BlackRock has outperformed the market for years and there's nothing stopping it from continuing to do so.
BlackRock (BLK 0.69%) recently reported another stellar quarter of earnings, with revenue in the period increasing 32% to $4.8 billion while net income was up 14% to $1.4 billion.
The investment management firm's solid report is no surprise to long-term investors, who have grown accustomed to high performance. BlackRock has crushed it for years and will likely continue to do so for three reasons: its dominance in the exchange traded fund (ETF) space with its iShares products, its shift toward environmental, social, and corporate governance (ESG) and sustainable investments options for investors, and a growing technology platform for portfolio and climate risk management.
Image source: Getty Images.
1. Its ETF products will continue to grow at an eye-popping rate
BlackRock is a leading provider of ETFs and index investment options for institutional and retail investors -- with its iShares products leading the way. The firm offers a wide range of ETFs, covering things including fixed income, sustainable funds, and factor investing styles such as momentum or value.
During its recent investor day, BlackRockannounced it expects to see a generational shift that will propel further growth in the ETF space. Despite global ETF assets under management (AUM) of $8 trillion in 2020, the company says ETF penetration of the total equity and bond market is still low.
BlackRock projects ETF assets to nearly double to $15 trillion by 2025, and it's leading the charge. One area where institutional investors are turning toward ETFs is in the fixed-income space. AUM in 2018 in fixed-income ETFs was $428 billion, and in the first quarter this year it is $668 billion.
In the second quarter, the firm saw strong client demand for ETFs, with over half of net inflows here coming from fixed-income and sustainable ETFs. Total net inflows into ETFs were $75 billion in the quarter, and client assets in iShares ETFs passed the $3 trillion milestone. To put this in perspective, it took 15 years to grow iShares to $1 trillion in assets, five years to get to the next trillion, and two years to surpass $3 trillion.
2. ESG investments are growing in popularity -- and BlackRock leads the way
In the first half of the year, BlackRock saw $40 billion flow into sustainable ETFs, after seeing $46 billion in inflows for all of 2020. The firm touts $120 billion in sustainable ETFs, four times the size of the next sustainable ETF player, and it says demand is only accelerating. Active sustainable strategies saw $4 billion in inflows during the quarter.
BlackRock is a leading provider of sustainable ETFs, but in an effort to put sustainability at the center of portfolios it looks to bring enhanced climate risk models to investment managers. That's where its technology comes into play.
3. Investments in Aladdin and other technology help expand offerings
CEO Larry Fink says BlackRock's investment platform and portfolio construction expertise put the firm in solid position to meet its customers' changing needs, and it's all made possible by Aladdin, the company's investment and risk management technology offering. It gathers data from public markets and private markets, which allows investors to view their portfolios -- of both public and private assets -- on a single platform. This is the same technology BlackRock uses for its investments, and it's evolving to expand the company's climate offering, too.
The company has been developing Aladdin Climate, a technology solution for investors looking for climate risk analytics. The tool measures risks at the asset and portfolio levels and gauges the impact from physical risks like extreme weather, new technologies, and energy supply.
As part of this platform, BlackRock formed a partnership with Baringa to improve its climate analytics and risk management tools. The partnership will combine Baringa's climate transition risk models with Aladdin's financial and physical risk models to help investors customize their climate risk exposures.
A stellar long-term investment
BlackRock continues to lead the pack when it comes to portfolio solutions. The firm has done a splendid job of building out its iShares ETF offerings. It has also established itself as a leader in sustainable investment solutions to both institutional and retail clients, leveraging its technology platform in the process to drive continued growth.
The stock has outperformed the S&P 500 for a decade now, returning investors a total of roughly 500% versus the index's 300%, and there's no reason it can't continue to do so for the next decade. The company's strong growth history allows it to pay out an attractive dividend yield of 1.9% at Friday's prices, making it a solid option for income investors. Finally, BlackRock's ability to innovate and get ahead of clients' needs makes it a stellar long-term investment for any portfolio.
Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
FAQs
BlackRock has crushed it for years and will likely continue to do so for three reasons: its dominance in the exchange traded fund (ETF) space with its iShares products, its shift toward environmental, social, and corporate governance (ESG) and sustainable investments options for investors, and a growing technology ...
What makes BlackRock so successful? ›
BlackRock is one of the world's largest investment management companies by AUM. The company operates as a single business segment. The firm derives most of its revenue from investment advisory and administration fees. BlackRock said that it has halted purchases of Russian securities amid Russia's invasion of Ukraine.
What is Blackrocks competitive advantage? ›
BlackRock's Market Advantage strategy is designed to provide returns with resilience by targeting equity-like returns with lower risk and shallower drawdowns.
Why do people not want to invest in BlackRock? ›
BlackRock is still the world's number-one investor in fossil fuels and it's still heavily invested in coal. The company has made little progress on deforestation and human rights.
Which company is more powerful than BlackRock? ›
Vanguard is the world's second-largest investment company or brokerage firm, offering a range of active and passive options, as well as a competitive fee structure and other attractive selling points. BlackRock, Inc. is the world's largest investment firm and asset manager.
What are the strengths of BlackRock? ›
Market Leadership and AUM Growth: BlackRock Inc's position as the largest asset manager globally is a testament to its robust business model and ability to attract and retain clients. With $10.5 trillion in AUM, the company benefits from economies of scale, a diverse product offering, and a strong brand reputation.
What strategy does BlackRock use? ›
Through Secure Market Entry, Business Intelligence, Risk Mitigation Principles, and Intelligence Process & Analysis, Blackrock Strategy helps commercial clients tackle the most critical challenges facing global organizations.
Who is BlackRock biggest rival? ›
Top Competitors and Alternatives of Blackrock Investors
The top three of Blackrock Investors's competitors in the Investment And Finance Services category are Q4 with 26.30%, Coinbase with 15.94%, Orion Advisor with 9.64% market share.
What is unique about BlackRock? ›
BlackRock is a global company with 70 offices in 30 countries, giving us unique global reach and local relationships. Because we cover all corners of the globe, we bring the best of the world to how we invest in the U.S.
How does BlackRock control the world? ›
Influence and power
BlackRock invests the funds of its clients (for example, the owners of iShares exchange-traded fund units) in numerous publicly traded companies, some of which compete with each other.
BlackRock, as the largest global investment management company, and a leading voice in the investment community on climate and energy transition-related investment themes, has found itself at the center of a vocal anti-ESG movement by Republican politicians in the U.S., who have accused the firm of following a social ...
What if BlackRock goes bust? ›
In the extremely unlikely scenario that Penfold AND BlackRock and/or HSBC were to go out of business, your money is protected by FSCS.
Why is BlackRock not popular? ›
**Business Focus:** BlackRock primarily caters to institutional investors, asset managers, pension funds, and large corporations rather than individual retail investors. Their focus is more on asset management, investment strategies, and financial services rather than direct consumer engagement.
Who is the biggest shareholder of BlackRock? ›
BlackRock's largest institutional shareholders are Vanguard Group, BlackRock Fund Advisors, State Street Global Advisors, Temasek Holdings, and Bank of America. The company's largest individual shareholders include original BlackRock owners and founders Larry Fink and Susan L.
Does BlackRock own Amazon? ›
BlackRock (BLK -0.98%): Owns 627,171,762 Amazon shares, or 6.04% of shares outstanding. New York City–based BlackRock is the largest institutional money manager on the globe, with more than $9.4 trillion in assets under management.
Who is BlackRock owned by? ›
BlackRock is not owned by a single individual or company. Instead, its shares are owned by a large number of individual and institutional investors. The biggest institutional shareholders such as The Vanguard Group and State Street are merely custodians of the stock for their clients.
Why is BlackRock so famous? ›
BlackRock is one of the world's leading providers of investment, advisory and risk management solutions. We are a fiduciary to our clients. We're investing for the future on behalf of our clients, inspiring our employees, and supporting our local communities. Watch the video to learn more.
What does BlackRock do differently? ›
When changing interest rate cycles or varying market conditions leave investors feeling uncertain, BlackRock is here to help. We understand how important cash is and that is why we set out to go beyond what's expected to solve today's increasingly complex challenges for our clients. That's the BlackRock Difference.
Why do people choose BlackRock? ›
BlackRock is trusted to manage more money than any other investment manager in the world, helping millions of people and the world's biggest institutions and governments reach their investing goals.
What does BlackRock own the most? ›
Latest Holdings, Performance, AUM (from 13F, 13D)
Actual Assets Under Management (AUM) is this value plus cash (which is not disclosed). BlackRock Inc.'s top holdings are Microsoft Corporation (US:MSFT) , Apple Inc. (US:AAPL) , NVIDIA Corporation (US:NVDA) , Amazon.com, Inc. (US:AMZN) , and Meta Platforms, Inc.
 Armendariz, Montxo - [PDF Document])