Q1 2025 BlackRock Inc Earnings Call

Good morning, My name is Katie and I will be your conference facilitator today at this time I'd like to welcome everyone to the Blackrock incorporated first quarter 2025 earnings teleconference. Our hosts for todays call will be chairman and Chief Executive Officer, Laurence D Fink, Chief Financial Officer Martin.

Small president Robert S Capito, and General Counsel, Christopher J Meade.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answers period. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star two.

Meade: Mr. Meade you may begin your conference.

Chris Meade: Good morning, everyone I'm, Chris Meade, the general counsel of Blackrock.

Chris Meade: Before we begin I'd like to remind you that during the course of this call. We may make a number of forward looking statements.

Chris Meade: We call your attention to the fact that Blackrock actual results may of course differ from these statements.

Chris Meade: As you know Blackrock has filed reports with the SEC, which list some of the factors that may cause the results of Blackrock to differ materially from what we see.

Chris Meade: Blackrock assumes no duty and does not undertake to update any forward looking statements.

Martin: So with that I'll turn it over to Martin.

Martin: Thanks, Chris Good morning, everyone. It's my pleasure to present results for the first quarter of 2020 five before I turn it over to Larry I'll review, our financial performance and business results. Our earnings release discloses, both GAAP and as adjusted financial results I'll be focusing primarily on our as adjusted results.

Martin: We've built Blackrock platform to help clients in all market environments, even against a sharp change in markets and uncertainty in fiscal and monetary policy or strategy to anchor our business and structural growth engines like private markets Etfs digital assets full portfolio of solutions.

Martin: <unk> systematic in tax managed strategy and technology that strategy helped again deliver above target, 6% organic base fee growth.

Martin: That's alongside double digit growth across the board in revenue operating income and earnings per share and with 100 basis points of margin expansion in the first quarter of 2025.

Martin: The first quarter demonstrates the benefits of our investments to make the Blackrock platform more all weather across asset management and technology integrating public and private for clients and shareholders. Our platform is showing its ability to be more resilient and deliver higher and more consistent organic growth through market cycles.

Martin: We're a partner with both long term perspective, and the ability to move quickly in times of stress, we have been through times of economic and market disruption before during the financial crisis Covid and in 2022, so more than ever it's important that we continue our successful track record of being strongly connected to our clients.

Martin: Policymakers and employees locally in all the markets in which we operate.

Martin: We don't think of ourselves as a U S firm with international offices, we're a European firm, where Canadian firm, where middle eastern firm.

Martin: We aspire to be the best partner to our clients, we work to help governments and clients understand markets and complex questions at the intersection of Investor portfolios and geopolitics.

Martin: We lead with empathy and trusted advice these periods of uncertainty with major market resets, they're often catalyst for client changes to asset allocation and portfolio construction.

Martin: Benefiting from our breath Blackrock has a track record of share gains when there's money in motion.

Martin: We historically did that as a public markets focused firm now with money in motion again, Blackrock is better positioned to serve our clients and grow with leading capabilities that integrate public and private markets.

Martin: We finished a record quarter with record AUM record units of trust of 11, six trillion over the last 12 months clients trusted Blackrock with 670 billion of new assets, making more than 60% of our year over year AUM growth organic.

Martin: First quarter net inflows continued our growth with 84 billion as a management team. We look at core flow trends away from episodic large low fee institutional index redemptions of which we had 55 billion in the quarter.

Martin: Excluding that activity Blackrock delivered approximately 140 billion of net inflows in the quarter organic asset and base fee growth were driven by client demand for private markets strategic and precision categories within Etfs as well as top performing systematic strategies.

Martin: These are all capabilities, we've invested in over recent years and demonstrates the success of our structural growth strategy.

Martin: Turning to our financial results first quarter revenue of $5 3 billion increased 12% year over year, driven by the impact of organic growth and higher markets on average AUM based fees consolidated in the G IP transaction and higher technology services and subscription revenue.

Martin: Operating income of $2 billion was up 14% and earnings per share of $11 30.

It was 15% higher versus a year ago.

Martin: EPS also reflected lower non operating income a lower tax rate and higher share count in the current quarter.

Martin: The higher year over year share count included shares issued and delivered at the closing of the GIC transaction on October one 2024.

Martin: Non operating results for the quarter included $68 million of net investment gains driven primarily by mark to market noncash gains on our co investment portfolio and a gain on a minority investment.

Martin: Our as adjusted tax rate for the first quarter was approximately 16% and reflected $195 million of discreet tax benefits. A portion was related to stock based compensation awards that vested in the first quarter of each year.

Martin: We continue to estimate that 25% is a reasonable projected tax run rate for the remainder of 2025. The actual effective tax rate may differ because of nonrecurring or discrete items or potential changes in tax legislation.

Martin: First quarter base fee in securities lending revenue of $4 4 billion was up 16% year over year, driven by positive impact of market beta on average AUM organic base fee growth and approximately $285 million in base fees from Gi P.

Martin: On an equivalent day count basis, our annualized effective fee rate was a 10th of a basis point higher compared to the fourth quarter. This was mainly due to the impact of approximately $60 million higher catch up base fees associated with private markets fundraising.

Martin: Excluding first quarter catch up fees, and including the impact of market and foreign exchange movements towards the second half of the first quarter, we entered the second quarter with base fees, approximately 1% lower than the first quarter.

Martin: Performance fees of $60 million decreased from a year ago, primarily reflecting lower performance revenue from private markets and liquid alternatives.

Martin: Technology services and subscription revenue was up 16% compared to a year ago.

Martin: Growth reflects sustained demand for our full range of Aladdin technology offerings and the closing of the frequent transaction on March 3rd.

Martin: Frequent added approximately $20 million to first quarter revenue.

Annual contract value or <unk> increased 30% year over year, including the frequent acquisition and increased 14% organically, we remain committed to low to mid teens ACB growth over the long term.

Martin: Total expense increased 10% year over year, reflecting higher sales asset and account G&A and compensation expense.

Martin: Employee compensation and benefit expense was up 7%, reflecting higher head count associated with the Onboarding of the Gi P and frequent employees and higher incentive compensation linked to higher operating income.

Martin: G&A expense increased 12%, primarily driven by the Gi infrequent acquisitions and continued technology investments.

Martin: Excluding the impact of the GI Pn frequent acquisitions G&A would have increased 6% from a year ago.

Martin: Sales asset and account expense increased 14% compared to a year ago, primarily driven by higher direct fund expense and distribution cost direct fund expense was up 16% year over year, mainly due to higher average index.

Martin: Our first quarter as adjusted operating margin of 43, 2% was up 100 basis points from a year ago, reflecting the positive impact of markets on revenue and organic base fee growth. We continue to execute on our financial rubric. This approach has yielded profitable growth and operating leverage in good markets and we believe.

Martin: We'll add more resilience to our operating margin when markets are less supportive in.

Martin: In line with our January guidance, which excludes the impact of Hps and related transaction costs at present, we continue to expect a mid to high single digit percentage increase in 2025 core G&A expense.

Martin: Our capital management strategy remains consistent we invest first in our business either to scale strategic growth initiatives or drive operational efficiency, and then return cash to our shareholders through a combination of dividends and share repurchases.

Martin: We repurchased $375 million worth of common shares in the first quarter at present based on our capital spending plans for the year and subject to market and other conditions, we still anticipate repurchasing at least $375 million of shares per quarter for the balance of the year consistent with our January guidance.

Martin: We continue to target mid 2025 that the closing of the HCS transaction, which remains subject to regulatory approvals and other customary closing conditions.

Martin: Last month, an investor consortium, including Blackrock announced the acquisition of Iridium Group Viridian is Germany's leading closed block life insurance consolidator and fourth largest life insurance company. Upon the close of the transaction Blackrock will have a noncontrolling non consolidated minority equity investment in beryllium and help the company.

Martin: Access a broader range of private markets investment opportunities in support of policyholders and the company, we expect that growth to be in private credit strategies, including infrastructure and corporate debt as well as asset based finance the transaction.

Martin: <unk> is expected to close in the second half of 2025 subject to regulatory approvals and other customary closing conditions.

Martin: Also in March we issued $1 billion of Euro denominated 10 year debt at a coupon of 375% to refinance our euro denominated notes maturing in May 2025, the euro that aligns our capital structure with our global business <unk>.

Martin: Beginning in the first quarter, we refined our AUM presentation to further highlight growth areas within Blackrock the updates primarily focus on our private markets and ETF platforms. We believe these changes provide investors with further transparency into channels powering Blackrock organic growth strategy.

Martin: In the first quarter Blackrock generated total net inflows of 84 billion, excluding low fee institutional index outflows driven by rebalancing Blackrock net inflows were 140 billion each.

Martin: <unk> net inflows of $107 billion were positive across all channels led by core equity and fixed income Etfs with net inflows of 46 billion and $34 billion respectively.

Martin: Our innovative product launches across Etfs continued to see widespread adoption as clients use our latest offerings to access a range of investment exposures are active Etfs contributed 9 billion of net inflows and our digital asset Etp's generated another $3 billion inflows into these higher feeds yet categories contributed to <unk>.

Martin: 7% annualized organic base fee growth for Etfs in the first quarter.

Martin: Retail net inflows of 13 billion were led by record quarterly flows in a period of sustained demand for fixed income offerings and our systematic liquid alternatives funds.

Martin: Institutional active net inflows were 8 billion driven by demand for infrastructure private markets are lightpath target date franchise and systematic active equity offerings.

Martin: These inflows were partially offset by a handful of client specific redemptions from active fixed income primarily due to reinsurance activity.

Martin: Institutional index net outflows of 46 billion were concentrated in low fee index equities, partially offset by inflows into index fixed income.

Martin: Our institutional channel delivered 7% long term organic base fee growth in the quarter benefiting from client demand for private markets and systematic strategies and.

Martin: In private markets, we saw an aggregate 7 billion of net inflows led by infrastructure and private credit.

Martin: <unk> alternatives added $2 billion of net inflows primarily into global equity market neutral and multi strategy funds run by our systematic teams.

Martin: Finally, Blackrock cash management platform saw $1 billion of net inflows in the first quarter cash management results reflected growth in the Circle Reserve fund, partially offset by seasonal redemptions from U S government funds.

Martin: We've built our business around structural growers Etfs private markets tax managed and systematic data driven investing and whole portfolio solutions. It's not just that they're less market sensitive is that they are secular shifts in the way clients are doing business. That's what gives those categories tailwind when markets are strong they'll grow.

Martin: Faster when markets are weaker they may grow slower, but they still grow our.

Martin: Our first quarter results show our strategy in action, we surpassed our 5% organic base fee growth target, even with more stressed and uncertain markets.

Martin: Markets may take some time to sort out saber rattling around trade and tariffs, but blackrock and our clients see growth and opportunity clients may look to preserve capital in the near term, but ultimately we'll continue investing it will be a market where clients are looking for advice and where blackrock shines as an integrated whole portfolio provider looking ahead, we believe.

Martin: Our strategy will continue to deliver for both our clients and shareholders, resulting in market, leading organic growth differentiated operating leverage and earnings and multiple expansion over time with that I'll turn it over to Larry.

Larry: Thank you Martin good morning, everyone and thank you for joining the call.

Larry: Blackrock positioning and connectivity with clients are stronger than ever and it's clear in our results our structural growth strategy resonated in the first quarter with secular growth across our businesses, even with a volatile market backdrop.

Larry: We delivered above target, 6% organic base fee growth, which represented our best start of the year since 2021.

Larry: That's in a quarter, where the S&P 500 ended 9% off its February peak, it's proof of Blackrock enhanced structural strength, where we can power organic revenue growth that is undeterred by market movement.

Larry: Revenues grew double digit in our as adjusted operating margin expanded by over 100 basis points.

Martin: First quarter total net inflows were approximately 100 to 140 billion, excluding the episodic institutional index equity activity at Martin mentioned.

Martin: Importantly, net inflows an organic base fee growth were well diversified across the entire Blackrock platform.

We invested ahead of our secular growth opportunities and ahead of where our clients are going.

Martin: This quarter represents.

Martin: The largest organic base fee drivers where strategies, where we developed in just the last few years include.

Martin: Including Gi P.

Martin: Our digital asset offerings of <unk> active Etfs as well as our tech and data driven systematic equity equity franchise.

Martin: Strengthen our foundational business is also underpinned results with a record start of the year for Ishares, Etfs, and a 14% technology ACB growth.

Martin: Uncertainty and anxiety about the future of the markets and the economy or dominate a each and every client conversation.

Martin: I was traveling in Europe last week, when the sweeping U S. Tariffs announcements went beyond anything I could have imagined in my 49 years in finance.

Martin: I wrote in my Chairman's letter last week that know Cisco has done more to generate well for four more people than the capital markets.

Martin: As the capital markets have grown.

Martin: More people than ever before are investing in the stock market.

Martin: A little more than 60% of Americans owned stock in one way or another in mutual funds and Etfs individual chairs and especially in their own retirement accounts like <unk> and Iras.

Martin: So this isn't wall Street versus main street.

Martin: The market downturn impacts millions of ordinary People's retirement savings.

Martin: There are investments for a child's college education intuition or steps are taken to have more financial stability.

Martin: We're in a period of geopolitical and economic activity.

Martin: But we have seen this before.

Speaker Change: Whether a big pivots in the world Big structural changes in the market like the financial crisis like the European debt crisis, or COVID-19 or the surging inflation in 2022, Blackrock state in front of our clients and made some of our greatest leaps forward.

Speaker Change: At Blackrock, we are we really challenge ourselves not to get mirrored bear down and all the negativity.

Speaker Change: Navigate to mitigate the move for us to work with each and every client that help it each and every client.

Speaker Change: In recent weeks, we've connected with thousands of clients, providing them with real time information and our views on unfolding events.

Speaker Change: Blackrock expertise is built and delivered through our nearly 23000 employees located in 30 plus countries together they serve clients in more than 100 countries.

Speaker Change: The majority of our workforce is actually based outside the United States. Our international workforce includes people in our global platform centers in Europe, and India, and our international commercial offices all across the world.

Speaker Change: This enables us to bring the global insight and investment strategies locally.

Speaker Change: And to bring local insights globally.

Speaker Change: We need to be an American and.

Speaker Change: In the United States, or German in Germany, or Japanese in Japan, our Canadian into Canada, and Mexico Mexicans in Mexico.

Speaker Change: It is also to bring opportunities we see in each and every country to our global client base is contributing loyalty to build a country's capital marketed retirement system and working for each and every client and each and every country.

Speaker Change: Probably 80% of what we bring to our clients. Our clients are looking looking for a global global strength global expertise. They are looking for scale and operating efficiencies and investment talent.

Speaker Change: But it's the last 20% of the Magic where it occurs is where you show the best of Blackrock in our local setting anywhere in the world doesn't matter whether the client is larger small are where they are but the note that blackrock is working for them and we are and we show that we are working with each and every one of them.

Speaker Change: We're intentionally shaping our platform around the needs of our clients and we talk about this in every quarter result, it's about the clients building a premier global public private market investment and technology firm.

Speaker Change: Wherever we've assembled a leading franchise across active strategies Etfs private markets technology to serve the complete.

Speaker Change: Wage of our clients' needs.

Speaker Change: And to help them in each and every one of their own ambitions.

Speaker Change: Well, they are seeking capital preservation and cash.

Speaker Change: In short duration or capitalizing on opportunities in equities are looking for income and uncorrelated returns in private markets.

Speaker Change: Blackrock comprehensive offering is leading.

Speaker Change: Leading to clients consolidating more of their portfolio with them I look at our cash business is one example of how we help clients manage asset.

Speaker Change: Asset allocation in liquidity.

Speaker Change: Our cash AUM is up at an all time high as of April now its at $950 billion.

Speaker Change: At Blackrock, we are always listening.

Speaker Change: And deeply listening to each and every client and looking ahead to what their future needs will be.

Speaker Change: We're working with them on long term issues, not the ups and downs of the market or the next tweet or the next issue.

Speaker Change: We're constantly testing yourself to see where we need to do more to be more different to be faster to be working on behalf of our clients I said last quarter that it is just the beginning.

Speaker Change: The successful <unk> of Blackrock of G IP and prequel and soon Hbf's are all coming together in a shared story.

Speaker Change: And frequent employees moved into our Blackrock headquarters earlier this year and we expect Hps's joined shortly after the closing, it's one blackrock physically and definitely one Blackrock spiritually.

Speaker Change: We're seeing how sensitive public market is hard to uncertainty in how quickly. They can move in reaction to policy proposals. These dynamics to drive even more capital flows into private markets as investors look to insulate portfolios from tariff impact and seek attractive income and growth.

Speaker Change: Last year, we invested in enriching our private markets information investments data platform to serve our clients more were.

Speaker Change: We are seeing the results today.

Speaker Change: And our position for this type of secular growth as economic uncertainty plays out.

Speaker Change: And the infrastructure of our combination with Gi P. Just six months ago has already unlocked differentiated opportunities for our clients.

Last month, we announced the largest infrastructure investment in our history, we have an agreement in principle to acquire a significant portfolio of 43 ports in more than 20 countries.

Speaker Change: We had a strong existing relationship with the seller of these assets and as a long term shareholder.

Speaker Change: Our partners in this consortium includes meta trading and shipping company one of the world's leading leaders in shipping and logistics and terminal investment limited, which is one of the world's largest global container terminal operators. Upon closing on this deal our consortium, our investors will have a portfolio of approximately.

Speaker Change: <unk> 100 ports around the world together, we know how to invest and own them improve on them and operate them.

Speaker Change: We have recently expanded our AI infrastructure partnership and we're excited to welcome <unk> into videos partners alongside Microsoft and <unk>.

Speaker Change: Since this announcement AIP has attracted significant capital interest and advanced key discussions that AI infrastructure projects.

Speaker Change: The partnership will.

Speaker Change: We will meet the expected target of $30 billion in capital from investors asset odors and corporations and over time, we believe this can unlock over $100 billion.

Speaker Change: And investment potential including debt financing of these infrastructure projects.

Speaker Change: Well, the AIP and our landmark ports announcements are early confirmations of the power and value of Gi P pairing with Blackrock.

Speaker Change: It's unlikely either of us on our own would have been part of these transactions.

Speaker Change: At the heart of the <unk> acquisition, whether our conviction and how our combined relationships, our combined expertise with come together and deliver fantastic investment opportunities for each and every client worldwide.

Speaker Change: We expect to scale, our private credit AUM to approximately $220 billion. Following our planned acquisition of Hps.

Speaker Change: The opportunity set for private credit is expanding as a variety of borrows from startups to large corporate partners seek more flexible execution as they evaluate their financing needs and the longer duration lower risk returns of investment grade private debt are driving increased allocations from insurance companies.

Speaker Change: Blackrock already manages approximately 700 billion.

Speaker Change: For the insurance industry.

Speaker Change: Primarily in index public credit strategies, and our Aladdin technology powers over 100 different insurance companies.

Speaker Change: As Martin mentioned, our investment in <unk> is the latest example of our commitment to supporting partners through broad solutions sets, including investments capital and insurance expertise.

Speaker Change: Blackrock has a meaningful role in helping manage iridium as private market investments going forward, including it infrastructure investments in private credit.

Speaker Change: The upcoming addition of Hps represents even more opportunities to extend our insurance relationships across all private credit markets.

Speaker Change: We also expect <unk> to advance our positioning in the quickly growing arps to wealth space, including through there are approximately $20 billion of wealth focused BDC offerings. We've had recent success with our own non traded bdcs, including basements placements with <unk> and with a large traditional distribution platforms.

Speaker Change: And we're looking forward to leveraging our shared expertise and expanded network to grow our combined franchise even further.

Speaker Change: After closing.

Speaker Change: Our acquisition of <unk> brings leading capabilities in private market data to our technology platform.

Speaker Change: And now triples, our desktop reached to more than 300000 users.

Speaker Change: We believe this acquisition enriches growth potential not only for Blackrock private markets and technology franchises, but for the entire private market industry as a whole.

Speaker Change: Growth is a diverse is diversified across our Aladdin franchise as clients are increasingly choosing to leverage the integrated capabilities of Republic private market workflow and data offerings, it's more important than ever for our clients to have a clear unified view of their portfolio from the building blocks of asset allocation.

Speaker Change: Two the minutiae of trade execution and accounting.

Speaker Change: Ill added recently went live with our first client in Korea, adding to our scaled relationships with leading institutions around the world and looking ahead, we see more opportunity to expand our relationships with <unk> more than 4400 clients.

Speaker Change: Blackrock is the global firm, but one that operates hyper locally we connect our clients across regions to both local and global capital markets.

Speaker Change: The U S investment opportunity set is still going to be very relevant we see our role outside of the United States. The boat both help our clients understand dynamics of the United States market and enabling them to channel investments into their own capital markets.

Speaker Change: Drawing local capital markets underpin the development of each and every country's robust retirement system.

Speaker Change: Blackrock is partnering with governments and sovereign wealth funds and these efforts in India, We expect our joint venture with Geo Blackrock to launch later this year subject to regulatory approvals. We believe we can transform accessed to investing for India's ultimately contributing to the development of our retirement system and a better financial.

Speaker Change: Future for each and every of our clients in India.

Speaker Change: In Saudi Arabia, we launched an investment management platform, the part or the public investment fund to drive capital into the local markets. It's managed by a dedicated Blackrock team in Riyadh.

Speaker Change: We're also working in the Kingdom to help develop our mortgage backed securities market and establishment of a secondary market for mortgage loan, which should help banks lower the cost of a home mortgages and home mortgages, becoming more accessible for citizens in the kingdom.

Speaker Change: In Europe, we are making it easier for more and more people to shift from savings to investing through Etfs in digital first offerings.

Speaker Change: Our European ETF platform crossed over one trillion for the first time this quarter and is well positioned for the future with approximately 40% market share by AUM.

Speaker Change: And the European ETF market is opened in 2025 with record demand.

Speaker Change: I shares European net inflows have more than doubled compared to the flows at this time last year.

Speaker Change: Blackrock Ishares is well positioned to capture significant upside in the coming years, with our leading platform and diversified offering.

Speaker Change: We continue to innovate new products and new uses and recently.

Speaker Change: Our bitcoin Etfs to Europe. This builds on the success of our bid quite ETF launched in the United States last year and Canada in January.

Speaker Change: Continue to gain adoption with another $3 billion of net inflows in the first quarter.

Speaker Change: We see large opportunities for growth in digital assets and more broadly for blockchain and <unk> technology.

Speaker Change: Digital assets drove cash management net inflows this quarter as we continue to manage cash based reserves through our relationship with circle.

Speaker Change: And Blackrock token his eyes digital liquidity fund available on a public blockchain became the first Wall Street issued fund.

Speaker Change: The cross over $1 billion in AUM.

Speaker Change: And just recently surpassed $2 billion.

Speaker Change: Blackrock will continue to look for ways to push not.

Speaker Change: <unk> chain finance forward as part of our leadership and financial technology and innovation and in data.

Speaker Change: Blackrock global scale, our relationships worldwide and locally at our industry, leading technology has made us the first call for more clients and more partnerships than any other time theyre seeking blackrock to have conversations that not about the tick tock of anyone.

Speaker Change: Single day of the markets, they're looking to us to talk to them on long term trends working with them to help them designed a portfolio that can be leading them for better futures.

Speaker Change: We're not a transactional organization Blackrock has always remained to be focused on the long term with consistency always there with capital with corporations, we often have relationships that going back decades, as long term investors in their debt and their equity.

Speaker Change: And through our financial markets Advisory practice, where the advisor of choice that governments central banks and other public and private capital market participants turned to when they need frameworks to support their economy and their capital liquidity.

Speaker Change: Since the financial crisis, FMA has had been more trusted to counsel the fed government degrees in Ireland and bank of Canada, and so many others. We have a long history of providing guidance on practical targeted monetary and fiscal solutions in support of the global economy. We will continue to work with clients we have.

Speaker Change: We'll continue to work with governments around the world to help them navigate develops in the economies and help them build out the global capital markets.

Speaker Change: I would note that the market downturn. This year is different from what we've seen at other shocks since the financial crisis.

Speaker Change: We do not see systemic risks that there is not a pandemic the financial system has shown it's safe and sound and the resiliency the markets trading more more volume with liquidity than any other time with all this volatility the markets have proven to be quite.

Speaker Change: Slide and work quite well.

Speaker Change: Obviously, there's near term uncertainty, but the big macro trend is that were in place 80 days ago actually are still around I know, it's hard to believe only 80 days ago, but the Mega forces like artificial intelligence.

Speaker Change: Surging demand for global infrastructure, and the ongoing evolution of the debt financing presents trap transformative investment opportunities.

Speaker Change: [noise] build outs of data centers in energy the need for power grids in semiconductor plants and other infrastructure are beginning and are going to be growing dramatically over the coming years.

Speaker Change: More policy clarity will help this uncertainty, but I remain very optimistic about the capital coming into the markets over the long term.

Speaker Change: I want to end by saying that I believe that we are in a better position better prepared today to meet our clients' demand at blackrock than ever before.

Speaker Change: This is reflective of our depth.

Speaker Change: The quality of our dialogue and the deepness of our relationships and the length of our relationships with our clients world wide, we are having the most.

Speaker Change: The highest quality of conversations with our clients worldwide here in the United States that ever before.

Speaker Change: Actually in markets like today.

Speaker Change: Clients are putting even a greater premium premium on Blackrock and the differentiating value proposition that Blackrock can offer them. We have remained in good times and bad times their trusted partner.

Speaker Change: I'd like to thank our employees for their steadfast focus on delivering for our clients and driving value for our shareholders.

Speaker Change: Once again, we're very proud that Blackrock generated 6% organic base fee growth against this very complex market backdrop, driven by categories that we've only invested in recent years like.

Speaker Change: And the structural long term growers like infrastructure like Etfs and like systematic equities.

Speaker Change: We lead with a growth mindset, we lead with optimism.

Speaker Change: Long term winners don't get bogged down in the pessimism.

Speaker Change: Break down barriers to find solutions that help build that optimism with each and every client over the long run we tried to see through the pessimism in the short run and that is exactly what we're doing and we're excited for the opportunity to do great work.

Speaker Change: Today and tomorrow throughout 2025 and going forward in the coming years ahead I want to thank everybody. So operator, let's open it up for questions.

Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad. If you do ask a question. Please take your phone off of it speaker setting and use your handset to avoid any potential feedback. Please limit yourself to one question. If you have a follow up please re enter the.

Speaker Change: Q well pause for just a moment to compile the Q&A roster.

Speaker Change: Your first question comes from Michael Cyprus with Morgan Stanley.

Michael Cyprus: Hey, good morning, Barton Hey, Thanks for taking the question, maybe just given so much going on around the world maybe just starting off with the current backdrop curious in your conversations with clients are you getting any sort of sense of how retail and institutional allocations may shift as we look forward from here and how our clients approaching.

Speaker Change: Their decision, making in this current backdrop.

Michael Cyprus: So Michael I mean I.

Speaker Change: We have not seen any capitulation with any clients at all.

Michael Cyprus: Obviously.

Michael Cyprus: We're spending a lot of time with our retail investors were seeing.

Michael Cyprus: <unk> seen an elevated increase in April which is an unusual time to see elevated increases in cash we had $20 billion in inflows this month alone in cash.

Michael Cyprus: Let's be clear there are over $12 trillion in money market funds. So there is a huge reserve of money that will be put to work in the future.

Michael Cyprus: We're having a lot of conversations related to fixed income.

Michael Cyprus: When you think about as the yield curve.

Michael Cyprus: Steepens and we are a big believer the yield curve is going to continue to steepen.

Michael Cyprus: In the coming months as the yield curve continues to steepen, we probably you're going to see more people extend out.

Michael Cyprus: And it already represents more opportunities. If you go out the yield curve and then looked at where private credits trading that youre going to be able to earn.

Michael Cyprus: Eight ish percent or even more today and so with all this market uncertainty a these are not bad places to put.

Michael Cyprus: For an intermediate period of time, where you would be putting your money.

Michael Cyprus: That being said, we have not seen one true capitulation with one client in equities actually in most cases more or more of our clients are saying, hey should we be when do we come in and buy more equities.

Michael Cyprus: Obviously, there's a lot of people.

Michael Cyprus: At this time, you don't buy the dip.

Michael Cyprus: But I would say the one thing of caution.

Michael Cyprus: Okay.

Michael Cyprus: Is.

Michael Cyprus: Over the last 15 years, we've seen a broad.

Michael Cyprus: Broadening of interests in the U S capital markets, we saw the U S capital markets grow to represent 75% of the total value of the world capital markets.

Michael Cyprus: As Europe as is now finally focused on growing instead of controlling.

Michael Cyprus: Could Europe become a new a better destination for capital are there other areas, where you could see reallocations, we as a country benefited by the huge reallocation an over allocation and U S markets.

Michael Cyprus: Or are we going to see a systematic reallocation into other parts of the world we have not seen that yet, but that's a good question to be racing as.

Michael Cyprus: As people are starting to believe that Europe Mike.

Michael Cyprus: As might for the first time in many years focusing on growth not David.

Michael Cyprus: And so.

Michael Cyprus: More questions are being asked but I think the dominant area, where we're seeing conversations are.

Michael Cyprus: Should is this a time to go out the curve in fixed income as the time, whereas this time to add more equity exposure that I would also say very clearly there has been no change in client demand for infrastructure, if anything the demand for infrastructure strategies that can throw off mid teen return.

Michael Cyprus: <unk> over that are that can be a great.

Michael Cyprus: Protector of inflationary pressures over the long run the opportunity in infrastructure, probably is as great as any other time that we've seen the one thing that we are seeing that I think is differentiated.

Michael Cyprus: Most other asset managers are systematic equity team that has had great performance even now.

Michael Cyprus: We continue to see large larger interests and consistent inflows, we saw inflows in systematic equities in the first quarter and in our conversations.

Speaker Change: In some cases moving out of fundamental equities into systematic equities is certainly the conversation to be had but I would say, it's too early to see any major wholesale changes by any major client base.

Speaker Change: Thank you we'll take our next question from Craig Siegenthaler with Bank of America.

Larry Martin: Good morning, Larry Martin Hope everyone's doing well.

Speaker Change: Good morning, Mario Craig.

Speaker Change: I'm good so theres a lot to talk about these days, but I wanted to come back to some comments that you made in your annual letter around private markets entering the retail channel. So given that Blackrock is one of the largest foreign K managers.

Speaker Change: And is the largest D CIO manage Europe, where are you in the build out of adding privates into either existing target date funds or launching new target date funds.

Speaker Change: Have a significant allocation of private are you really just waiting on guidance or actual rulemaking from the department of Labor before you move forward.

Speaker Change: Let me just talk on one thing. This is one of the main reason why we buy frequent.

Speaker Change: And why I believe <unk> will become a major component for the whole ecosystem as I said in my prepared remarks.

Speaker Change: Yes.

Speaker Change: To properly AD, especially in retirement products.

Speaker Change: More private or private investments.

Speaker Change: I believe better data analytics that will create better transparency better price discovery is going to be necessary.

Speaker Change: And this is why we believe in what we're doing and the Aladdin space with <unk>.

Speaker Change: <unk> is going to be a major component of this changing ecosystem in retirement and I'll, let Martin get into the specifics of what we're doing at Blackrock related to those type of products.

Martin: Yes. Thanks, So Greg you've got it you know Blackrock is the number one DC investment only firm the number one D CIO firm and we're a top <unk>.

Speaker Change: Five private markets and Alps manager following our recent acquisitions.

Speaker Change: So we have the investment content, we have the franchise, we have a $500 billion AUM target date business and Larry talked about it in his letter, but we see real potential benefits to retirees in greater diversification and better retirement outcomes through the blending of public and private markets. We have a real strong presence in both.

Speaker Change: Retirement channels and private markets relationships distribution investment opportunities. So a couple of things one we have developed the glide path technology.

Speaker Change: To create a target date style product in terms of allocations and moving allocations across public and private markets to think about growth potential and liquidity in target date style. So we have the glide path technology in order to implement those portfolios.

Speaker Change: We are launching and have plans to launch in the middle of the year, a target date style offering with private markets on our retirement platform one of the larger trust companies in the United States. So we look forward to being to able to update you about that later in the year.

Speaker Change: So we see target date really Craig is the most efficient way to deliver private markets into retirement accounts, particularly defined contribution because this approach would embed. These exposures in allocations already made by target funds. So it's got to be target funds balanced funds or managed accounts, we see that as the most efficient way of <unk>.

Speaker Change: It is those are the types of vehicles that serve as the qualified default investment alternative or the <unk> and they capture the bulk of 401K flows and participant.

Speaker Change: Participant directed individual accounts.

Speaker Change: We do think for the opportunity to be really broad really scalable in the most tangible we'd likely need to see litigation reform or at least some advice reform in the U S to add private markets disposure into DC plans.

Speaker Change: We have innovated we've advocated on behalf of workers for improved retirement solutions and national initiatives to modernize retirement, just this past quarter. We hosted a large group of policymakers and members of Congress to discuss retirement at Blackrock retirement summit in Washington D. C that was very successful this was.

Speaker Change: One of the topics that we discussed so if theres an opportunity to make private markets more accessible in the retirement channel.

Speaker Change: Our plan is to be at the forefront.

Speaker Change: Thank you we'll take our next question from Alex <unk> with Goldman Sachs.

Speaker Change: Good morning, Alex.

Alex: Hi, Larry Good morning, everybody.

Speaker Change: Question for you guys, a little bit more strategically and when I sort of think about periods of prior major market dislocations Blackrock made some real kind of monumental changes to the business.

Speaker Change: <unk>, obviously comes to mind with Ishares acquisition in a while I know you've made a big bet on private markets today as I sort of think about ahead than any other major changes that are yet to come from for our markets and it sounds like you is decoupling from the rest of the world in terms of cap markets is top of mind for you guys does that mean, Blackrock, where it might need to.

Speaker Change: Get even larger outside the U S does that mean that blackrock might need to pursue larger acquisitions outside the U S or how are you thinking about this sort of period of disruption relative to your longer term strategy versus other periods.

Speaker Change: Great question, Alex So let me just say the answer is no.

Speaker Change: It related to any acquisitions outside of the world.

Speaker Change: Our relationship with governments across the world is giving us a real opportunity I talked about what we're doing in India and building out that that market.

Speaker Change: We're very excited about that opportunity in India, we have a couple of announcements of partnerships with other organizations and Latam that we're working on so it's strategically partnering with our long term clients. In addition, if you just looked at our position in Europe with Etfs with 40% market share.

Speaker Change: And ice shares.

Speaker Change: And then there are as I said in my prepared remarks, I was in Europe last week.

Speaker Change: The conversations were having let's say in Netherlands, as they move away from defined benefit to.

Speaker Change: Defined contribution the opportunities we have there and working with all of these different plan sponsors and the major pension plans, there, but across the board our acquisition.

Speaker Change: It would be part of a consortium of radium really gives us a unique opportunity in the insurance space managing insurance assets in Germany, and other parts of Europe.

Speaker Change: Working with in Australia, where I was earlier this year the opportunity we have with GIC.

Speaker Change: And the opportunities we have in infrastructure across the board.

Speaker Change: I think as you know <unk> acquired all the airports and in Malaysia.

Speaker Change: So.

Speaker Change: If anything our our footprint.

Speaker Change: Continues to grow we are now in 30 different countries where.

Speaker Change: With offices in I would say by year end, we maybe be as largest $34 35 different countries. We will be shortly announcing three new countries, where we're opening our offices, we actually manage money for 100 different countries for our clients worldwide. So if anything.

Speaker Change: By helping countries navigate changes in their retirement system like DB to DC by healthy countries begin a retirement system like.

Speaker Change: India are beginning.

Speaker Change: <unk> security system like in Saudi Arabia.

Speaker Change: And then continue to have the food, but no firm is in the position that have these.

Speaker Change: Is this footprint and so many different parts of the world. If anything this has been one of our.

Speaker Change: Great features which I think in many cases had been totally underappreciated, how deeply engaged we are and how deeply local we are with in so many countries and the one thing that we talk about across the board as one of the largest shareholders of companies worldwide are relationships are not transactional where we are.

Speaker Change: Working with the pension fund communities, we're working with all the major corporations and all the different countries and it is gives us a differentiated position with.

Speaker Change: One of the Big reasons I said in the prepared remarks related to the port transaction of our long term relationship with CK Hutchison.

Speaker Change: It gives us the ability to understand the client better.

Speaker Change: And so I actually believe.

Speaker Change: With this type of uncertainty with this type of volatility with this type of sometimes chaos that we're seeing if anything the degree of Blackrock is consistency that we could bring to each and every client.

Speaker Change: <unk> has allowed us to have a broadening conversation.

Speaker Change: Do you want to add to anything.

Speaker Change: I guess that was it.

Speaker Change: Thank you we'll go next to Mike Brown with Wells Fargo Securities.

Mike Brown: Good morning, Mike Good morning, Thanks for taking my question.

Mike Brown: Lots of good color here on the on the international footprint and key strengths of the franchise there, but just wanted to ask about the growing frictions between the U S and other countries may be worried about the risk of some assets potentially moving away from the U S. In general and is there any.

Mike Brown: Risk you think of any backlash to Blackrock, specifically as a U S headquartered manager.

Mike Brown: Great question as I said in my prepared remarks, we are Mexican Mexico Canadian in Canada.

Mike Brown: Dutch in Netherlands.

Mike Brown: British in the UK Irish and Ireland Japanese in Japan. This is not something new.

Mike Brown: This is something that we started this type of emphasis 37 years ago.

Mike Brown: The whole foundation of Blackrock, our first client worldwide was Japanese client was not a U S client.

Mike Brown: And we have systematically made sure that we remain local.

Mike Brown: <unk> at a part of each and every economy and that's what we're trying to do and that's why we're going to be.

Mike Brown: Opening a few more offices that we're going to announce shortly.

Mike Brown: To be even more local in these different.

Mike Brown: Areas, where we have large clients.

Mike Brown: Our client relationships.

Mike Brown: And so there is no question as I also said in my prepared remarks.

When you think about the growth of the U S capital markets, representing 75% of the totality of the global capital markets.

Mike Brown: And it used to be around $50 55.

Mike Brown: Could we see.

Mike Brown: Could the European leaders doing that are now unlocking growth instead of containing growth could this be a time, where people should be reallocating back.

Mike Brown: At least in a market most most clients under invested in Europe.

Mike Brown: Is this a time to at least have a market weighting in Europe or is this a time to have a market overweight.

Mike Brown: You could say this about many other areas.

So we're not our job is to be working with each and every client.

Mike Brown: Lot of it is going to be on relative.

Mike Brown: Evaluation.

Mike Brown: But as I said in my prepared remarks, 80 days ago, everyone talked about U S.

Mike Brown: S.

Mike Brown: Supremacy.

Mike Brown: Italic, the United States that was a major conversations even in Davos 80 days ago about.

Mike Brown: The strength of the U S.

Mike Brown: That is not a conversation that had been have it now, but as I said in my prepared remarks.

Mike Brown: Macro.

Mike Brown: Forces of AI of infrastructure.

Mike Brown: Is just as strong today as it was 80 days ago and all the other macro trends.

Mike Brown: I do believe.

Mike Brown: With the Trump administration works on their growth initiatives that they've talked about the deregulation.

Mike Brown: The simplification of permits and I hope the same thing happens in Europe that is going to unlock an amazing amount of private capital.

Mike Brown: And this is why we why we put such an emphasis in infrastructure and private credit we will be prepared when there is an unlocking of more private capital to invest in infrastructure and data centers and airports.

Mike Brown: In grids and.

Mike Brown: In power and.

Mike Brown: And so all of this remains I know, it's been obscured by the conversations of tariffs being obscure about all the other issues going around but the macro mega.

Mike Brown: Trends have not changed and as I said, if Europe is focused on growth that is a great added opportunity that we didn't see 80 days ago. If other parts of the world are focusing on their own growth. In addition to the growth that we see in the United States. This will be fine in the short run yes, we do have inflation.

Mike Brown: Larry pressures, yes in the short run we have an economy that.

Mike Brown: That is at risk.

Speaker Change: But my long term views have not changed at all despite all up short term fears.

Speaker Change: I want to expand on just one one point that Larry made that I think Mike goes to your question, but also maybe a little bit to Alex's. Prior question, which is if you were to take the page five of our supplement and look at the revenue weighted composite index is for Blackrock AUM you'd see Blackrock has a lot of positive leverage.

Speaker Change: <unk> two growing stock markets outside of the United States.

Speaker Change: That generally tends to be good for our business it tends to be fee rate accretive to our business and so we believe in helping countries grow their capital markets and we see those opportunities of improved capital markets performance outside of the United States as being very much aligned with our financial growth.

Speaker Change: We will take our next question from Patrick Davitt with Autonomous research.

Patrick Davitt: Hi, Patrick Hi, good morning, everyone.

Patrick Davitt: Just a follow up on the ops and 401K discussion on the demand side of things could you expand on what you're actually hearing from the plans in terms of demand for these products.

Speaker Change: If we do get that legal safe Harbor could there be a quick uptake or do you think it'll be a slower build once you get that green light. Thank you.

Speaker Change: Thanks, Patrick for the question. So I would segment the market basically into I'll say three main categories. The first of which would be large large plan sponsors large plan sponsors.

Speaker Change: Move very slowly they have consultants, they're very prudent.

Speaker Change: And take time, that's not where we're seeing rapid growth or rapid interest at this point I would say mid tier plan sponsors are more interested in the smaller plan sponsors are most interested in building. These types of portfolios. In addition, what I would say its platforms right. The platforms at our Trust company is retirement platforms.

Speaker Change: Our registered investment advisors that do advisor sold 401, K business. They all have high degrees of interest.

Speaker Change: In being able to offer these types of products to their clients. So I would expect among the largest 401k planned sponsors sponsors that are consult into intermediate it.

Speaker Change: That carry heavy amounts of fiduciary scrutiny, they're going to be the slowest to move and as you move down into advisor sold there'll be the fastest to move so we're seeing a great amount of velocity down in that bottom part and I mentioned earlier that the trust company that we'd be working with this would be one of the places we'd see as a first mover of course.

Speaker Change: You'll still need to see how pricing comes through how operations come through but I think those things can be done in a shorter period than we did lightpath paycheck, which took multiple years. This I think can be done faster than that because it can be done largely through allocations to funds inside of target date funds that are already themselves.

Speaker Change: Asset allocation vehicles.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Dan Fannon with Jefferies.

Speaker Change: Good morning, Dan Good morning.

Dan Fannon: Yes, good morning.

Dan Fannon: So Martin several moving parts on the exit fee rates I was hoping you could discuss the outlook for your fee rate based on client demand trends and some of the growth and also this quarter Vanguard made some splashy news with cutting in fees can you talk about the competitive backdrop within the ETF market today, and how you may or may not respond to those changes.

Dan Fannon: Yes.

Dan Fannon: So thanks, Dan on the fee rate I'd start by saying, we generated 6% annualized base fee growth in the quarter and organic base fee growth is above target.

Dan Fannon: Over the last 12 months.

Dan Fannon: This is our third consecutive quarter at or above our through the cycle organic base fee target of 6%. So we are continuing a very solid trend of growing revenues and operating income and expanding margin as I mentioned in my remarks on a day count equivalent basis, the annualized effective fee rate was approximately 110th of a <unk>.

Dan Fannon: At this point higher sequentially.

Dan Fannon: Due to continued growth in fundraising within private markets, we had about $84 million in catch up fees in Q1, which increased $60 million kind of quarter on quarter. We've now seen two successive quarters with sequential fee rate increases and our fee rates, 5% higher than it was six months ago and thats even against.

Dan Fannon: Market and FX headwinds and later in 2025, we expect to add the fee rate accretive assets of Hps. So I expect you'll see much of the same effect you saw post the <unk> transaction.

Dan Fannon: Excluding the catch up fees and including the impact of markets and FX towards the second half of the year Youll note. We ended with spot assets lower than average assets, we enter the second quarter with base fees, approximately 1% lower other than the first quarter as.

Dan Fannon: As I've always said.

Dan Fannon: Blackrock AUM base the fee rate, it's a backward looking output of the mix of the stock of assets on the platform and the net new flows it's primarily affected by beta and FX, but also by organic growth.

Dan Fannon: As I mentioned, we would expect to see positive leverage to base fee revenue average fee rates on organic growth over time, as we grow our private markets business and we see really excellent velocity in private markets fundraising and again, we expect to add.

Dan Fannon: We expect to add hps and the latter half of the year just on Ishares pricing our pricing strategy is the same it hasnt change we make targeted price investments in high growth categories, where clients are price sensitive and we can expect two to.

Dan Fannon: To earn backlog earn back foregone revenue through volumes or historical levels of pricing investments have been about one 5% to 5% of global Ishares revenue, we've definitely been well below that in recent years, we've made no ETF price changes in the first quarter, we've always discussed the ETF business having.

Dan Fannon: Different segments, where clients evaluate price relative to many different objectives and see a different value proposition in superior indexes or liquidity capital markets expertise and again in the first quarter, we had $107 billion of ETF flows.

Dan Fannon: Running that's following a $390 billion flow year, which was a record 24. So we're annualizing at a 10% higher rate already on Etfs. So we feel very comfortable with our positioning there.

Speaker Change: Thank you ladies and gentlemen, we have reached the allotted time for questions. Mr. Fink do you have any closing remarks.

Dan Fannon: Yes. Thank you operator, I want to thank everybody for joining us This morning, and your continued interest in Blackrock.

Dan Fannon: Our first quarter results are possible. Thanks to the growth of routes strategic investments that we made over the past years.

Powerade through our integrated asset management and technology platform, we welcome our new colleagues from frequent in this quarter and we look forward to our planned closing Hps later this year.

Dan Fannon: More than ever we're seeing closer to our clients than ever before and each and every client and wherever they're located we believe Blackrock today has as a strong upside for our shareholders in any other time.

Dan Fannon: I want to just thank everybody and have a.

Speaker Change: Ah Com second quarter. Thanks.

Dan Fannon: Okay.

Dan Fannon: That concludes today's teleconference. You may now disconnect.

Dan Fannon: Yes.