance in the company's shares on Monday may have been caused by higher revenue growth expectations from investors given BlackRock’s premium valuation to its peer group.
Investment advisory and administration fees rose 8.6% to $3.72 billion.
Revenue from technology services jumped 10% to $395 million, reflecting sustained demand for its investment risk management platform Aladdin.
BlackRock's total revenue jumped 8% to $4.81 billion.
Net income rose to $1.50 billion, or $9.99 per share, in the three months ended June 30, from $1.37 billion, or $9.06 per share, a year earlier.
(Reporting by Arasu Kannagi Basil in Bengaluru, Davide Barbuscia in New York; Editing by Pooja Desai, Jan Harvey and Rod Nickel)
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