The Wall Street Journal-20080118-BlackRock Net Leaps 90- on Performance Fees
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BlackRock Net Leaps 90% on Performance Fees
BlackRock Inc.'s fourth-quarter earnings jumped 90% on strong demand for the money manager's advisory and alternative-investment services.
Performance fees on investments managed for clients were $153 million in the quarter, compared with $40 million a year earlier, thanks to higher fees on international equity separate accounts, energy and fixed-income hedge funds, the fund of funds of Quellos Group LLC, which it acquired last summer, and real-estate products.
BlackRock's fourth-quarter costs rose 8.7% due in part to $24 million associated with the support of two enhanced cash funds hurt by the credit crunch, including $18 million in funding put up by BlackRock in support of the funds' net-asset values, and a $12 million charge for capital support agreements covering securities in the funds.
"We believe we can support those clients...and get all the clients cash back during the 2008 time frame," said Paul L. Audet, BlackRock's managing director and acting chief financial officer, in a conference call with investors.
Assets under management grew to $1.357 trillion, up $57.1 billion since Sept. 30, and $232 billion from a year earlier. The firm attracted $22.2 billion to its cash funds, $10.8 billion to equity and balanced funds, and $3.7 billion to alternatives.
Fixed-income funds, however, had net outflows of $4.4 billion and transfers of $1.6 billion.
BlackRock is preparing for a large shift in investors' allocations by adding new products in equities, alternative assets and longer-term fixed-income securities, said Chief Executive Laurence D. Fink.
"Once people have more comfort in the world," they will rotate to these areas, away from short-term bonds and cash, said Mr. Fink.
BlackRock also may be in the market for a loan-serving company to help it assess assets to be part of a new distressed real-estate mortgage fund it is launching, Mr. Fink said in an interview.
He said the $1 billion-plus fund would invest in underlying mortgages. BlackRock has already raised $4.5 billion in two distressed funds, including $3 billion in a distressed-debt fund and $1.5 billion in distressed-mortgage securities.
Merrill Lynch & Co. owns 49% of BlackRock, a stake it acquired last year when it agreed to combine its asset-management business with BlackRock. PNC Financial Services Group Inc. owns a one-third stake.
Shares of the New York firm rose $1.25 to $204.95 in 4 p.m. composite trading on the New York Stock Exchange.
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Jonathan Vuocolo contributed to this article.
