UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2017March 31, 2021
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934.
For the transition period from to .
Commission file number 001-33099
BlackRock, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
| 32-0174431 | |
(State or Other Jurisdiction of Incorporation or Organization) |
|
|
55 East 52nd Street, New York, NY 10055
(Address of Principal Executive Offices)
(Zip Code)
(212) 810-5300
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $.01 par value | BLK | New York Stock Exchange | ||
1.250% Notes due 2025 | BLK25 | New York Stock Exchange | ||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes |
| X |
| No |
|
|
Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes |
| X |
| No |
|
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
| ☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes |
|
|
| No |
| X |
As of October 31, 2017,April 30, 2021, there were 160,332,161152,526,401 shares of the registrant’s common stock outstanding.
BlackRock, Inc.
Index to Form 10-Q
PART I
FINANCIAL INFORMATION
|
| Page |
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Item 1. |
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| 1 | |
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| 2 | |
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| 3 | |
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| 4 | |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. | 65 | |
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Item 4. | 66 |
PART II
OTHER INFORMATION
Item 1. | 67 | |
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Item 1A. | 68 | |
Item 2. | 69 | |
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Item 6. | 70 |
i
PART I – FINANCIAL INFORMATION
Condensed Consolidated Statements of Financial Condition
(unaudited)
|
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
(in millions, except shares and per share data) |
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
| ||||
Assets |
|
|
|
|
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|
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|
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|
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|
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|
Cash and cash equivalents |
| $ | 6,165 |
|
| $ | 6,091 |
|
| $ | 6,267 |
|
| $ | 8,664 |
|
Accounts receivable |
|
| 3,183 |
|
|
| 2,350 |
|
|
| 3,825 |
|
|
| 3,535 |
|
Investments |
|
| 1,928 |
|
|
| 1,595 |
|
|
| 7,145 |
|
|
| 6,919 |
|
Assets of consolidated variable interest entities: |
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|
|
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|
|
| ||||||||
Cash and cash equivalents |
|
| 82 |
|
|
| 84 |
| ||||||||
Investments |
|
| 1,286 |
|
|
| 1,008 |
| ||||||||
Other assets |
|
| 46 |
|
|
| 63 |
| ||||||||
Separate account assets |
|
| 147,938 |
|
|
| 149,089 |
|
|
| 102,415 |
|
|
| 104,663 |
|
Separate account collateral held under securities lending agreements |
|
| 27,431 |
|
|
| 27,792 |
|
|
| 15,711 |
|
|
| 16,507 |
|
Property and equipment (net of accumulated depreciation of $708 and $601 at September 30, 2017 and December 31, 2016, respectively) |
|
| 571 |
|
|
| 559 |
| ||||||||
Intangible assets (net of accumulated amortization of $909 and $832 at September 30, 2017 and December 31, 2016, respectively) |
|
| 17,400 |
|
|
| 17,363 |
| ||||||||
Property and equipment (net of accumulated depreciation and amortization of $1,150 and $1,098 at March 31, 2021 and December 31, 2020, respectively) |
|
| 671 |
|
|
| 681 |
| ||||||||
Intangible assets (net of accumulated amortization of $314 and $291 at March 31, 2021 and December 31, 2020, respectively) |
|
| 18,516 |
|
|
| 18,263 |
| ||||||||
Goodwill |
|
| 13,226 |
|
|
| 13,118 |
|
|
| 15,348 |
|
|
| 14,551 |
|
Other assets |
|
| 1,311 |
|
|
| 1,065 |
| ||||||||
Other assets(1) |
|
| 3,961 |
|
|
| 3,199 |
| ||||||||
Total assets |
| $ | 220,567 |
|
| $ | 220,177 |
|
| $ | 173,859 |
|
| $ | 176,982 |
|
Liabilities |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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Accrued compensation and benefits |
| $ | 1,614 |
|
| $ | 1,880 |
|
| $ | 1,077 |
|
| $ | 2,499 |
|
Accounts payable and accrued liabilities |
|
| 1,652 |
|
|
| 1,094 |
|
|
| 1,196 |
|
|
| 1,028 |
|
Liabilities of consolidated variable interest entities |
|
| 319 |
|
|
| 216 |
| ||||||||
Borrowings |
|
| 5,000 |
|
|
| 4,915 |
|
|
| 7,232 |
|
|
| 7,264 |
|
Separate account liabilities |
|
| 147,938 |
|
|
| 149,089 |
|
|
| 102,415 |
|
|
| 104,663 |
|
Separate account collateral liabilities under securities lending agreements |
|
| 27,431 |
|
|
| 27,792 |
|
|
| 15,711 |
|
|
| 16,507 |
|
Deferred income tax liabilities |
|
| 4,966 |
|
|
| 4,840 |
|
|
| 3,794 |
|
|
| 3,673 |
|
Other liabilities |
|
| 1,230 |
|
|
| 1,007 |
| ||||||||
Other liabilities(1) |
|
| 4,594 |
|
|
| 3,692 |
| ||||||||
Total liabilities |
|
| 190,150 |
|
|
| 190,833 |
|
|
| 136,019 |
|
|
| 139,326 |
|
Commitments and contingencies (Note 11) |
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| ||||||||
Commitments and contingencies (Note 15) |
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Temporary equity |
|
|
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Redeemable noncontrolling interests |
|
| 320 |
|
|
| 194 |
|
|
| 2,411 |
|
|
| 2,322 |
|
Permanent Equity |
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BlackRock, Inc. stockholders’ equity |
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Common stock, $0.01 par value; |
|
| 2 |
|
|
| 2 |
|
|
| 2 |
|
|
| 2 |
|
Shares authorized: 500,000,000 at September 30, 2017 and December 31, 2016; Shares issued: 171,252,185 at September 30, 2017 and December 31, 2016; Shares outstanding: 160,528,060 and 161,534,443 at September 30, 2017 and December 31, 2016, respectively |
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| ||||||||
Preferred stock (Note 15) |
|
| — |
|
|
| — |
| ||||||||
Shares authorized: 500,000,000 at March 31, 2021 and December 31, 2020; Shares issued: 172,075,373 at both March 31, 2021 and December 31, 2020; Shares outstanding:152,635,930 and 152,532,885 at March 31, 2021 and December 31, 2020, respectively |
|
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| ||||||||
Additional paid-in capital |
|
| 19,145 |
|
|
| 19,337 |
|
|
| 19,121 |
|
|
| 19,293 |
|
Retained earnings |
|
| 15,065 |
|
|
| 13,660 |
|
|
| 24,872 |
|
|
| 24,334 |
|
Accumulated other comprehensive loss |
|
| (473 | ) |
|
| (716 | ) |
|
| (411 | ) |
|
| (337 | ) |
Treasury stock, common, at cost (10,724,125 and 9,717,742 shares held at September 30, 2017 and December 31, 2016, respectively) |
|
| (3,697 | ) |
|
| (3,185 | ) | ||||||||
Treasury stock, common, at cost (19,439,443 and 19,542,488 shares held at March 31, 2021 and December 31, 2020, respectively) |
|
| (8,204 | ) |
|
| (8,009 | ) | ||||||||
Total BlackRock, Inc. stockholders’ equity |
|
| 30,042 |
|
|
| 29,098 |
|
|
| 35,380 |
|
|
| 35,283 |
|
Nonredeemable noncontrolling interests |
|
| 55 |
|
|
| 52 |
|
|
| 49 |
|
|
| 51 |
|
Total permanent equity |
|
| 30,097 |
|
|
| 29,150 |
|
|
| 35,429 |
|
|
| 35,334 |
|
Total liabilities, temporary equity and permanent equity |
| $ | 220,567 |
|
| $ | 220,177 |
|
| $ | 173,859 |
|
| $ | 176,982 |
|
(1) | At March 31, 2021, cash and cash equivalents, investments, other assets and other liabilities include $186 million, $4,583 million, $95 million, and $1,179 million, respectively, related to consolidated variable interest entities (“VIEs”). At December 31, 2020, cash and cash equivalents, investments, other assets and other liabilities include $155 million, $4,253 million, $90 million, and $952 million, respectively, related to consolidated VIEs. |
See accompanying notes to condensed consolidated financial statements.
1
Condensed Consolidated Statements of Income
(unaudited)
|
| Three Months Ended |
| |||||||||||||||||||||
|
| Three Months Ended |
|
| Nine Months Ended |
|
| March 31, |
| |||||||||||||||
(in millions, except shares and per share data) |
| September 30, |
|
| September 30, |
|
| 2021 |
|
| 2020 |
| ||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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Investment advisory, administration fees and securities lending revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Investment advisory, administration fees and securities lending revenue: |
|
|
|
|
|
|
|
| ||||||||||||||||
Related parties |
| $ | 1,995 |
|
| $ | 1,768 |
|
| $ | 5,662 |
|
| $ | 5,098 |
|
| $ | 2,685 |
|
| $ | 2,175 |
|
Other third parties |
|
| 797 |
|
|
| 778 |
|
|
| 2,335 |
|
|
| 2,296 |
|
|
| 907 |
|
|
| 880 |
|
Total investment advisory, administration fees and securities lending revenue |
|
| 2,792 |
|
|
| 2,546 |
|
|
| 7,997 |
|
|
| 7,394 |
|
|
| 3,592 |
|
|
| 3,055 |
|
Investment advisory performance fees |
|
| 191 |
|
|
| 58 |
|
|
| 309 |
|
|
| 166 |
|
|
| 129 |
|
|
| 41 |
|
Technology and risk management revenue |
|
| 175 |
|
|
| 152 |
|
|
| 497 |
|
|
| 439 |
| ||||||||
Technology services revenue |
|
| 306 |
|
|
| 274 |
| ||||||||||||||||
Distribution fees |
|
| 5 |
|
|
| 10 |
|
|
| 17 |
|
|
| 32 |
|
|
| 340 |
|
|
| 276 |
|
Advisory and other revenue |
|
| 70 |
|
|
| 71 |
|
|
| 202 |
|
|
| 234 |
|
|
| 31 |
|
|
| 64 |
|
Total revenue |
|
| 3,233 |
|
|
| 2,837 |
|
|
| 9,022 |
|
|
| 8,265 |
|
|
| 4,398 |
|
|
| 3,710 |
|
Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Employee compensation and benefits |
|
| 1,088 |
|
|
| 969 |
|
|
| 3,108 |
|
|
| 2,893 |
|
|
| 1,409 |
|
|
| 1,137 |
|
Distribution and servicing costs |
|
| 123 |
|
|
| 114 |
|
|
| 361 |
|
|
| 320 |
|
|
| 505 |
|
|
| 445 |
|
Amortization of deferred sales commissions |
|
| 4 |
|
|
| 8 |
|
|
| 13 |
|
|
| 27 |
| ||||||||
Direct fund expense |
|
| 234 |
|
|
| 200 |
|
|
| 666 |
|
|
| 583 |
|
|
| 320 |
|
|
| 277 |
|
General and administration |
|
| 363 |
|
|
| 312 |
|
|
| 1,014 |
|
|
| 946 |
| ||||||||
Restructuring charge |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76 |
| ||||||||
General and administration expense |
|
| 585 |
|
|
| 1,142 |
| ||||||||||||||||
Amortization of intangible assets |
|
| 27 |
|
|
| 25 |
|
|
| 77 |
|
|
| 75 |
|
|
| 34 |
|
|
| 25 |
|
Total expense |
|
| 1,839 |
|
|
| 1,628 |
|
|
| 5,239 |
|
|
| 4,920 |
|
|
| 2,853 |
|
|
| 3,026 |
|
Operating income |
|
| 1,394 |
|
|
| 1,209 |
|
|
| 3,783 |
|
|
| 3,345 |
|
|
| 1,545 |
|
|
| 684 |
|
Nonoperating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on investments |
|
| 41 |
|
|
| 31 |
|
|
| 128 |
|
|
| 49 |
|
|
| 82 |
|
|
| (40 | ) |
Interest and dividend income |
|
| 15 |
|
|
| 22 |
|
|
| 35 |
|
|
| 33 |
|
|
| 19 |
|
|
| 15 |
|
Interest expense |
|
| (46 | ) |
|
| (52 | ) |
|
| (159 | ) |
|
| (154 | ) |
|
| (55 | ) |
|
| (46 | ) |
Total nonoperating income (expense) |
|
| 10 |
|
|
| 1 |
|
|
| 4 |
|
|
| (72 | ) |
|
| 46 |
|
|
| (71 | ) |
Income before income taxes |
|
| 1,404 |
|
|
| 1,210 |
|
|
| 3,787 |
|
|
| 3,273 |
|
|
| 1,591 |
|
|
| 613 |
|
Income tax expense |
|
| 445 |
|
|
| 333 |
|
|
| 1,090 |
|
|
| 954 |
| ||||||||
Income tax expense (benefit) |
|
| 318 |
|
|
| (14 | ) | ||||||||||||||||
Net income |
|
| 959 |
|
|
| 877 |
|
|
| 2,697 |
|
|
| 2,319 |
|
|
| 1,273 |
|
|
| 627 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests |
|
| 12 |
|
|
| 2 |
|
|
| 31 |
|
|
| (2 | ) |
|
| 74 |
|
|
| (179 | ) |
Net income attributable to BlackRock, Inc. |
| $ | 947 |
|
| $ | 875 |
|
| $ | 2,666 |
|
| $ | 2,321 |
|
| $ | 1,199 |
|
| $ | 806 |
|
Earnings per share attributable to BlackRock, Inc. common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Basic |
| $ | 5.85 |
|
| $ | 5.33 |
|
| $ | 16.41 |
|
| $ | 14.09 |
|
| $ | 7.86 |
|
| $ | 5.19 |
|
Diluted |
| $ | 5.78 |
|
| $ | 5.26 |
|
| $ | 16.23 |
|
| $ | 13.92 |
|
| $ | 7.77 |
|
| $ | 5.15 |
|
Cash dividends declared and paid per share |
| $ | 2.50 |
|
| $ | 2.29 |
|
| $ | 7.50 |
|
| $ | 6.87 |
| ||||||||
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 161,872,716 |
|
|
| 164,129,214 |
|
|
| 162,459,737 |
|
|
| 164,756,355 |
|
|
| 152,567,453 |
|
|
| 155,243,279 |
|
Diluted |
|
| 163,773,546 |
|
|
| 166,256,598 |
|
|
| 164,289,042 |
|
|
| 166,760,912 |
|
|
| 154,301,812 |
|
|
| 156,416,726 |
|
See accompanying notes to condensed consolidated financial statements.
2
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
|
| Three Months Ended |
| |||||||||||||||||||||
|
| Three Months Ended |
|
| Nine Months Ended |
|
| March 31, |
| |||||||||||||||
(in millions) |
| September 30, |
|
| September 30, |
|
| 2021 |
|
| 2020 |
| ||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||||||
Net income |
| $ | 959 |
|
| $ | 877 |
|
| $ | 2,697 |
|
| $ | 2,319 |
|
| $ | 1,273 |
|
| $ | 627 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
| ||||||||||||||||
Foreign currency translation adjustments(1) |
|
| 102 |
|
|
| (38 | ) |
|
| 244 |
|
|
| (151 | ) |
|
| (74 | ) |
|
| (239 | ) |
Other |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| 1 |
| ||||||||
Other comprehensive income (loss) |
|
| 102 |
|
|
| (38 | ) |
|
| 243 |
|
|
| (150 | ) | ||||||||
Comprehensive income |
|
| 1,061 |
|
|
| 839 |
|
|
| 2,940 |
|
|
| 2,169 |
| ||||||||
Comprehensive income (loss) |
|
| 1,199 |
|
|
| 388 |
| ||||||||||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests |
|
| 12 |
|
|
| 2 |
|
|
| 31 |
|
|
| (2 | ) |
|
| 74 |
|
|
| (179 | ) |
Comprehensive income attributable to BlackRock, Inc. |
| $ | 1,049 |
|
| $ | 837 |
|
| $ | 2,909 |
|
| $ | 2,171 |
|
| $ | 1,125 |
|
| $ | 567 |
|
(1) | Amounts for the three months ended |
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Statements of Changes in Equity
(unaudited)
For the Three Months Ended March 31, 2021
(in millions) |
| Additional Paid-in Capital(1) |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Treasury Stock Common |
|
| Total BlackRock Stockholders’ Equity |
|
| Nonredeemable Noncontrolling Interests |
|
| Total Permanent Equity |
|
| Redeemable Noncontrolling Interests / Temporary Equity |
| ||||||||
December 31, 2016 |
| $ | 19,339 |
|
| $ | 13,660 |
|
| $ | (716 | ) |
| $ | (3,185 | ) |
| $ | 29,098 |
|
| $ | 52 |
|
| $ | 29,150 |
|
| $ | 194 |
|
Net income |
|
| — |
|
|
| 2,666 |
|
|
| — |
|
|
| — |
|
|
| 2,666 |
|
|
| 3 |
|
|
| 2,669 |
|
|
| 28 |
|
Dividends paid |
|
| — |
|
|
| (1,259 | ) |
|
| — |
|
|
| — |
|
|
| (1,259 | ) |
|
| — |
|
|
| (1,259 | ) |
|
| — |
|
Stock-based compensation |
|
| 417 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 417 |
|
|
| — |
|
|
| 417 |
|
|
| — |
|
PNC preferred stock capital contribution |
|
| 193 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 193 |
|
|
| — |
|
|
| 193 |
|
|
| — |
|
Retirement of preferred stock |
|
| (193 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (193 | ) |
|
| — |
|
|
| (193 | ) |
|
| — |
|
Issuance of common shares related to employee stock transactions |
|
| (612 | ) |
|
| — |
|
|
| — |
|
|
| 621 |
|
|
| 9 |
|
|
| — |
|
|
| 9 |
|
|
| — |
|
Employee tax withholdings related to employee stock transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (308 | ) |
|
| (308 | ) |
|
| — |
|
|
| (308 | ) |
|
| — |
|
Shares repurchased |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (825 | ) |
|
| (825 | ) |
|
| — |
|
|
| (825 | ) |
|
| — |
|
Subscriptions (redemptions/ distributions) — noncontrolling interest holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (14 | ) |
|
| (14 | ) |
|
| 338 |
|
Net consolidations (deconsolidations) of sponsored investment funds |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14 |
|
|
| 14 |
|
|
| (240 | ) |
Other comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| 243 |
|
|
| — |
|
|
| 243 |
|
|
| — |
|
|
| 243 |
|
|
| — |
|
Adoption of new accounting pronouncement |
|
| 3 |
|
|
| (2 | ) |
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
September 30, 2017 |
| $ | 19,147 |
|
| $ | 15,065 |
|
| $ | (473 | ) |
| $ | (3,697 | ) |
| $ | 30,042 |
|
| $ | 55 |
|
| $ | 30,097 |
|
| $ | 320 |
|
(in millions) | Additional Paid-in Capital(1) |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Treasury Stock Common |
|
| Total BlackRock Stockholders’ Equity |
|
| Nonredeemable Noncontrolling Interests |
|
| Total Permanent Equity |
|
| Redeemable Noncontrolling Interests / Temporary Equity |
| ||||||||
December 31, 2020 | $ | 19,295 |
|
| $ | 24,334 |
|
| $ | (337 | ) |
| $ | (8,009 | ) |
| $ | 35,283 |
|
| $ | 51 |
|
| $ | 35,334 |
|
| $ | 2,322 |
|
Net income |
| — |
|
|
| 1,199 |
|
|
| — |
|
|
| — |
|
|
| 1,199 |
|
|
| — |
|
|
| 1,199 |
|
|
| 74 |
|
Dividends declared ($4.13 per share) |
| — |
|
|
| (661 | ) |
|
| — |
|
|
| — |
|
|
| (661 | ) |
|
| — |
|
|
| (661 | ) |
|
| — |
|
Stock-based compensation |
| 196 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 196 |
|
|
| — |
|
|
| 196 |
|
|
| — |
|
Issuance of common shares related to employee stock transactions |
| (368 | ) |
|
| — |
|
|
| — |
|
|
| 373 |
|
|
| 5 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
Employee tax withholdings related to employee stock transactions |
| — |
|
|
| — |
|
|
| — |
|
|
| (268 | ) |
|
| (268 | ) |
|
| — |
|
|
| (268 | ) |
|
| — |
|
Shares repurchased |
| — |
|
|
| — |
|
|
| — |
|
|
| (300 | ) |
|
| (300 | ) |
|
| — |
|
|
| (300 | ) |
|
| — |
|
Subscriptions (redemptions/distributions) — noncontrolling interest holders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
|
| 622 |
|
Net consolidations (deconsolidations) of sponsored investment funds |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (607 | ) |
Other comprehensive income (loss) |
| — |
|
|
| — |
|
|
| (74 | ) |
|
| — |
|
|
| (74 | ) |
|
| — |
|
|
| (74 | ) |
|
| — |
|
March 31, 2021 | $ | 19,123 |
|
| $ | 24,872 |
|
| $ | (411 | ) |
| $ | (8,204 | ) |
| $ | 35,380 |
|
| $ | 49 |
|
| $ | 35,429 |
|
| $ | 2,411 |
|
| Amounts include $2 million of common stock at both |
For the Three Months Ended March 31, 2020
(in millions) | Additional Paid-in Capital(1) |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Treasury Stock Common |
|
| Total BlackRock Stockholders’ Equity |
|
| Nonredeemable Noncontrolling Interests |
|
| Total Permanent Equity |
|
| Redeemable Noncontrolling Interests / Temporary Equity |
| ||||||||
December 31, 2019 | $ | 19,188 |
|
| $ | 21,662 |
|
| $ | (571 | ) |
| $ | (6,732 | ) |
| $ | 33,547 |
|
| $ | 66 |
|
| $ | 33,613 |
|
| $ | 1,316 |
|
Net income |
| — |
|
|
| 806 |
|
|
| — |
|
|
| — |
|
|
| 806 |
|
|
| — |
|
|
| 806 |
|
|
| (179 | ) |
Dividends declared ($3.63 per share) |
| — |
|
|
| (596 | ) |
|
| — |
|
|
| — |
|
|
| (596 | ) |
|
| — |
|
|
| (596 | ) |
|
| — |
|
Stock-based compensation |
| 149 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 149 |
|
|
| — |
|
|
| 149 |
|
|
| — |
|
Issuance of common shares related to employee stock transactions |
| (450 | ) |
|
| — |
|
|
| — |
|
|
| 453 |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
Employee tax withholdings related to employee stock transactions |
| — |
|
|
| — |
|
|
| — |
|
|
| (257 | ) |
|
| (257 | ) |
|
| — |
|
|
| (257 | ) |
|
| — |
|
Shares repurchased |
| — |
|
|
| — |
|
|
| — |
|
|
| (400 | ) |
|
| (400 | ) |
|
| — |
|
|
| (400 | ) |
|
| — |
|
Subscriptions (redemptions/distributions) — noncontrolling interest holders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9 | ) |
|
| (9 | ) |
|
| 871 |
|
Net consolidations (deconsolidations) of sponsored investment funds |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (568 | ) |
Other comprehensive income (loss) |
| — |
|
|
| — |
|
|
| (239 | ) |
|
| — |
|
|
| (239 | ) |
|
| — |
|
|
| (239 | ) |
|
| — |
|
March 31, 2020 | $ | 18,887 |
|
| $ | 21,872 |
|
| $ | (810 | ) |
| $ | (6,936 | ) |
| $ | 33,013 |
|
| $ | 57 |
|
| $ | 33,070 |
|
| $ | 1,440 |
|
(1) | Amounts include $2 million of common stock at both March 31, 2020 and December 31, 2019. |
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statements of Changes in Equity
(unaudited)
(in millions) |
| Additional Paid-in Capital(1) |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Treasury Stock Common |
|
| Total BlackRock Stockholders’ Equity |
|
| Nonredeemable Noncontrolling Interests |
|
| Total Permanent Equity |
|
| Redeemable Noncontrolling Interests / Temporary Equity |
| ||||||||
December 31, 2015 |
| $ | 19,407 |
|
| $ | 12,033 |
|
| $ | (448 | ) |
| $ | (2,489 | ) |
| $ | 28,503 |
|
| $ | 77 |
|
| $ | 28,580 |
|
| $ | 464 |
|
Net income |
|
| — |
|
|
| 2,321 |
|
|
| — |
|
|
| — |
|
|
| 2,321 |
|
|
| (2 | ) |
|
| 2,319 |
|
|
| — |
|
Dividends paid |
|
| — |
|
|
| (1,171 | ) |
|
| — |
|
|
| — |
|
|
| (1,171 | ) |
|
| — |
|
|
| (1,171 | ) |
|
| — |
|
Stock-based compensation |
|
| 408 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 408 |
|
|
| — |
|
|
| 408 |
|
|
| — |
|
PNC preferred stock capital contribution |
|
| 172 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 172 |
|
|
| — |
|
|
| 172 |
|
|
| — |
|
Retirement of preferred stock |
|
| (172 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (172 | ) |
|
| — |
|
|
| (172 | ) |
|
| — |
|
Issuance of common shares related to employee stock transactions |
|
| (654 | ) |
|
| — |
|
|
| — |
|
|
| 688 |
|
|
| 34 |
|
|
| — |
|
|
| 34 |
|
|
| — |
|
Employee tax withholdings related to employee stock transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (268 | ) |
|
| (268 | ) |
|
| — |
|
|
| (268 | ) |
|
| — |
|
Shares repurchased |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (850 | ) |
|
| (850 | ) |
|
| — |
|
|
| (850 | ) |
|
| — |
|
Net tax benefit (shortfall) from stock-based compensation |
|
| 77 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 77 |
|
|
| — |
|
|
| 77 |
|
|
| — |
|
Subscriptions (redemptions/ distributions) — noncontrolling interest holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18 | ) |
|
| (18 | ) |
|
| 1,017 |
|
Net consolidations (deconsolidations) of sponsored investment funds |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (881 | ) |
Other comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| (150 | ) |
|
| — |
|
|
| (150 | ) |
|
| — |
|
|
| (150 | ) |
|
| — |
|
September 30, 2016 |
| $ | 19,238 |
|
| $ | 13,183 |
|
| $ | (598 | ) |
| $ | (2,919 | ) |
| $ | 28,904 |
|
| $ | 57 |
|
| $ | 28,961 |
|
| $ | 600 |
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||
(in millions) |
| September 30, |
|
| March 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
| ||||||||
Operating activities |
|
|
|
|
|
|
|
| ||||||||
Net income |
| $ | 2,697 |
|
| $ | 2,319 |
|
| $ | 1,273 |
|
| $ | 627 |
|
Adjustments to reconcile net income to cash flows from operating activities: |
|
|
|
|
|
|
|
| ||||||||
Adjustments to reconcile net income to net cash provided by/(used in) operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 190 |
|
|
| 198 |
|
|
| 97 |
|
|
| 82 |
|
Noncash lease expense |
|
| 31 |
|
|
| 29 |
| ||||||||
Stock-based compensation |
|
| 417 |
|
|
| 408 |
|
|
| 196 |
|
|
| 149 |
|
Deferred income tax expense (benefit) |
|
| 175 |
|
|
| (6 | ) |
|
| 102 |
|
|
| (133 | ) |
Assets and liabilities of consolidated VIEs: |
|
|
|
|
|
|
|
| ||||||||
Change in cash and cash equivalents |
|
| (19 | ) |
|
| (127 | ) | ||||||||
Net (gains) losses within consolidated VIEs |
|
| (95 | ) |
|
| (34 | ) | ||||||||
Net (purchases) proceeds within consolidated VIEs |
|
| (148 | ) |
|
| (855 | ) | ||||||||
Charitable Contribution |
|
| — |
|
|
| 589 |
| ||||||||
Gain related to the Charitable Contribution |
|
| — |
|
|
| (122 | ) | ||||||||
Other investment gains |
|
| — |
|
|
| (244 | ) | ||||||||
Net (gains) losses within consolidated sponsored investment products |
|
| (104 | ) |
|
| 391 |
| ||||||||
Net (purchases) proceeds within consolidated sponsored investment products |
|
| (612 | ) |
|
| (860 | ) | ||||||||
(Earnings) losses from equity method investees |
|
| (92 | ) |
|
| (71 | ) |
|
| (25 | ) |
|
| 40 |
|
Distributions of earnings from equity method investees |
|
| 24 |
|
|
| 16 |
|
|
| 8 |
|
|
| 13 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (776 | ) |
|
| (336 | ) |
|
| (311 | ) |
|
| (5 | ) |
Investments, trading |
|
| (145 | ) |
|
| (278 | ) |
|
| 82 |
|
|
| 132 |
|
Other assets |
|
| (190 | ) |
|
| (114 | ) |
|
| (731 | ) |
|
| (1,669 | ) |
Accrued compensation and benefits |
|
| (267 | ) |
|
| (484 | ) |
|
| (1,432 | ) |
|
| (1,222 | ) |
Accounts payable and accrued liabilities |
|
| 595 |
|
|
| 309 |
|
|
| 155 |
|
|
| (214 | ) |
Other liabilities |
|
| 120 |
|
|
| 17 |
|
|
| 698 |
|
|
| 1,479 |
|
Cash flows from operating activities |
|
| 2,486 |
|
|
| 962 |
| ||||||||
Cash flows from investing activities |
|
|
|
|
|
|
|
| ||||||||
Net cash provided by/(used in) operating activities |
|
| (573 | ) |
|
| (938 | ) | ||||||||
Investing activities |
|
|
|
|
|
|
|
| ||||||||
Purchases of investments |
|
| (400 | ) |
|
| (292 | ) |
|
| (146 | ) |
|
| (45 | ) |
Proceeds from sales and maturities of investments |
|
| 121 |
|
|
| 215 |
|
|
| 110 |
|
|
| 17 |
|
Distributions of capital from equity method investees |
|
| 26 |
|
|
| 26 |
|
|
| 34 |
|
|
| 61 |
|
Net consolidations (deconsolidations) of sponsored investment funds |
|
| (35 | ) |
|
| (74 | ) |
|
| (38 | ) |
|
| (15 | ) |
Acquisitions |
|
| (102 | ) |
|
| (30 | ) | ||||||||
Acquisitions, net of cash acquired |
|
| (1,062 | ) |
|
| — |
| ||||||||
Purchases of property and equipment |
|
| (100 | ) |
|
| (88 | ) |
|
| (48 | ) |
|
| (52 | ) |
Cash flows from investing activities |
|
| (490 | ) |
|
| (243 | ) | ||||||||
Cash flows from financing activities |
|
|
|
|
|
|
|
| ||||||||
Net cash provided by/(used in) investing activities |
|
| (1,150 | ) |
|
| (34 | ) | ||||||||
Financing activities |
|
|
|
|
|
|
|
| ||||||||
Proceeds from long-term borrowings |
|
| 697 |
|
|
| — |
|
|
| — |
|
|
| 999 |
|
Repayments of long-term borrowings |
|
| (700 | ) |
|
| — |
| ||||||||
Cash dividends paid |
|
| (1,259 | ) |
|
| (1,171 | ) |
|
| (661 | ) |
|
| (596 | ) |
Proceeds from stock options exercised |
|
| — |
|
|
| 26 |
| ||||||||
Repurchases of common stock |
|
| (1,133 | ) |
|
| (1,118 | ) |
|
| (568 | ) |
|
| (657 | ) |
Net proceeds from (repayments of) borrowings by consolidated sponsored investment products |
|
| 13 |
|
|
| 22 |
| ||||||||
Net (redemptions/distributions paid)/subscriptions received from noncontrolling interest holders |
|
| 324 |
|
|
| 999 |
|
|
| 620 |
|
|
| 862 |
|
Excess tax benefit from stock-based compensation |
|
| — |
|
|
| 81 |
| ||||||||
Other financing activities |
|
| (12 | ) |
|
| 3 |
|
|
| 5 |
|
|
| (2 | ) |
Cash flows from financing activities |
|
| (2,083 | ) |
|
| (1,180 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents |
|
| 161 |
|
|
| (168 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents |
|
| 74 |
|
|
| (629 | ) | ||||||||
Cash and cash equivalents, beginning of period |
|
| 6,091 |
|
|
| 6,083 |
| ||||||||
Cash and cash equivalents, end of period |
| $ | 6,165 |
|
| $ | 5,454 |
| ||||||||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
| ||||||||
Cash paid for: |
|
|
|
|
|
|
|
| ||||||||
Interest |
| $ | 150 |
|
| $ | 144 |
| ||||||||
Income taxes (net of refunds) |
| $ | 916 |
|
| $ | 910 |
| ||||||||
Net cash provided by/(used in) financing activities |
|
| (591 | ) |
|
| 628 |
| ||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| (7 | ) |
|
| (79 | ) | ||||||||
Net increase/(decrease) in cash, cash equivalents and restricted cash |
|
| (2,321 | ) |
|
| (423 | ) | ||||||||
Cash, cash equivalents and restricted cash, beginning of period |
|
| 8,681 |
|
|
| 4,846 |
| ||||||||
Cash, cash equivalents and restricted cash, end of period |
| $ | 6,360 |
|
| $ | 4,423 |
| ||||||||
Supplemental schedule of noncash investing and financing transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
| $ | 612 |
|
| $ | 654 |
|
| $ | 368 |
|
| $ | 450 |
|
PNC preferred stock capital contribution |
| $ | 193 |
|
| $ | 172 |
| ||||||||
Charitable Contribution of an investment |
| $ | — |
|
| $ | (589 | ) | ||||||||
Increase (decrease) in noncontrolling interests due to net consolidation (deconsolidation) of sponsored investment funds |
| $ | (226 | ) |
| $ | (881 | ) |
| $ | (607 | ) |
| $ | (568 | ) |
See accompanying notes to condensed consolidated financial statements.
6
Notes to the Condensed Consolidated Financial Statements
(unaudited)
1. Business Overview
BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, “BlackRock” or the “Company”) is a leading publicly traded investment management firm providing a broad range of investment management and risk managementtechnology services to institutional and retail clients worldwide.
BlackRock’s diverse platform of alpha-seeking active, (alpha)index and index (beta)cash management investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares®exchange-traded funds (“ETFs”), separate accounts, collective investmenttrust funds (“CTFs”) and other pooled investment vehicles. BlackRock also offers antechnology services, including the investment and risk management technology platform, Aladdin®, risk analytics,Aladdin Wealth, eFront, Cachematrix and FutureAdvisor, as well as advisory and technology services and solutions to a broad base of institutional and wealth management investors.
At September 30, 2017, The PNC Financial Services Group, Inc. (“PNC”) held 21.4% of the Company’s voting common stock and 21.9% of the Company’s capital stock, which includes outstanding common and nonvoting preferred stock.
clients.
2. Significant Accounting Policies
Basis of Presentation.
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its controlled subsidiaries. Noncontrolling interests (“NCI”) on the condensed consolidated statements of financial condition represents the portion of consolidated sponsored investment funds in which the Company does not have direct equity ownership. Accounts and transactions between consolidated entities have been eliminated.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.
Certain financial information that normally is included in annual financial statements, including certain financial statement footnotes, is not required for interim reporting purposes and has been condensed or omitted herein. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2020, which was filed with the Securities and Exchange Commission (“SEC”) on February 28, 201725, 2021 (“20162020 Form 10-K”).
The interim financial information at September 30, 2017March 31, 2021 and for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 is unaudited. However, in the opinion of management, the interim information includes all normal recurring adjustments necessary for the fair presentation of the Company’s results for the periods presented. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year.
Certain items previously reported have beenprior period presentations and disclosures, while not required to be recast, were reclassified to conform to theensure comparability with current year presentation. Beginning with the first quarter of 2017, Aladdin revenue previously reported within “BlackRock Solutions® and advisory” has been presented within “Technology and risk management revenue” on the condensed consolidated statements of income. The remaining previously reported “BlackRock Solutions and advisory” revenue is currently reported as part of “Advisory and other revenue.” The prior period amounts reported for BlackRock Solutions and advisory for the three and nine months ended September 30, 2016 have been reclassified to conform to the current presentation.
Accounting Pronouncements Adopted in the Nine Months Ended September 30, 2017.
Accounting for Share-Based Payments. In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the condensed consolidated
7
statements of cash flows. The Company adopted ASU 2016-09 as of January 1, 2017. ASU 2016-09 requires all excess tax benefits and deficiencies to be recognized in income tax expense on the condensed consolidated statements of income. Accordingly, the Company recorded a discrete income tax benefit of $81 million during the three months ended March 31, 2017 for vested restricted stock units where the grant date stock price was lower than the vesting date stock price. The new guidance will increase the volatility of income tax expense as a result of fluctuations in the Company’s stock price. Upon adoption, the Company elected to account for forfeitures as they occur, which did not have a material impact on the condensed consolidated financial statements. In addition, the Company elected to present excess tax benefits and deficiencies prospectively in operating activities on the condensed consolidated statements of cash flows.classifications.
Fair Value Measurements.Measurements
Hierarchy of Fair Value Inputs. Inputs. The Company uses a fair value hierarchy that prioritizes inputs to valuation approaches used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:
Level 1 Inputs:
Quoted prices (unadjusted) in active markets for identical assets or liabilities at the reporting date.
• | Level 1 assets may include listed mutual funds, ETFs, listed equities and certain exchange-traded derivatives. |
Level 1 assets may include listed mutual funds, ETFs, listed equities and certain exchange-traded derivatives.
Level 2 Inputs:
Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; quotes from pricing services or brokers for which the Company can determine that orderly transactions took place at the quoted price or that the inputs used to arrive at the price are observable; and inputs other than quoted prices that are observable, such as models or other valuation methodologies.
Level 2 assets may include debt securities, investments in CLOs, short-term floating-rate notes, asset-backed securities, securities held within consolidated hedge funds, restricted public securities valued at a discount, as well as over-the-counter derivatives, including interest and inflation rate swaps and foreign currency exchange contracts that have inputs to the valuations that generally can be corroborated by observable market data.
• | Level 2 assets may include debt securities, investments in collateralized loan obligations (“CLOs”), bank loans, short-term floating-rate notes, asset-backed securities, securities held within consolidated hedge funds, restricted public securities valued at a discount, as well as over-the-counter derivatives, including interest and inflation rate swaps and foreign currency exchange contracts that have inputs to the valuations that generally can be corroborated by observable market data. |
Level 3 Inputs:
Unobservable inputs for the valuation of the asset or liability, which may include nonbinding broker quotes. Level 3 assets include investments for which there is little, if any, market activity. These inputs require significant management judgment or estimation.
Level 3 assets may include direct private equity investments held within consolidated funds and investments in CLOs.
• | Level 3 assets may include direct private equity investments held within consolidated funds, investments in CLOs and bank loans held within consolidated CLOs. |
Level 3 liabilities include contingent liabilities related to acquisitions valued based upon discounted cash flow analyses using unobservable market data.
• | Level 3 liabilities may include contingent liabilities related to borrowings of consolidated CLOs and acquisitions valued based upon discounted cash flow analyses using unobservable market data. |
Significance of Inputs.The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.
Valuation Approaches.The fair values of certain Level 3 assets and liabilities were determined using various valuation approaches as appropriate, including third-party pricing vendors, broker quotes and market and income approaches. Such quotes and modeled prices are evaluated for reasonableness through various procedures, including due diligence reviews of third-party pricing vendors, variance analyses, consideration of the current market environment and other analytical procedures.
A significant number of inputs used to value equity, debt securities, and investments in CLOs and bank loans is sourced from third-party pricing vendors. Generally, prices obtained from pricing vendors are categorized as Level 1 inputs for identical securities traded in active markets and as Level 2 for other similar securities if the vendor uses observable inputs in determining the price. Annually, BlackRock’s internal valuation committee or other designated groups review both the valuation approaches, including the general assumptions and methods used to value various asset classes, and
8
operational processes with these vendors. On a quarterly basis, meetings are held with key vendors to identify any significant changes to the vendors’ processes.
In addition, quotes obtained from brokers generally are nonbinding and categorized as Level 3 inputs. However, if the Company is able to determine that market participants have transacted for the asset in an orderly manner near the quoted price or if the Company can determine that the inputs used by the broker are observable, the quote is classified as a Level 2 input.
Investments Measured at Net Asset Values. As a practical expedient, the Company uses net asset value (“NAV”) as the fair value for certain investments. The inputs to value these investments may include BlackRockthe Company’s capital accounts for its partnership interests in various alternative investments, including hedge funds, real assets and private equity funds, which may be adjusted by using the returns of certain market indices. The various partnerships generally are investment companies, which record their underlying investments at fair value based on fair value policies established by management of the underlying fund. Fair value policies at the underlying fund generally require the fund to utilize pricing/valuation information from third-party sources, including independent appraisals. However, in some instances, current valuation information for illiquid securities or securities in markets that are not active may not be available from any third-party source or fund management may conclude that the valuations that are available from third-party sources are not reliable. In these instances, fund management may perform model-based analytical valuations that could be used as an input to value these investments.
Derivative InstrumentsFair Value Assets and Liabilities of Consolidated CLO. The Company applies the fair value option provisions for eligible assets, including bank loans, held by a consolidated CLO. As the fair value of the financial assets of the consolidated CLO is more observable than the fair value of the borrowings of the consolidated CLO, the Company measures the fair value of the borrowings of the consolidated CLO equal to the fair value of the assets of the consolidated CLO less the fair value of the Company’s economic interest in the CLO.
Derivatives and Hedging Activities. The Company does not use derivative financial instruments for trading or speculative purposes. The Company uses derivative financial instruments primarily for purposes of hedging exposures to fluctuations in foreign currency exchange rates of certain assets and liabilities, and market exposures for certain seed investments. However, certain consolidated sponsored investment funds may also utilize derivatives as a part of their investment strategy.
The Company records all derivative financial instruments as either assets or liabilities at fair value on a gross basis in the condensed consolidated statements of financial condition. Credit risks are managed through master netting and collateral support agreements. The amounts related to the right to reclaim or the obligation to return cash collateral may not be used to offset amounts due under the derivative instruments in the normal course of settlement. Therefore, such amounts are not offset against fair value amounts recognized for derivative instruments with the same counterparty and are included in other assets and other liabilities. Changes in the fair value of the Company’s derivative financial instruments are recognized in earnings and, where applicable, are offset by the corresponding gain or loss on the related foreign-denominated assets or liabilities or hedged investments, on the condensed consolidated statements of income.
The Company may also use financial instruments designated as net investment hedges for accounting purposes to hedge net investments in international subsidiaries whose functional currency is not U.S.US dollars. The gain or loss from revaluing accountingnet investment hedges of net investments in foreign operations at the spot rate is deferred and reported within accumulated other comprehensive income (loss) on the condensed consolidated statements of financial condition. Amounts excluded from the effectiveness assessment are reported in the condensed consolidated statements of income using a systematic and rational method. The Company reassesses the effectiveness of its net investment hedge on a quarterly basis.
Money Market Fee Waivers. The Company is currently voluntarily waiving a portion of its management fees on certain money market funds to ensure that they maintain a targeted level of daily net investment income (the “Yield Support waivers”). During the three and nine months ended September 30, 2017, these waivers resulted in a reduction of management fees of approximately $0million and $6 million, respectively. During the three and nine months ended September 30, 2016, these waivers resulted in a reduction of management fees of approximately $17million and $42 million, respectively. Approximately 0% and 45% of Yield Support waivers for the nine months ended September 30, 2017 and 2016, respectively, were offset by a reduction of BlackRock’s distribution and servicing costs paid to a financial intermediary. BlackRock may increase or decrease the level of Yield Support waivers in future periods.at least quarterly.
Separate Account Assets and Liabilities. Separate account assets are maintained by BlackRock Life Limited, a wholly owned subsidiary of the Company, which is a registered life insurance company in the United Kingdom, and represent segregated assets held for purposes of funding individual and group pension contracts. The life insurance company does not underwrite any insurance contracts that involve any insurance risk transfer from the insured to the life insurance company. The separate account assets primarily include equity securities, debt securities, money market funds and derivatives. The separate account assets are not subject to general claims of the creditors of BlackRock. These separate account assets and the related equal and offsetting liabilities are recorded as separate account assets and separate account liabilities on the condensed consolidated statements of financial condition.
The net investment income attributable to separate account assets supporting individual and group pension contracts accrues directly to the contract owner and is not reported on the condensed consolidated statements of income. While BlackRock has no economic interest in these separate account assets and liabilities, BlackRock earns policy administration and management fees associated with these products, which are included in investment advisory, administration fees and securities lending revenue on the condensed consolidated statements of income.
9
Separate Account Collateral Assets Held and Liabilities Under Securities Lending Agreements. The Company facilitates securities lending arrangements whereby securities held by separate accounts maintained by BlackRock Life Limited are lent to third parties under global master securities lending agreements. In exchange, the Company receives legal title to the collateral with minimum values generally ranging from approximately 102% to 112% of the value of the securities lent in order to reduce counterparty risk. The required collateral value is calculated on a daily basis. The global master securities lending agreements provide the Company the right to request additional collateral or, in the event of borrower default, the right to liquidate collateral. The securities lending transactions entered into by the Company are accompanied by an agreement that entitles the Company to request the borrower to return the securities at any time; therefore, these transactions are not reported as sales.
The Company records on the condensed consolidated statements of financial condition the cash and noncash collateral received under these BlackRock Life Limited securities lending arrangements as its own asset in addition to an equal and offsetting collateral liability for the obligation to return the collateral. The securities lending revenue earned from lending securities held by the separate accounts is included in investment advisory, administration fees and securities lending revenue on the condensed consolidated statements of income. During the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, the Company had not0t resold or repledged any of the collateral received under these arrangements. At September 30, 2017March 31, 2021 and December 31, 2016,2020, the fair value of loaned securities held by separate accounts was approximately $24.7$14.4 billion and $25.7$15.2 billion, respectively, and the fair value of the collateral held under these securities lending agreements was approximately $27.4$15.7 billion and $27.8$16.5 billion, respectively.
Recent Accounting Pronouncements Not Yet Adopted.
Revenue from Contracts with Customers. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance also changes the accounting for certain contract costs and revises the criteria for determining if an entity is acting as a principal or agent in certain arrangements.Money Market Fee Waivers. The Company continues to evaluate the impact of ASU 2014-09 on the presentation and recognitionmay voluntarily waive a portion of its revenue contractsmanagement fees on certain money market funds to ensure that they maintain a targeted level of daily net investment income (the “Yield Support waivers”). During the three months ended March 31, 2021, these waivers resulted in a reduction of management fees of approximately $70 million, which was partially offset by a reduction of BlackRock’s distribution and certain contract costs.servicing costs paid to financial intermediaries. There were no Yield Support waivers for the three months ended March 31, 2020. The most significant change identified to date relatesCompany may increase or decrease the level of Yield Support waivers in future periods.
3. Acquisition
On February 1, 2021, the Company acquired 100% of the equity interests of Aperio Group, LLC (the “Aperio Transaction” or “Aperio”), a pioneer in customizing tax-optimized index equity separately managed accounts (“SMAs”) for approximately $1.1 billion in cash, using existing cash resources. The acquisition of Aperio increased BlackRock’s SMA assets under management and expanded the breadth of the Company’s capabilities via tax-managed strategies across factors, broad market indexing, and investor Environmental, Social, and Governance preferences across all asset classes.
The purchase price for the Aperio Transaction was allocated to the presentationassets acquired and liabilities assumed based upon their estimated fair values at the date of certain distribution costs, which are currently presented net against revenues (contra-revenue) and will likely be presented as an expense on a gross basis. the transaction. The Company currently expects such net gross upgoodwill recognized in connection with the acquisition is primarily attributable to annual revenueanticipated synergies from the transaction. The amount of goodwill expected to be deductible for tax purposes is approximately $1 billion with a corresponding gross up$0.5 billion. A summary of the fair values of the assets acquired and liabilities assumed in this acquisition is as follows(1):
|
| Initial |
|
| |
|
| Estimate of |
|
| |
(in millions) |
| Fair Value |
|
| |
Accounts receivable |
| $ | 16 |
|
|
Finite-lived intangible assets: |
|
|
|
|
|
Customer relationships(2) |
|
| 270 |
|
|
Other |
|
| 17 |
|
|
Goodwill |
|
| 799 |
|
|
Deferred income tax liabilities |
|
| (28 | ) |
|
Other liabilities assumed |
|
| (12 | ) |
|
Total consideration, net of cash acquired |
| $ | 1,062 |
|
|
|
|
|
|
|
|
Summary of consideration, net of cash acquired: |
|
|
|
|
|
Cash paid |
| $ | 1,066 |
|
|
Cash acquired |
|
| (4 | ) |
|
Total consideration, net of cash acquired |
| $ | 1,062 |
|
|
|
|
|
|
|
|
(1) | At this time, the Company does not expect material changes to the value of the assets acquired or liabilities assumed in conjunction with the transaction. |
(2) | The fair value was determined based on the excess earnings method (a Level 3 input), has a weighted-average estimated useful life of approximately 10 years and is amortized using the accelerated amortization method. |
Finite-lived intangible assets are amortized over their estimated useful lives, which range from three to annual expense. The Company is currently evaluating which transition method it will apply when it adopts the new revenue recognition guidance in the first quarter of 2018.
Recognition and Measurement of Financial Instruments.In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 amends guidance on the classification and measurement of financial instruments, including significant revisions in accounting10 years. Amortization expense related to the classificationfinite-lived intangible assets was $7 million for the three months ended March 31, 2021. The finite-lived intangible assets had a weighted-average remaining useful life of approximately 10 years with remaining amortization expense as follows:
(in millions) |
|
|
|
|
Year |
| Amount |
| |
2021 (excluding the three months ended March 31, 2021) |
| $ | 30 |
|
2022 |
|
| 40 |
|
2023 |
|
| 38 |
|
2024 |
|
| 32 |
|
2025 |
|
| 29 |
|
Thereafter |
|
| 111 |
|
Total |
| $ | 280 |
|
The financial results of Aperio have been included in BlackRock’s condensed consolidated financial statements from the closing of the Aperio Transaction. For the three months ended March 31, 2021, Aperio contributed $13 million of revenue and measurementdid 0t have a material impact to net income attributable to BlackRock, Inc. Consequently, the Company has not presented pro forma combined results of investments in equity securitiesoperations for this acquisition.
4. Cash, Cash Equivalents and presentationRestricted Cash
The following table provides a reconciliation of certain fair value changes for financial liabilities when the fair value option is elected. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. The Company does not currently expect the reclassification of unrealized gains(losses) on equity securitiescash and cash equivalents reported within accumulated other comprehensive income to retained earnings to be material upon adoption effective January 1, 2018.
Leases. In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize assets and liabilities arising from most operating leases on the condensed consolidated statements of financial condition. The Company expectscondition to record assetsthe cash, cash equivalents, and liabilities for its current operating leases upon adoption of ASU 2016-02 and does not expect the adoption to have a material impact on its results of operations orrestricted cash flows. ASU 2016-02 is effective for the Company on January 1, 2019, and the Company intends to apply the practical expedients allowed by the standard upon transition. See Note 13 of the 2016 Form 10-K for information on the Company’s operating lease commitments.
Cash Flow Classification. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which amends and clarifies the current guidance to reduce diversity in practice of the classification of certain cash receipts and payments inreported within the condensed consolidated statements of cash flows. The Company is currently evaluating the impact of adopting ASU 2016-15, which is effective for the Company on January 1, 2018 with early adoption permitted. The Company must apply the guidance retrospectively to all periods presented.
|
| March 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
(in millions) |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 6,267 |
|
| $ | 8,664 |
|
Restricted cash included in other assets(1) |
|
| 93 |
|
|
| 17 |
|
Total cash, cash equivalents and restricted cash |
| $ | 6,360 |
|
| $ | 8,681 |
|
10
(1) | Amount as of March 31, 2021, primarily includes cash, which is restricted by a certain regulatory authority. The duration of this restriction is currently unknown. |
5. Investments
A summary of the carrying value of total investments is as follows:
|
| September 30, |
|
| December 31, |
| ||
(in millions) |
| 2017 |
|
| 2016 |
| ||
Available-for-sale investments |
| $ | 104 |
|
| $ | 80 |
|
Held-to-maturity investments |
|
| 76 |
|
|
| 51 |
|
Trading investments: |
|
|
|
|
|
|
|
|
Consolidated sponsored investment funds |
|
| 507 |
|
|
| 465 |
|
Other equity and debt securities |
|
| 131 |
|
|
| 101 |
|
Deferred compensation plan mutual funds |
|
| 54 |
|
|
| 59 |
|
Total trading investments |
|
| 692 |
|
|
| 625 |
|
Other investments: |
|
|
|
|
|
|
|
|
Equity method investments(1) |
|
| 944 |
|
|
| 730 |
|
Cost method investments(2) |
|
| 92 |
|
|
| 91 |
|
Carried interest(3) |
|
| 20 |
|
|
| 18 |
|
Total other investments |
|
| 1,056 |
|
|
| 839 |
|
Total investments |
| $ | 1,928 |
|
| $ | 1,595 |
|
| March 31, |
|
| December 31, |
| ||
(in millions) | 2021 |
|
| 2020 |
| ||
Debt securities: |
|
|
|
|
|
|
|
Held-to-maturity investments | $ | 308 |
|
| $ | 310 |
|
Trading securities |
| 1,496 |
|
|
| 1,964 |
|
Total debt securities |
| 1,804 |
|
|
| 2,274 |
|
Equity securities at FVTNI(1) |
| 2,679 |
|
|
| 2,317 |
|
Equity method investments(2) |
| 1,223 |
|
|
| 1,081 |
|
Bank loans |
| 258 |
|
|
| 248 |
|
Federal Reserve Bank stock(3) |
| 95 |
|
|
| 94 |
|
Carried interest(4) |
| 805 |
|
|
| 627 |
|
Other investments(5) |
| 281 |
|
|
| 278 |
|
Total investments | $ | 7,145 |
|
| $ | 6,919 |
|
| Fair value recorded through net income (“FVTNI”). |
(2) | Equity method investments primarily include BlackRock’s direct investments in certain BlackRock sponsored investment funds. |
|
|
| Carried interest |
(5) | Other investments include BlackRock’s investments in nonmarketable equity securities, which are measured at cost, adjusted for observable price changes and private equity and real asset investments of consolidated sponsored investment products measured at fair value. |
Available-for-Sale Investments
At both September 30, 2017 and December 31, 2016, available-for-sale investments primarily included certain investments in CLOs and seed investments in BlackRock sponsored mutual funds. The cost of these investments approximated carrying value.
Held-to-Maturity Investments
The carrying value of held-to-maturity investments was $76$308 million and $51$310 million at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively. Held-to-maturity investments included certain investments in CLOs and foreign government debt held primarily for regulatory purposes and certain investments in CLOs.purposes. The amortized cost (carrying value) of these investments approximated fair value.value (primarily a Level 2 input). At September 30, 2017,March 31, 2021, $11 million of these investments mature between one to five years, $135 million of these investments mature between five to ten10 years and $65$162 million of these investments mature after ten10 years.
Trading InvestmentsDebt Securities and Equity Securities at FVTNI
A summary of the cost and carrying value of trading investmentsdebt securities and equity securities at FVTNI is as follows:
|
|
|
|
|
|
|
|
|
|
| |||||
| March 31, 2021 |
|
| December 31, 2020 |
| ||||||||||
(in millions) | Cost |
|
| Carrying Value |
|
| Cost |
|
| Carrying Value |
| ||||
Trading debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt | $ | 1,121 |
|
| $ | 1,132 |
|
| $ | 1,591 |
|
| $ | 1,641 |
|
Government debt |
| 259 |
|
|
| 259 |
|
|
| 203 |
|
|
| 210 |
|
Asset/mortgage-backed debt |
| 119 |
|
|
| 105 |
|
|
| 132 |
|
|
| 113 |
|
Total trading debt securities | $ | 1,499 |
|
| $ | 1,496 |
|
| $ | 1,926 |
|
| $ | 1,964 |
|
Equity securities at FVTNI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities/mutual funds | $ | 2,383 |
|
| $ | 2,679 |
|
| $ | 2,055 |
|
| $ | 2,317 |
|
Total equity securities at FVTNI | $ | 2,383 |
|
| $ | 2,679 |
|
| $ | 2,055 |
|
| $ | 2,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
|
| December 31, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
| ||||||||||
|
| Cost |
|
| Carrying Value |
|
| Cost |
|
| Carrying Value |
| ||||
Trading investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan mutual funds |
| $ | 34 |
|
| $ | 54 |
|
| $ | 41 |
|
| $ | 59 |
|
Equity securities/multi-asset mutual funds |
|
| 323 |
|
|
| 353 |
|
|
| 290 |
|
|
| 308 |
|
Debt securities/fixed income mutual funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt |
|
| 160 |
|
|
| 162 |
|
|
| 128 |
|
|
| 128 |
|
Government debt |
|
| 59 |
|
|
| 60 |
|
|
| 60 |
|
|
| 60 |
|
Asset/mortgage backed debt |
|
| 62 |
|
|
| 63 |
|
|
| 70 |
|
|
| 70 |
|
Total trading investments |
| $ | 638 |
|
| $ | 692 |
|
| $ | 589 |
|
| $ | 625 |
|
At September 30, 2017, trading investments included $268 million of debt securities and $239 million of equity securities held by consolidated sponsored investment funds accounted for as VREs, $54 million of certain deferred compensation plan mutual fund investments and $131 million of other equity and debt securities.
11
At December 31, 2016, trading investments included $246 million of debt securities and $219 million of equity securities held by consolidated sponsored investment funds accounted for as VREs, $59 million of certain deferred compensation plan mutual fund investments and $101 million of other equity and debt securities.
Other
In addition, the Company accounts for its interest in PennyMac Financial Services, Inc. (“PennyMac”) as an equity method investment. At September 30, 2017 and December 31, 2016 the Company’s investment in PennyMac was excluded from investments in the table above and included in other assets on the condensed consolidated statements of financial condition. The carrying value and fair value of the Company’s interest (approximately 20% or 16 million shares and units) was approximately $333 million and $277 million, respectively, at September 30, 2017 and approximately $301 million and $259 million, respectively, at December 31, 2016. The fair value of the Company’s interest reflected the PennyMac stock price at September 30, 2017 and December 31, 2016, respectively (a Level 1 input). The Company performed an other-than-temporary impairment analysis as of September 30, 2017 and determined the difference in fair value below the carrying value to be temporary.
4.6. Consolidated Voting Rights EntitiesSponsored Investment Products
The Company consolidates certain sponsored investment funds accounted for as VREsvoting rights entities (“VREs”) because it is deemed to control such funds. The investments owned by these consolidated VREs are classified as trading investments. The following table presents the balances related to these consolidated VREs that were recorded on the condensed consolidated statements of financial condition, including BlackRock’s net interest in these funds:
|
| September 30, |
|
| December 31, |
| ||
(in millions) |
| 2017 |
|
| 2016 |
| ||
Cash and cash equivalents |
| $ | 73 |
|
| $ | 53 |
|
Trading investments |
|
| 507 |
|
|
| 465 |
|
Other assets |
|
| 28 |
|
|
| 15 |
|
Other liabilities |
|
| (61 | ) |
|
| (50 | ) |
Noncontrolling interests ("NCI") |
|
| (68 | ) |
|
| (39 | ) |
BlackRock’s net interests in consolidated VREs |
| $ | 479 |
|
| $ | 444 |
|
BlackRock’s total exposure to consolidated VREs represents the value of its economic ownership interest in these sponsored investment funds. Valuation changes associated with investments held at fair value by these consolidated VREs are reflected in nonoperating income (expense) and partially offset in net income (loss) attributable to noncontrolling interests for the portion not attributable to BlackRock.
The Company cannot readily access cash and cash equivalents held by consolidated VREs to use in its operating activities.
12
In the normal course of business, the Company is the manager of various types of sponsored investment vehicles, which may be considered variable interest entities (“VIEs”).VIEs. The Company may from time to time own equity or debt securities or enter into derivatives with the vehicles, each of which are considered variable interests. The Company’s involvement in financing the operations of the VIEs is generally limited to its investments in the entity. The Company consolidates entities when it is determined to be the primary beneficiary (“PB”).
Consolidated VIEs. The Company’s consolidated VIEs include certain sponsored investment fundsproducts in which BlackRock has an investment and as the investment manager, is deemed to have both the power to direct the most significant activities of the fundsproducts and the right to receive benefits (or the obligation to absorb losses) that could potentially be significant to these sponsored investment funds.products. The assets of these VIEs are not available to creditors of the Company. In addition, the investors in these VIEs have no recourse to the credit of the Company.
Consolidated VIE assetsThe following table presents the balances related to these consolidated sponsored investment products accounted for as VIEs and liabilities are presented after intercompany eliminationsVREs that were recorded on the consolidated statements of financial condition, including BlackRock’s net interest in the following table:these products:
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||||||||||||||||
(in millions) |
| VIEs |
|
| VREs |
|
| Total |
|
| VIEs |
|
| VREs |
|
| Total |
| ||||||
Cash and cash equivalents |
| $ | 186 |
|
| $ | 56 |
|
| $ | 242 |
|
| $ | 155 |
|
| $ | 51 |
|
| $ | 206 |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading debt securities |
|
| 1,329 |
|
|
| 129 |
|
|
| 1,458 |
|
|
| 1,618 |
|
|
| 310 |
|
|
| 1,928 |
|
Equity securities at FVTNI |
|
| 2,022 |
|
|
| 388 |
|
|
| 2,410 |
|
|
| 1,592 |
|
|
| 413 |
|
|
| 2,005 |
|
Bank loans |
|
| 258 |
|
|
| — |
|
|
| 258 |
|
|
| 248 |
|
|
| — |
|
|
| 248 |
|
Other investments |
|
| 196 |
|
|
| — |
|
|
| 196 |
|
|
| 191 |
|
|
| — |
|
|
| 191 |
|
Carried interest |
|
| 778 |
|
|
| — |
|
|
| 778 |
|
|
| 604 |
|
|
| — |
|
|
| 604 |
|
Total investments |
|
| 4,583 |
|
|
| 517 |
|
|
| 5,100 |
|
|
| 4,253 |
|
|
| 723 |
|
|
| 4,976 |
|
Other assets |
|
| 95 |
|
|
| 13 |
|
|
| 108 |
|
|
| 90 |
|
|
| 9 |
|
|
| 99 |
|
Other liabilities(1) |
|
| (1,179 | ) |
|
| (37 | ) |
|
| (1,216 | ) |
|
| (952 | ) |
|
| (70 | ) |
|
| (1,022 | ) |
Noncontrolling interests |
|
| (2,372 | ) |
|
| (88 | ) |
|
| (2,460 | ) |
|
| (2,193 | ) |
|
| (180 | ) |
|
| (2,373 | ) |
BlackRock's net interests in consolidated investment products |
| $ | 1,313 |
|
| $ | 461 |
|
| $ | 1,774 |
|
| $ | 1,353 |
|
| $ | 533 |
|
| $ | 1,886 |
|
|
| September 30, |
|
| December 31, |
| ||
(in millions) |
| 2017 |
|
| 2016 |
| ||
Assets of consolidated VIEs: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 82 |
|
| $ | 84 |
|
Investments |
|
| 1,286 |
|
|
| 1,008 |
|
Other assets |
|
| 46 |
|
|
| 63 |
|
Total investments and other assets |
|
| 1,332 |
|
|
| 1,071 |
|
Liabilities of consolidated VIEs |
|
| (319 | ) |
|
| (216 | ) |
Noncontrolling interests |
|
| (307 | ) |
|
| (207 | ) |
BlackRock's net interests in consolidated VIEs |
| $ | 788 |
|
| $ | 732 |
|
(1) | At both March 31, 2021 and December 31, 2020, other liabilities of VIEs primarily include deferred carried interest liabilities and borrowings of a consolidated CLO. |
BlackRock’s total exposure to consolidated sponsored investment products represents the value of its economic ownership interest in these sponsored investment products. Valuation changes associated with investments held at fair value by these consolidated sponsored investment products are reflected in nonoperating income (expense) and partially offset in net income (loss) attributable to noncontrolling interests for the portion not attributable to BlackRock.
The Company cannot readily access cash and cash equivalents held by consolidated sponsored investment products to use in its operating activities.
Net gain (loss) related to consolidated VIEs is presented in the following table:
|
| Three Months Ended |
|
| |||||
|
| March 31, |
|
| |||||
(in millions) |
| 2021 |
|
| 2020 |
|
| ||
|
|
|
|
|
|
|
|
|
|
Nonoperating net gain (loss) on consolidated VIEs |
| $ | 83 |
|
| $ | (309 | ) |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NCI on consolidated VIEs |
| $ | 55 |
|
| $ | (158 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating net gain (loss) on consolidated VIEs |
| $ | 29 |
|
| $ | 19 |
|
| $ | 95 |
|
| $ | 34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) attributable to NCI on consolidated VIEs |
| $ | 10 |
|
| $ | 1 |
|
| $ | 28 |
|
| $ | (2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Consolidated
7. Variable Interest Entities
Nonconsolidated VIEs. At September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company’s carrying value of assets and liabilities included on the condensed consolidated statements of financial condition pertaining to nonconsolidated VIEs and its maximum risk of loss related to VIEs for which it held a variable interest, but for which it was not the PB,primary beneficiary, was as follows:
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Advisory Fee |
|
| Other Net Assets |
|
| Maximum |
| |||
At September 30, 2017 |
| Investments |
|
| Advisory Fee Receivables |
|
| Other Net Assets (Liabilities) |
|
| Maximum Risk of Loss(1) |
| |||||||||||||||||||
At March 31, 2021 | Investments |
|
| Receivables |
|
| (Liabilities) |
|
| Risk of Loss(1) |
| ||||||||||||||||||||
Sponsored investment products |
| $ | 227 |
|
| $ | 15 |
|
| $ | (7 | ) |
| $ | 259 |
| $ | 612 |
|
| $ | 96 |
|
| $ | (12 | ) |
| $ | 725 |
|
At December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
At December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Sponsored investment products |
| $ | 171 |
|
| $ | 9 |
|
| $ | (8 | ) |
| $ | 197 |
| $ | 662 |
|
| $ | 71 |
|
| $ | (13 | ) |
| $ | 750 |
|
(1) | At both |
The net assets of sponsored investment products that are nonconsolidated VIEs approximated $5 billion and $4$16 billion at September 30, 2017both March 31, 2021 and December 31, 2016, respectively. 2020.
13
6.8. Fair Value Disclosures
Fair Value Hierarchy
Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value
September 30, 2017 |
| Quoted Prices in Active Markets for Identical Assets |
|
| Significant Other Observable Inputs |
|
| Significant Unobservable Inputs |
|
| Investments Measured at |
|
| Other Assets Not Held at |
|
| September 30, |
| ||||||
(in millions) |
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
|
| NAV(1) |
|
| Fair Value(2) |
|
| 2017 |
| ||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale |
| $ | 8 |
|
| $ | 73 |
|
| $ | 23 |
|
| $ | — |
|
| $ | — |
|
| $ | 104 |
|
Held-to-maturity securities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76 |
|
|
| 76 |
|
Trading: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
Deferred compensation plan mutual funds |
|
| 54 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 54 |
|
Equity securities/Multi-asset mutual funds |
|
| 353 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 353 |
|
Debt securities / fixed income mutual funds |
|
| 1 |
|
|
| 282 |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 285 |
|
Total trading |
|
| 408 |
|
|
| 282 |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 692 |
|
Other investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity method: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and fixed income mutual funds |
|
| 314 |
|
|
| — |
|
|
| — |
|
|
| 10 |
|
|
| — |
|
|
| 324 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 608 |
|
|
| 12 |
|
|
| 620 |
|
Total equity method |
|
| 314 |
|
|
| — |
|
|
| — |
|
|
| 618 |
|
|
| 12 |
|
|
| 944 |
|
Cost method investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 92 |
|
|
| 92 |
|
Carried interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20 |
|
|
| 20 |
|
Total investments |
|
| 730 |
|
|
| 355 |
|
|
| 25 |
|
|
| 618 |
|
|
| 200 |
|
|
| 1,928 |
|
Separate account assets |
|
| 112,957 |
|
|
| 34,268 |
|
|
| — |
|
|
| — |
|
|
| 713 |
|
|
| 147,938 |
|
Separate account collateral held under securities lending agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
| 19,093 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,093 |
|
Debt securities |
|
| — |
|
|
| 8,338 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,338 |
|
Total separate account collateral held under securities lending agreements |
|
| 19,093 |
|
|
| 8,338 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27,431 |
|
Investments of consolidated VIEs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private / public equity(3) |
|
| 5 |
|
|
| 3 |
|
|
| 114 |
|
|
| 69 |
|
|
| 83 |
|
|
| 274 |
|
Equity securities |
|
| 338 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 338 |
|
Debt securities |
|
| — |
|
|
| 350 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 350 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 64 |
|
|
| — |
|
|
| 64 |
|
Carried interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 260 |
|
|
| 260 |
|
Total investments of consolidated VIEs |
|
| 343 |
|
|
| 353 |
|
|
| 114 |
|
|
| 133 |
|
|
| 343 |
|
|
| 1,286 |
|
Total |
| $ | 133,123 |
|
| $ | 43,314 |
|
| $ | 139 |
|
| $ | 751 |
|
| $ | 1,256 |
|
| $ | 178,583 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate account collateral liabilities under securities lending agreements |
| $ | 19,093 |
|
| $ | 8,338 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 27,431 |
|
Other liabilities(4) |
|
| — |
|
|
| 7 |
|
|
| 228 |
|
|
| — |
|
|
| — |
|
|
| 235 |
|
Total |
| $ | 19,093 |
|
| $ | 8,345 |
|
| $ | 228 |
|
| $ | — |
|
| $ | — |
|
| $ | 27,666 |
|
March 31, 2021 (in millions) | Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Investments Measured at NAV(1) |
|
| Other(2) |
|
| March 31, 2021 |
| ||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity investments | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 308 |
|
| $ | 308 |
|
Trading securities |
| — |
|
|
| 1,482 |
|
|
| 14 |
|
|
| — |
|
|
| — |
|
|
| 1,496 |
|
Total debt securities |
| — |
|
|
| 1,482 |
|
|
| 14 |
|
|
| — |
|
|
| 308 |
|
|
| 1,804 |
|
Equity securities at FVTNI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities/mutual funds |
| 2,679 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,679 |
|
Equity method: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and fixed income mutual funds |
| 337 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 337 |
|
Hedge funds/funds of hedge funds |
| — |
|
|
| — |
|
|
| — |
|
|
| 327 |
|
|
| — |
|
|
| 327 |
|
Private equity funds |
| — |
|
|
| — |
|
|
| — |
|
|
| 355 |
|
|
| — |
|
|
| 355 |
|
Real assets funds |
| — |
|
|
| — |
|
|
| — |
|
|
| 204 |
|
|
| — |
|
|
| 204 |
|
Total equity method |
| 337 |
|
|
| — |
|
|
| — |
|
|
| 886 |
|
|
| — |
|
|
| 1,223 |
|
Bank loans |
| — |
|
|
| 23 |
|
|
| 235 |
|
|
| — |
|
|
| — |
|
|
| 258 |
|
Federal Reserve Bank Stock |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 95 |
|
|
| 95 |
|
Carried interest |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 805 |
|
|
| 805 |
|
Other investments(3) |
| — |
|
|
| — |
|
|
| 9 |
|
|
| 96 |
|
|
| 176 |
|
|
| 281 |
|
Total investments |
| 3,016 |
|
|
| 1,505 |
|
|
| 258 |
|
|
| 982 |
|
|
| 1,384 |
|
|
| 7,145 |
|
Other assets(4) |
| 178 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 178 |
|
Separate account assets |
| 71,368 |
|
|
| 30,095 |
|
|
| — |
|
|
| — |
|
|
| 952 |
|
|
| 102,415 |
|
Separate account collateral held under securities lending agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
| 12,025 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,025 |
|
Debt securities |
| — |
|
|
| 3,686 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,686 |
|
Total separate account collateral held under securities lending agreements |
| 12,025 |
|
|
| 3,686 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,711 |
|
Total | $ | 86,587 |
|
| $ | 35,286 |
|
| $ | 258 |
|
| $ | 982 |
|
| $ | 2,336 |
|
| $ | 125,449 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate account collateral liabilities under securities lending agreements | $ | 12,025 |
|
| $ | 3,686 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 15,711 |
|
Other liabilities(5) |
| — |
|
|
| 35 |
|
|
| 280 |
|
|
| — |
|
|
| — |
|
|
| 315 |
|
Total | $ | 12,025 |
|
| $ | 3,721 |
|
| $ | 280 |
|
| $ | — |
|
| $ | — |
|
| $ | 16,026 |
|
(1) | Amounts are comprised of certain investments measured at fair value using NAV (or its equivalent), as a practical expedient. |
(2) | Amounts are comprised of investments held at |
(3) | Level 3 |
(4) |
|
(5) | Level 2 amount primarily includes fair value of derivatives (See Note 9, Derivatives and Hedging, for more information). Level 3 amounts primarily include borrowings of a consolidated CLO classified based on the significance of unobservable inputs used for calculating the fair value of consolidated CLO assets, and contingent liabilities related to certain acquisitions (see Note |
14
Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value
December 31, 2016 (in millions) |
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Investments Measured at NAV(1) |
|
| Other Assets Not Held at Fair Value(2) |
|
| December 31, 2016 |
| ||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale |
| $ | 7 |
|
| $ | 49 |
|
| $ | 24 |
|
| $ | — |
|
| $ | — |
|
| $ | 80 |
|
Held-to-maturity securities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 51 |
|
|
| 51 |
|
Trading: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan mutual funds |
|
| 59 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 59 |
|
Equity/Multi-asset mutual funds |
|
| 308 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 308 |
|
Debt securities / fixed income mutual funds |
|
| 1 |
|
|
| 250 |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 258 |
|
Total trading |
|
| 368 |
|
|
| 250 |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 625 |
|
Other investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity method: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and fixed income mutual funds |
|
| 323 |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 328 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 394 |
|
|
| 8 |
|
|
| 402 |
|
Total equity method |
|
| 323 |
|
|
| — |
|
|
| — |
|
|
| 399 |
|
|
| 8 |
|
|
| 730 |
|
Cost method investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 91 |
|
|
| 91 |
|
Carried interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18 |
|
|
| 18 |
|
Total investments |
|
| 698 |
|
|
| 299 |
|
|
| 31 |
|
|
| 399 |
|
|
| 168 |
|
|
| 1,595 |
|
Separate account assets |
|
| 109,663 |
|
|
| 38,542 |
|
|
| — |
|
|
| — |
|
|
| 884 |
|
|
| 149,089 |
|
Separate account collateral held under securities lending agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
| 22,173 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,173 |
|
Debt securities |
|
| — |
|
|
| 5,619 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,619 |
|
Total separate account collateral held under securities lending agreements |
|
| 22,173 |
|
|
| 5,619 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27,792 |
|
Investments of consolidated VIEs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private / public equity(3) |
|
| 3 |
|
|
| 2 |
|
|
| 112 |
|
|
| 89 |
|
|
| 79 |
|
|
| 285 |
|
Equity securities |
|
| 278 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 278 |
|
Debt securities |
|
| — |
|
|
| 274 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 274 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 63 |
|
|
| — |
|
|
| 63 |
|
Carried interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 108 |
|
|
| 108 |
|
Total investments of consolidated VIEs |
|
| 281 |
|
|
| 276 |
|
|
| 112 |
|
|
| 152 |
|
|
| 187 |
|
|
| 1,008 |
|
Total |
| $ | 132,815 |
|
| $ | 44,736 |
|
| $ | 143 |
|
| $ | 551 |
|
| $ | 1,239 |
|
| $ | 179,484 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate account collateral liabilities under securities lending agreements |
| $ | 22,173 |
|
| $ | 5,619 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 27,792 |
|
Other liabilities(4) |
|
| — |
|
|
| 7 |
|
|
| 115 |
|
|
| — |
|
|
| — |
|
|
| 122 |
|
Total |
| $ | 22,173 |
|
| $ | 5,626 |
|
| $ | 115 |
|
| $ | — |
|
| $ | — |
|
| $ | 27,914 |
|
December 31, 2020 (in millions) | Quoted Prices in Active Markets for Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Investments Measured at NAV(1) |
|
| Other(2) |
|
| December 31, 2020 |
| ||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity investments | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 310 |
|
| $ | 310 |
|
Trading securities |
| — |
|
|
| 1,953 |
|
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 1,964 |
|
Total debt securities |
| — |
|
|
| 1,953 |
|
|
| 11 |
|
|
| — |
|
|
| 310 |
|
|
| 2,274 |
|
Equity securities at FVTNI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities/mutual funds |
| 2,317 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,317 |
|
Equity method: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and fixed income mutual funds |
| 235 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 235 |
|
Hedge funds/funds of hedge funds |
| — |
|
|
| — |
|
|
| — |
|
|
| 313 |
|
|
| — |
|
|
| 313 |
|
Private equity funds |
| — |
|
|
| — |
|
|
| — |
|
|
| 315 |
|
|
| — |
|
|
| 315 |
|
Real assets funds |
| — |
|
|
| — |
|
|
| — |
|
|
| 218 |
|
|
| — |
|
|
| 218 |
|
Total equity method |
| 235 |
|
|
| — |
|
|
| — |
|
|
| 846 |
|
|
| — |
|
|
| 1,081 |
|
Bank loans |
| — |
|
|
| 16 |
|
|
| 232 |
|
|
| — |
|
|
| — |
|
|
| 248 |
|
Federal Reserve Bank Stock |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 94 |
|
|
| 94 |
|
Carried interest |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 627 |
|
|
| 627 |
|
Other investments(3) |
| — |
|
|
| — |
|
|
| 9 |
|
|
| 94 |
|
|
| 175 |
|
|
| 278 |
|
Total investments |
| 2,552 |
|
|
| 1,969 |
|
|
| 252 |
|
|
| 940 |
|
|
| 1,206 |
|
|
| 6,919 |
|
Other assets(4) |
| 205 |
|
|
| 13 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 218 |
|
Separate account assets |
| 71,392 |
|
|
| 32,404 |
|
|
| — |
|
|
| — |
|
|
| 867 |
|
|
| 104,663 |
|
Separate account collateral held under securities lending agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
| 13,126 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,126 |
|
Debt securities |
| — |
|
|
| 3,381 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,381 |
|
Total separate account collateral held under securities lending agreements |
| 13,126 |
|
|
| 3,381 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,507 |
|
Total | $ | 87,275 |
|
| $ | 37,767 |
|
| $ | 252 |
|
| $ | 940 |
|
| $ | 2,073 |
|
| $ | 128,307 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate account collateral liabilities under securities lending agreements | $ | 13,126 |
|
| $ | 3,381 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 16,507 |
|
Other liabilities(5) |
| — |
|
|
| 68 |
|
|
| 272 |
|
|
| — |
|
|
| — |
|
|
| 340 |
|
Total | $ | 13,126 |
|
| $ | 3,449 |
|
| $ | 272 |
|
| $ | — |
|
| $ | — |
|
| $ | 16,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Amounts are comprised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient. |
(2) | Amounts are comprised of investments held at |
(3) | Level 3 |
(4) |
|
(5) | Level 2 amount primarily includes fair value of derivatives (See Note 9, Derivatives and Hedging, for more information). Level 3 amounts primarily include borrowings of a consolidated CLO classified based on the significance of unobservable inputs used for calculating the fair value of consolidated CLO assets, and contingent liabilities related to certain acquisitions (see Note |
15
Level 3 Assets. Level 3 investments of consolidated VIEs of $114 million and $112 million at September 30, 2017 and December 31, 2016, respectively, related to direct investments in private equity companies held by consolidated private equity funds.
Direct investments in private equity companies may be valued using the market approach or the income approach, or a combination thereof, and were valued based on an assessment of each underlying investment, incorporating evaluation of additional significant third-party financing, changes in valuations of comparable peer companies, the business environment of the companies, market indices, assumptions relating to appropriate risk adjustments for nonperformance and legal restrictions on disposition, among other factors. The fair value derived from the methods used is evaluated and weighted, as appropriate, considering the reasonableness of the range of values indicated. Under the market approach, fair value may be determined by reference to multiples of market-comparable companies or transactions, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. Under the income approach, fair value may be determined by discounting the expected cash flows to a single present value amount using current expectations about those future amounts. Unobservable inputs used in a discounted cash flow model may include projections of operating performance generally covering a five-year period and a terminal value of the private equity direct investment. For investments utilizing the discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, risk premium or discount for lack of marketability in isolation could result in a significantly lower (higher) fair value measurement. For investments utilizing the market-comparable valuation technique, a significant increase (decrease) in the EBITDA multiple in isolation could result in a significantly higher (lower) fair value measurement.
Level 3 assets may include investments in CLOs and bank loans of consolidated CLOs, which were valued based on single-broker nonbinding quotes and direct private equity investments, which were valued using the market approach or the income approach as described above.approach.
Level 3 investments of $258 million and $252 million at March 31, 2021 and December 31, 2020, respectively, primarily included bank loans of a consolidated CLO.
Level 3 Liabilities. Level 3 other liabilities primarily include recordedborrowings of a consolidated CLO, which were valued based on the fair value of the assets of the consolidated CLO less the fair value of the Company’s economic interest in the CLO, and contingent liabilities related to certain acquisitions, which were valued based upon discounted cash flow analyses using unobservable market data inputs.
16
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2017March 31, 2021
(in millions) |
| June 30, 2017 |
|
| Realized and Unrealized Gains (Losses) in Earnings and OCI |
|
| Purchases |
|
| Sales and Maturities |
|
| Issuances and other Settlements(1) |
|
| Transfers into Level 3 |
|
| Transfers out of Level 3 |
|
| September 30, 2017 |
|
| Total Net Unrealized Gains (Losses) Included in Earnings(2) |
|
| December 31, 2020 |
|
| Realized and Unrealized Gains (Losses) |
|
| Purchases |
|
| Sales and Maturities |
|
| Issuances and other Settlements(1) |
|
| Transfers into Level 3 |
|
| Transfers out of Level 3 |
|
| March 31, 2021 |
|
| Total Net Unrealized Gains (Losses) Included in Earnings(2) |
| ||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities(3) |
| $ | 23 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 23 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Trading |
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| 2 |
|
|
|
|
|
| $ | 11 |
|
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | (2 | ) |
| $ | 14 |
|
| $ | — |
|
Total debt securities |
|
| 11 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| 14 |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Private equity |
|
| 9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9 |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Bank loans |
|
| 232 |
|
|
| — |
|
|
| 9 |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| (10 | ) |
|
| 235 |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Total investments |
|
| 27 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| 25 |
|
|
|
|
|
| $ | 252 |
|
| $ | — |
|
| $ | 14 |
|
| $ | — |
|
| $ | — |
|
| $ | 4 |
|
| $ | (12 | ) |
| $ | 258 |
|
| $ | — |
|
Assets of consolidated VIEs - Private equity |
|
| 113 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 114 |
|
| $ | 1 |
| ||||||||||||||||||||||||||||||||||||
Total Level 3 assets |
| $ | 140 |
|
| $ | 1 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | (2 | ) |
| $ | 139 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities(4) |
| $ | 218 |
|
| $ | (7 | ) |
| $ | — |
|
| $ | — |
|
| $ | 3 |
|
| $ | — |
|
| $ | — |
|
| $ | 228 |
|
| $ | (7 | ) | ||||||||||||||||||||||||||||||||||||
Other liabilities |
| $ | 272 |
|
| $ | (3 | ) |
| $ | — |
|
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
| $ | — |
|
| $ | 280 |
|
| $ | (3 | ) | ||||||||||||||||||||||||||||||||||||
Total Level 3 liabilities |
| $ | 272 |
|
| $ | (3 | ) |
| $ | — |
|
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
| $ | — |
|
| $ | 280 |
|
| $ | (3 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Issuance and other settlements amount includes a contingent liability of $9 million in connection with the acquisition of Cachematrix in July 2017 (“Cachematrix Transaction”) and a contingent liability payment in connection with a prior acquisition.
(1) | Amounts include proceeds from borrowings of a consolidated CLO and contingent liability payment related to a prior acquisition. |
(2) | Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date. |
|
|
|
|
17
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 2017
(in millions) |
| December 31, 2016 |
|
| Realized and Unrealized Gains (Losses) in Earnings and OCI |
|
| Purchases |
|
| Sales and Maturities |
|
| Issuances and other Settlements(1) |
|
| Transfers into Level 3 |
|
| Transfers out of Level 3(2) |
|
| September 30, 2017 |
|
| Total Net Unrealized Gains (Losses) Included in Earnings(3) |
| |||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities(4) |
| $ | 24 |
|
| $ | — |
|
| $ | 23 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | (24 | ) |
| $ | 23 |
|
|
|
|
|
Trading |
|
| 7 |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9 | ) |
|
| 2 |
|
|
|
|
|
Total investments |
|
| 31 |
|
|
| — |
|
|
| 27 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (33 | ) |
|
| 25 |
|
|
|
|
|
Assets of consolidated VIEs - Private equity |
|
| 112 |
|
|
| 2 |
|
|
| — |
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 114 |
|
| $ | 2 |
|
Total Level 3 assets |
| $ | 143 |
|
| $ | 2 |
|
| $ | 27 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | (33 | ) |
| $ | 139 |
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities(5) |
| $ | 115 |
|
| $ | (2 | ) |
| $ | — |
|
| $ | — |
|
| $ | 111 |
|
| $ | — |
|
| $ | — |
|
| $ | 228 |
|
| $ | (2 | ) |
(1) Issuance and other settlements amount includes $120 million and $9 million of contingent liabilities in connection with the acquisition of the equity infrastructure franchise of First Reserve in June 2017 (“First Reserve Transaction”) and the Cachematrix Transaction, respectively, and contingent liability payments in connection with certain prior acquisitions.
(2) Amounts include transfers out of Level 3 due to availability of observable market inputs from pricing vendors.
(3) Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.
|
|
|
|
18
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2016March 31, 2020
(in millions) |
| June 30, 2016 |
|
| Realized and Unrealized Gains (Losses) in Earnings and OCI |
|
| Purchases |
|
| Sales and Maturities |
|
| Issuances and other Settlements |
|
| Transfers into Level 3 |
|
| Transfers out of Level 3 |
|
| September 30, 2016 |
|
| Total Net Unrealized Gains (Losses) Included in Earnings(1) |
|
| December 31, 2019 |
|
| Realized and Unrealized Gains (Losses) |
|
| Purchases |
|
| Sales and Maturities |
|
| Issuances and other Settlements(1) |
|
| Transfers into Level 3 |
|
| Transfers out of Level 3 |
|
| March 31, 2020 |
|
| Total Net Unrealized Gains (Losses) Included in Earnings(2) |
| ||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities(2) |
| $ | — |
|
| $ | — |
|
| $ | 24 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 24 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Trading |
|
| 3 |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
|
|
|
| $ | 8 |
|
| $ | — |
|
| $ | 1 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 9 |
|
| $ | — |
|
Total debt securities |
|
| 8 |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9 |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Private equity |
|
| 9 |
|
|
| — |
|
|
| 8 |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Bank loans |
|
| 177 |
|
|
| (14 | ) |
|
| 18 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 181 |
|
|
| (14 | ) | ||||||||||||||||||||||||||||||||||||
Total investments |
|
| 3 |
|
|
| — |
|
|
| 26 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29 |
|
|
|
|
|
| $ | 194 |
|
| $ | (14 | ) |
| $ | 27 |
|
| $ | (1 | ) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 206 |
|
| $ | (14 | ) |
Assets of consolidated VIEs - Private equity |
|
| 189 |
|
|
| 11 |
|
|
| — |
|
|
| (6 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
| $ | 11 |
| ||||||||||||||||||||||||||||||||||||
Total Level 3 assets |
| $ | 192 |
|
| $ | 11 |
|
| $ | 26 |
|
| $ | (6 | ) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 223 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities(3) |
| $ | 121 |
|
| $ | (2 | ) |
| $ | — |
|
| $ | — |
|
| $ | (5 | ) |
| $ | — |
|
| $ | — |
|
| $ | 118 |
|
| $ | (2 | ) | ||||||||||||||||||||||||||||||||||||
Other liabilities |
| $ | 388 |
|
| $ | (11 | ) |
| $ | — |
|
| $ | — |
|
| $ | 22 |
|
| $ | — |
|
| $ | — |
|
| $ | 421 |
|
| $ | (11 | ) | ||||||||||||||||||||||||||||||||||||
Total Level 3 liabilities |
| $ | 388 |
|
| $ | (11 | ) |
| $ | — |
|
| $ | — |
|
| $ | 22 |
|
| $ | — |
|
| $ | — |
|
| $ | 421 |
|
| $ | (11 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Amount includes proceeds from borrowings of a consolidated CLO. |
(2) | Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date. |
|
|
|
|
19
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 2016
|
| December 31, |
|
| Realized and Unrealized Gains (Losses) in Earnings |
|
|
|
|
|
| Sales and |
|
| Issuances and other |
|
| Transfers into |
|
| Transfers out of |
|
| September 30, |
|
| Total Net Unrealized Gains (Losses) Included in |
| ||||||||
(in millions) |
| 2015 |
|
| and OCI |
|
| Purchases |
|
| Maturities |
|
| Settlements(1) |
|
| Level 3 |
|
| Level 3 |
|
| 2016 |
|
| Earnings(2) |
| |||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities(3) |
| $ | 23 |
|
| $ | — |
|
| $ | 47 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | (46 | ) |
| $ | 24 |
|
|
|
|
|
Trading |
|
| 2 |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| 5 |
|
|
|
|
|
Total investments |
|
| 25 |
|
|
| — |
|
|
| 53 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (49 | ) |
|
| 29 |
|
|
|
|
|
Assets of consolidated VIEs - Private equity |
|
| 196 |
|
|
| 13 |
|
|
| — |
|
|
| (15 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
| $ | 13 |
|
Total Level 3 assets |
| $ | 221 |
|
| $ | 13 |
|
| $ | 53 |
|
| $ | (15 | ) |
| $ | — |
|
| $ | — |
|
| $ | (49 | ) |
| $ | 223 |
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities(4) |
| $ | 48 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 70 |
|
| $ | — |
|
| $ | — |
|
| $ | 118 |
|
| $ | — |
|
(1) Issuances and other settlements amount includes a contingent liability related to the BofA® Global Capital Management transaction in April 2016.
|
|
|
|
|
|
Realized and Unrealized Gains (Losses) for Level 3 Assets and Liabilities. Realized and unrealized gains (losses) recorded for Level 3 assets and liabilities are reported in nonoperating income (expense) on the condensed consolidated statements of income. A portion of net income (loss) for consolidated sponsored investment funds areis allocated to noncontrolling interests to reflect net income (loss) not attributable to the Company.
Transfers in and/or out of Levels. Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable/unobservable, or when the carrying value of certain equity method investments no longer represents fair value as determined under valuation methodologies.
Disclosures of Fair Value for Financial Instruments Not Held at Fair Value. At September 30, 2017March 31, 2021 and December 31, 2016,2020, the fair value of the Company’s financial instruments not held at fair value are categorized in the table below:
|
| September 30, 2017 |
|
| December 31, 2016 |
|
|
|
| March 31, 2021 |
|
| December 31, 2020 |
|
|
|
| ||||||||||||||||||||
(in millions) |
| Carrying Amount |
|
| Estimated Fair Value |
|
| Carrying Amount |
|
| Estimated Fair Value |
|
| Fair Value Hierarchy |
| Carrying Amount |
|
| Estimated Fair Value |
|
| Carrying Amount |
|
| Estimated Fair Value |
|
| Fair Value Hierarchy |
| ||||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Financial Assets(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Cash and cash equivalents |
| $ | 6,165 |
|
| $ | 6,165 |
|
| $ | 6,091 |
|
| $ | 6,091 |
|
| Level 1 | (1) (2) | $ | 6,267 |
|
| $ | 6,267 |
|
| $ | 8,664 |
|
| $ | 8,664 |
|
| Level 1 | (2) (3) |
Accounts receivable |
|
| 3,183 |
|
|
| 3,183 |
|
|
| 2,350 |
|
|
| 2,350 |
|
| Level 1 | (3) | ||||||||||||||||||
Cash and cash equivalents of consolidated VIEs |
|
| 82 |
|
|
| 82 |
|
|
| 84 |
|
|
| 84 |
|
| Level 1 | (1) (2) | ||||||||||||||||||
Other assets |
|
| 62 |
|
|
| 62 |
|
|
| 25 |
|
|
| 25 |
|
| Level 1 | (1) (4) | $ | 103 |
|
| $ | 103 |
|
| $ | 69 |
|
| $ | 69 |
|
| Level 1 | (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
| 1,652 |
|
|
| 1,652 |
|
|
| 1,094 |
|
|
| 1,094 |
|
| Level 1 | (3) | ||||||||||||||||||
Long-term borrowings |
|
| 5,000 |
|
|
| 5,248 |
|
|
| 4,915 |
|
|
| 5,165 |
|
| Level 2 | (5) | $ | 7,232 |
|
| $ | 7,553 |
|
| $ | 7,264 |
|
| $ | 7,883 |
|
| Level 2 | (5) |
(1) | See Note 5, Investments, for further information on investments not held at fair value. |
(2) | Cash and cash equivalents are carried at either cost or amortized cost, which approximates fair value due to their short-term maturities. |
| At |
| Other assets include restricted cash and cash collateral deposited with certain derivative counterparties. The carrying |
|
|
(5) | Long-term borrowings are recorded at amortized cost, net of debt issuance costs. The fair value of the long-term borrowings, including the current portion of long-term borrowings, is |
21
Investments in Certain Entities that Calculate Net Asset Value Per Share.Share
As a practical expedient to value certain investments that do not have a readily determinable fair value and have attributes of an investment company, the Company uses NAV as the fair value. The following tables list information regarding all investments in entities that use a fair value measurement to account for both their financial assets and financial liabilities in their calculation of a NAV per share (or equivalent).
September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
(in millions) |
| Ref |
| Fair Value |
|
| Total Unfunded Commitments |
|
| Redemption Frequency |
| Redemption Notice Period |
| Ref |
| Fair Value |
|
| Total Unfunded Commitments |
|
| Redemption Frequency |
| Redemption Notice Period | ||||
Equity method:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge funds/funds of hedge funds |
| (a) |
| $ | 249 |
|
| $ | 42 |
|
| Daily/Monthly (19%) Quarterly (55%) N/R (26%) |
| 1 – 90 days |
| (a) |
| $ | 327 |
|
| $ | 123 |
|
| Daily/Monthly (27%) Quarterly (15%) N/R (58%) |
| 1 – 90 days |
Private equity funds |
| (b) |
|
| 89 |
|
|
| 92 |
|
| N/R |
| N/R |
| (b) |
|
| 355 |
|
|
| 364 |
|
| N/R |
| N/R |
Real assets funds |
| (c) |
|
| 265 |
|
|
| 111 |
|
| Quarterly (85%) N/R (15%) |
| 60 days |
| (c) |
|
| 204 |
|
|
| 199 |
|
| Quarterly (21%) N/R (79%) |
| 60 days |
Other |
|
|
|
| 15 |
|
|
| 13 |
|
| Daily/Monthly (66%) N/R (34%) |
| 3 – 5 days | ||||||||||||||
Consolidated VIEs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Consolidated sponsored investment products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Private equity funds of funds |
| (d) |
|
| 69 |
|
|
| 20 |
|
| N/R |
| N/R |
| (d) |
|
| 19 |
|
|
| 7 |
|
| N/R |
| N/R |
Hedge fund |
| (a) |
|
| 23 |
|
|
| — |
|
| Quarterly |
| 90 days | ||||||||||||||
Real assets funds |
| (c) |
|
| 41 |
|
|
| 54 |
|
| N/R |
| N/R |
| (c) |
|
| 77 |
|
|
| 87 |
|
| N/R |
| N/R |
Total |
|
|
| $ | 751 |
|
| $ | 332 |
|
|
|
|
|
|
|
| $ | 982 |
|
| $ | 780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
(in millions) |
| Ref |
| Fair Value |
|
| Total Unfunded Commitments |
|
| Redemption Frequency |
| Redemption Notice Period |
| Ref |
| Fair Value |
|
| Total Unfunded Commitments |
|
| Redemption Frequency |
| Redemption Notice Period | ||||
Equity method:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge funds/funds of hedge funds |
| (a) |
| $ | 237 |
|
| $ | 14 |
|
| Daily/Monthly (21%) Quarterly (51%) N/R (28%) |
| 1 – 90 days |
| (a) |
| $ | 313 |
|
| $ | 101 |
|
| Daily/Monthly (21%) Quarterly (21%) N/R (58%) |
| 1 – 90 days |
Private equity funds |
| (b) |
|
| 90 |
|
|
| 62 |
|
| N/R |
| N/R |
| (b) |
|
| 315 |
|
|
| 372 |
|
| N/R |
| N/R |
Real assets funds |
| (c) |
|
| 60 |
|
|
| 35 |
|
| Quarterly (41%) N/R (59%) |
| 60 days |
| (c) |
|
| 218 |
|
|
| 205 |
|
| Quarterly (31%) N/R (69%) |
| 60 days |
Other |
|
|
|
| 12 |
|
|
| 9 |
|
| Daily/Monthly (42%) N/R (58%) |
| 3 – 5 days | ||||||||||||||
Consolidated VIEs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Consolidated sponsored investment products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Private equity funds of funds |
| (d) |
|
| 89 |
|
|
| 16 |
|
| N/R |
| N/R |
| (d) |
|
| 19 |
|
|
| 7 |
|
| N/R |
| N/R |
Hedge fund |
| (a) |
|
| 36 |
|
|
| — |
|
| Quarterly |
| 90 days | ||||||||||||||
Real assets funds |
| (c) |
|
| 27 |
|
|
| 21 |
|
| N/R |
| N/R |
| (c) |
|
| 75 |
|
|
| 94 |
|
| N/R |
| N/R |
Total |
|
|
| $ | 551 |
|
| $ | 157 |
|
|
|
|
|
|
|
| $ | 940 |
|
| $ | 779 |
|
|
|
|
|
N/R – not redeemable
(1) | Comprised of equity method investments, which include |
(a) | This category includes hedge funds and funds of hedge funds that invest primarily in equities, fixed income securities, distressed credit, opportunistic and mortgage instruments and other third-party hedge funds. The fair values of the investments have been estimated using the NAV of the Company’s ownership interest in partners’ capital. |
(b) | This category includes |
(c) | This category includes several real assets funds that invest directly and indirectly in real estate |
(d) | This category includes the underlying third-party private equity funds within consolidated BlackRock sponsored private equity funds of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company’s ownership interest in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption or are not currently redeemable; however, for certain funds, the Company may sell or transfer its interest, which may need approval by the general partner of the underlying funds. Due to the nature of the investments in this category, the Company reduces its investment by distributions that are received through the realization of the underlying assets of the funds. The liquidation period for the underlying assets of these funds is unknown at both March 31, 2021 and December 31, 2020. The total remaining unfunded commitments to other third-party funds |
Fair Value Option.
(d) This category includes the underlying third-party private equity funds within consolidated BlackRock sponsored private equity funds of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company’s ownership interest in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption; however, for certain funds, the Company may sell or transfer its interest, which may need approval by the general partner of the underlying funds. Due to the nature of the investments in this category, the Company reduces its investment by distributions that are received through the realization of the underlying assets of the funds. It is estimated that the underlying assets of these funds will be liquidated over a weighted-average period of approximately five years at both September 30, 2017
At March 31, 2021 and December 31, 2016. The total remaining unfunded commitments to other third-party funds were $202020, the Company elected the fair value option for certain investments in CLOs of approximately $40 million and $16$35 million, respectively, reported within investments.
In addition, the Company elected the fair value option for bank loans and borrowings of a consolidated CLO, recorded within investments and other liabilities, respectively. The following table summarizes the information related to these bank loans and borrowings at September 30, 2017March 31, 2021 and December 31, 2016, respectively. The Company had contractual obligations to2020:
|
| March 31, |
|
| December 31, |
| ||
(in millions) |
| 2021 |
|
| 2020 |
| ||
CLO Bank loans: |
|
|
|
|
|
|
|
|
Aggregate principal amounts outstanding |
| $ | 257 |
|
| $ | 250 |
|
Fair value |
|
| 258 |
|
|
| 248 |
|
Aggregate unpaid principal balance in excess of (less than) fair value |
| $ | (1 | ) |
| $ | 2 |
|
|
|
|
|
|
|
|
|
|
CLO Borrowings: |
|
|
|
|
|
|
|
|
Aggregate principal amounts outstanding |
| $ | 254 |
|
| $ | 244 |
|
Fair value |
| $ | 259 |
|
| $ | 246 |
|
At March 31, 2021, the principal amounts outstanding of the borrowings issued by the CLOs mature in 2030.
During the three months ended March 31, 2021 and 2020, the net gains (losses) from the change in fair value of the bank loans and borrowings held by the consolidated fundsCLO were not material and were recorded in net gain (loss) on the condensed consolidated statements of $24 million at both September 30, 2017income. The change in fair value of the assets and December 31, 2016.liabilities included interest income and expense, respectively.
7.9. Derivatives and Hedging
The Company maintains a program to enter into swaps to hedge against market price and interest rate exposures with respect to certain seed investments in sponsored investment products. At September 30, 2017,March 31, 2021 and December 31, 2020, the Company had outstanding total return swaps with aggregate notional values of approximately $538 million.$778 million and $833 million, respectively.
The Company executes forward foreign currency exchange contracts to mitigate the risk of certain foreign exchange movements. At March 31, 2021 and December 31, 2016,2020, the Company had outstanding total return swaps and interest rate swapsforward foreign currency exchange contracts with aggregate notional values of approximately $572 million$1.9 billion and $42 million,$2.8 billion, respectively, and with expiration dates in April 2021 and January 2021, respectively.
Gains (losses) onAt both March 31, 2021 and December 31, 2020, the total return swaps are recorded in nonoperating income (expense) and were $(26) million and $(90) million for the three and nine months ended September 30, 2017, respectively, and $(25) million and $(33) million for the three and nine months ended September 30, 2016, respectively.
Gains (losses) on the interest rate swaps are recorded in nonoperating income (expense) and were not material for the three and nine months ended September 30, 2017 and 2016.
The Company has entered intohad a derivative providing credit protection towith a counterpartynotional amount of approximately $17 million to a counterparty, representing the Company’s maximum risk of loss with respect to the provision of credit protection.derivative. The Company carries the derivative at fair value based on the expected discounted future cash outflows under the arrangement.
The Company executes forward foreign currency exchange contracts to mitigatefollowing table presents the riskfair values of certain foreign exchange movements. At September 30, 2017derivative instruments recognized in the condensed consolidated statements of financial condition at March 31, 2021 and December 31, 2016,2020:
(in millions) | Assets |
|
| Liabilities |
| ||||||||||||||
Derivative instruments | Statement of Financial Condition Classification |
| March 31, 2021 |
|
| December 31, 2020 |
|
| Statement of Financial Condition Classification |
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Total return swaps | Other assets |
| $ | 7 |
|
| $ | — |
|
| Other liabilities |
| $ | 9 |
|
| $ | 50 |
|
Forward foreign currency exchange contracts | Other assets |
|
| 1 |
|
|
| 13 |
|
| Other liabilities |
|
| 14 |
|
|
| 5 |
|
Total |
|
| $ | 8 |
|
| $ | 13 |
|
|
|
| $ | 23 |
|
| $ | 55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents realized and unrealized gains (losses) recognized in the Company had outstanding forward foreign currency exchange contracts with aggregate notional valuescondensed consolidated statements of approximately $1.3 billion and $107 million, respectively.
Gains (losses)income on the forward foreign currency exchange contracts are recorded in other general and administration expense and were $29 million and $58 million for the three and nine months ended September 30, 2017, respectively. Gains (losses) on the forward foreign currency exchange contracts were not material for the three and nine months ended September 30, 2016.derivative instruments:
|
|
|
| Three Months Ended |
| |||||
|
|
|
| March 31, |
| |||||
(in millions) |
|
|
| 2021 |
|
| 2020 |
| ||
Derivative Instruments |
| Statement of Income Classification |
| Gains (Losses) |
| |||||
Total return swaps |
| Nonoperating income (expense) |
| $ | (34 | ) |
| $ | 142 |
|
Forward foreign currency exchange contracts |
| General and administration expense |
|
| 7 |
|
|
| (88 | ) |
Total gain (loss) from derivative instruments |
| $ | (27 | ) |
| $ | 54 |
|
The Company consolidates certain sponsored investment funds, which may utilize derivative instruments as a part of the funds’ investment strategies. The changechanges in fair value of such derivatives, which isare recorded in nonoperating income (expense), waswere not material for the three and nine months ended September 30, 2017March 31, 2021 and 2016.
The fair value of the outstanding derivatives mentioned above were not material at September 30, 2017 and December 31, 2016.2020.
See Note 12, 15, Borrowings, in the 20162020 Form 10-K for more information on the Company’s net investment hedge.
23
Goodwill activity during the ninethree months ended September 30, 2017March 31, 2021 was as follows:
(in millions) |
|
|
|
|
December 31, 2016 |
| $ | 13,118 |
|
Acquisitions (1) |
|
| 123 |
|
Goodwill adjustments related to Quellos (2) |
|
| (15 | ) |
September 30, 2017 |
| $ | 13,226 |
|
(in millions) |
|
|
|
December 31, 2020 | $ | 14,551 |
|
Acquisition(1) |
| 799 |
|
Other(2) |
| (2 | ) |
March 31, 2021 | $ | 15,348 |
|
(1) |
|
(2) |
|
9.
11. Intangible Assets
The carrying amounts of identifiable intangible assets are summarized as follows:
(in millions) |
| Indefinite-lived |
|
| Finite-lived |
|
| Total |
| |||
December 31, 2016 |
| $ | 17,178 |
|
| $ | 185 |
|
| $ | 17,363 |
|
Amortization expense |
|
| — |
|
|
| (77 | ) |
|
| (77 | ) |
Acquisitions (1) |
|
| — |
|
|
| 114 |
|
|
| 114 |
|
September 30, 2017 |
| $ | 17,178 |
|
| $ | 222 |
|
| $ | 17,400 |
|
(in millions) | Indefinite-lived |
|
| Finite-lived |
|
| Total |
| |||
December 31, 2020 | $ | 17,578 |
|
| $ | 685 |
|
| $ | 18,263 |
|
Acquisition(1) |
| — |
|
|
| 287 |
|
|
| 287 |
|
Amortization expense |
| — |
|
|
| (34 | ) |
|
| (34 | ) |
March 31, 2021 | $ | 17,578 |
|
| $ | 938 |
|
| $ | 18,516 |
|
(1) | In connection with the Aperio Transaction, which closed on February 1, 2021, the Company acquired $270 million of finite-lived customer relationships, $9 million of a finite-lived trade name and $8 million of finite-lived technology-related intangible assets, with weighted-average estimated lives of approximately 10 years, five years and three years, respectively. See Note 3, Acquisition, for information on the Aperio Transaction. |
(1)12. Leases
The amount represents $110 millionfollowing table presents components of finite-livedlease cost included in general and administration expense on the condensed consolidated statement of income:
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Lease cost: |
|
|
|
|
|
|
|
Operating lease cost(1) | $ | 39 |
|
| $ | 37 |
|
Variable lease cost(2) |
| 10 |
|
|
| 9 |
|
Total lease cost | $ | 49 |
|
| $ | 46 |
|
(1) | Amounts include short-term leases, which are immaterial for the three months ended March 31, 2021 and 2020. |
(2) | Amounts include operating lease payments, which may be adjusted based on usage, changes in an index or market rate, as well as common area maintenance charges and other variable costs not included in the measurement of right-of-use (“ROU”) assets and operating lease liabilities. |
The following table presents operating leases included on the condensed consolidated statement of financial condition:
| Statement of |
|
|
|
|
|
|
|
|
| Financial Condition |
| March 31, |
|
| December 31, |
| ||
(in millions) | Classification |
| 2021 |
|
| 2020 |
| ||
Statement of Financial Condition information: |
|
|
|
|
|
|
|
|
|
Operating lease ROU assets | Other assets |
| $ | 629 |
|
| $ | 649 |
|
Operating lease liabilities | Other liabilities |
| $ | 732 |
|
| $ | 755 |
|
Supplemental information related to the First Reserve Transaction and $4 million of finite-lived assets related to the Cachematrix Transactionoperating leases is summarized below:
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(in millions) |
| 2021 |
|
| 2020 |
| ||
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities |
| $ | 40 |
|
| $ | 38 |
|
|
|
|
|
|
|
|
|
|
Supplemental noncash information: |
|
|
|
|
|
|
|
|
ROU assets in exchange for operating lease liabilities |
| $ | 13 |
|
| $ | 47 |
|
| March 31, |
| December 31, | ||||||
| 2021 |
| 2020 | ||||||
Lease term and discount rate: |
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term |
| 8 |
| years |
|
| 8 |
| years |
Weighted-average discount rate |
| 3 |
| % |
|
| 3 |
| % |
13. Other Assets
iCapital
On March 10, 2020, in connection with a weighted average estimated liferecapitalization of iCapital Network, Inc. (“iCapital”), BlackRock received additional stock in exchange for certain securities it held, which resulted in a nonoperating pre-tax gain of approximately nine$240 million in the condensed consolidated statement of income for the three months ended March 31, 2020. Following this transaction, the Company accounts for its interest in iCapital as an equity method investment, which is included in other assets on the condensed consolidated statements of financial condition. At March 31, 2021 and 10 years,December 31, 2020, the carrying value of the Company’s interest in iCapital was approximately $294 million and $296 million, respectively.
10.14. Borrowings
Short-Term Borrowings
2017
2021 Revolving Credit Facility. The In March 2021, the Company’s credit facility has anwas amended to increase the aggregate commitment amount of $4.0to $4.4 billion and was amended in April 2017 to extend the maturity date to April 2022(the “2017March 2026 (the “2021 credit facility”). In addition, the amendment incorporated certain sustainability-linked pricing metrics into the agreement. Specifically, the Company’s applicable interest rate and commitment fee are subject to upward or downward adjustments on an annual basis if the Company achieves, or fails to achieve, certain specified targets. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate, or an applicable replacement benchmark, plus a spread. The 20172021 credit facility permits the Company to request up to an additional $1.0 billion of borrowing capacity, subject to lender credit approval, increasing the overall size of the 20172021 credit facility to an aggregate principal amount not to exceed $5.0$5.4 billion. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate plus a spread. The 20172021 credit facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of less than 1 to 1 at September 30, 2017.March 31, 2021. The 20172021 credit facility provides back-up liquidity to fund ongoing working capital for general corporate purposes and various investment opportunities. At September 30, 2017,March 31, 2021, the Company had no0 amount outstanding under the 20172021 credit facility.
Commercial Paper Program. The Company can issue unsecured commercial paper notes (the “CP Notes”) on a private-placement basis up to a maximum aggregate amount outstanding at any time of $4.0$4 billion. The commercial paper program is currently supported by the 20172021 credit facility. At September 30, 2017,March 31, 2021, BlackRock had no0 CP Notes outstanding.
24
Long-Term Borrowings
The carrying value and fair value of long-term borrowings estimateddetermined using market prices and EUR/USD foreign exchange ratesrate at September 30, 2017March 31, 2021 included the following:
(in millions) |
| Maturity Amount |
|
| Unamortized Discount and Debt Issuance Costs |
|
| Carrying Value |
|
| Fair Value |
| Maturity Amount |
|
| Unamortized Discount and Debt Issuance Costs |
|
| Carrying Value |
|
| Fair Value |
| ||||||||
5.00% Notes due 2019 |
| $ | 1,000 |
|
| $ | (1 | ) |
| $ | 999 |
|
| $ | 1,067 |
| |||||||||||||||
4.25% Notes due 2021 |
|
| 750 |
|
|
| (4 | ) |
|
| 746 |
|
|
| 802 |
| $ | 750 |
|
| $ | — |
|
| $ | 750 |
|
| $ | 754 |
|
3.375% Notes due 2022 |
|
| 750 |
|
|
| (4 | ) |
|
| 746 |
|
|
| 781 |
|
| 750 |
|
|
| — |
|
|
| 750 |
|
|
| 777 |
|
3.50% Notes due 2024 |
|
| 1,000 |
|
|
| (6 | ) |
|
| 994 |
|
|
| 1,044 |
|
| 1,000 |
|
|
| (3 | ) |
|
| 997 |
|
|
| 1,092 |
|
1.25% Notes due 2025 |
|
| 828 |
|
|
| (6 | ) |
|
| 822 |
|
|
| 846 |
|
| 822 |
|
|
| (3 | ) |
|
| 819 |
|
|
| 869 |
|
3.20% Notes due 2027 |
|
| 700 |
|
|
| (7 | ) |
|
| 693 |
|
|
| 708 |
|
| 700 |
|
|
| (5 | ) |
|
| 695 |
|
|
| 766 |
|
3.25% Notes due 2029 |
| 1,000 |
|
|
| (11 | ) |
|
| 989 |
|
|
| 1,081 |
| ||||||||||||||||
2.40% Notes due 2030 |
| 1,000 |
|
|
| (7 | ) |
|
| 993 |
|
|
| 1,008 |
| ||||||||||||||||
1.90% Notes due 2031 |
| 1,250 |
|
|
| (11 | ) |
|
| 1,239 |
|
|
| 1,206 |
| ||||||||||||||||
Total Long-term Borrowings |
| $ | 5,028 |
|
| $ | (28 | ) |
| $ | 5,000 |
|
| $ | 5,248 |
| $ | 7,272 |
|
| $ | (40 | ) |
| $ | 7,232 |
|
| $ | 7,553 |
|
Long-term borrowings at December 31, 2016 had a carrying value of $4.9 billion and a fair value of $5.2 billion determined using market prices at the end of December 2016.
2027 Notes. In March 2017, the Company issued $700 million in aggregate principal amount of 3.20% senior unsecured and unsubordinated notes maturing on March 15, 2027 (the “2027 Notes”). Interest is payable semi-annually on March 15 and September 15 of each year, commencing September 15, 2017, and is approximately $22 million per year. The 2027 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a “make-whole” redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2027 Notes.
In April 2017, the net proceeds of the 2027 Notes were used to fully repay $700 million in aggregate principal amount outstanding of 6.25% notes prior to their maturity in September 2017.
See Note 12, 15, Borrowings, in the 20162020 Form 10-K for more information regarding the Company’s borrowings.
11.15. Commitments and Contingencies
Investment Commitments. At September 30, 2017,March 31, 2021, the Company had $328$841 million of various capital commitments to fund sponsored investment funds,products, including consolidated VIEs.sponsored investment products. These fundsproducts include private equity funds, real assets funds and opportunistic funds. This amount excludes additional commitments made by consolidated funds of funds to underlying third-party funds as third-party noncontrolling interest holders have the legal obligation to fund the respective commitments of such funds of funds. Generally, the timing of the funding of these commitments is unknown and the commitments are callable on demand at any time prior to the expiration of the commitment. These unfunded commitments are not recorded on the condensed consolidated statements of financial condition. These commitments do not include potential future commitments approved by the Company that are not yet legally binding. The Company intends to make additional capital commitments from time to time to fund additional investment products for, and with, its clients.
25
Lease Commitment.In May 2017, the Company entered into an agreement with 50 HYMC Owner LLC, for the lease of approximately 847,000 square feet of office space located at 50 Hudson Yards, New York, New York. The term of the lease is twenty years from the date that rental payments begin, expected to occur in May 2023, with the option to renew for a specified term.
Future minimum commitments of annual base rental payments under this operating lease are as follows:
(in millions) |
|
|
|
Year | Amount |
| |
2023 | $ | 34 |
|
2024 |
| 51 |
|
2025 |
| 51 |
|
2026 |
| 51 |
|
2027 |
| 51 |
|
Thereafter |
| 1,007 |
|
Total | $ | 1,245 |
|
Contingencies
Contingent Payments Related to Business Acquisitions. In connection with certain acquisitions, BlackRock is required to make contingent payments, subject to achieving specified performance targets, which may include revenue related tofrom acquired contracts or new capital commitments for certain products.contracts. The fair value of the remaining aggregate contingent payments at September 30, 2017March 31, 2021 totaled $228$21 million including $125 million related to the First Reserve Transaction, and is included in other liabilities on the condensed consolidated statements of financial condition.
Other Contingent Payments.The Company acts as the portfolio manager in a series of derivative transactions and has a maximum potential exposure of $17 million between the Company and counterparty. See Note 7, 9, Derivatives and Hedging, for further discussion.
Legal Proceedings.From time to time, BlackRock receives subpoenas or other requests for information from various U.S.US federal and state governmental and domesticregulatory authorities and international governmental and regulatory authorities in connection with certain industry-wide or other investigations or proceedings. It is BlackRock’s policy to cooperate fully with such inquiries.matters. The Company, and certain of its subsidiaries and employees have been named as defendants in various legal actions, including arbitrations and other litigation arising in connection with BlackRock’s activities. Additionally, BlackRock advisedBlackRock-advised investment portfolios may be subject to lawsuits, any of which potentially could harm the investment returns of the applicable portfolio or result in the Company being liable to the portfolios for any resulting damages.
On May 27, 2014, certain purported investors in the BlackRock Global Allocation Fund, Inc. and the BlackRock Equity Dividend Fund (collectively, the “Funds”) filed a consolidated complaint (the “Consolidated Complaint”) in the U.S. District Court for the District of New Jersey against BlackRock Advisors, LLC, BlackRock Investment Management, LLC and BlackRock International Limited under the caption In re BlackRock Mutual Funds Advisory Fee Litigation. The Consolidated Complaint, which purports to be brought derivatively on behalf of the Funds, alleges that the defendants violated Section 36(b) of the Investment Company Act by receiving allegedly excessive investment advisory fees from the Funds. On February 24, 2015, the same plaintiffs filed another complaint in the same court against BlackRock Investment Management, LLC and BlackRock Advisors, LLC. The allegations and legal claims in both complaints are substantially similar, with the new complaint purporting to challenge fees received by defendants after the plaintiffs filed their prior complaint. Both complaints seek, among other things, to recover on behalf of the Funds all allegedly excessive advisory fees received by defendants in the twelve month period preceding the start of each lawsuit, along with purported lost investment returns on those amounts, plus interest. The defendants believe the claims in both lawsuits are without merit and intend to vigorously defend the actions. On September 25, 2017, the defendants filed a motion for summary judgment to dismiss the lawsuit.
Between November 12, 2015 and November 16, 2015, BlackRock, Inc., BlackRock Realty Advisors, Inc. (“BRA”), BlackRock US Core Property Fund, Inc. (formerly known as BlackRock Granite Property Fund, Inc.) (“Granite Fund”), and certain other Granite Fund related entities (collectively, the “BlackRock Parties”) were named as defendants in thirteen lawsuits filed in the Superior Court of the State of California for the County of Alameda arising out of the June
26
16, 2015 collapse of a balcony at the Library Gardens apartment complex in Berkeley, California (the “Property”). The Property is indirectly owned by the Granite Fund, which is managed by BRA. The plaintiffs also named as defendants in the lawsuits Greystar, which manages the Property, and certain other non-BlackRock related entities, including the developer of the Property, building contractors and building materials suppliers. The plaintiffs allege, among other things, that the BlackRock Parties were negligent in their ownership, control and maintenance of the Property’s balcony, and seek monetary, including punitive, damages. Additionally, on March 16, 2016, three former tenants of the Library Gardens apartment unit that experienced the balcony collapse sued the BlackRock Parties. The former tenants, who witnessed (but were not physically injured in) the accident make allegations virtually identical to those in the other previously filed actions and claim that, as a result of the collapse, they suffered unspecified emotional damage. Several defendants also filed cross-complaints alleging a variety of claims, including claims against the BlackRock Parties for contribution, negligence, and declaratory relief. BlackRock, Inc. believes the claims against it are without merit and intends to vigorously defend the actions. A trial on all claims is scheduled to begin on February 5, 2018.
On June 16, 2016, iShares Trust, BlackRock, Inc. and certain of its advisory affiliates, and the directors and certain officers of the iShares ETFs were named as defendants in a purported class action lawsuit filed in California state court. The lawsuit was filed by investors in certain iShares ETFs (the "ETFs"), and alleges the defendants violated the federal securities laws, purportedly by failing to adequately disclose in prospectuses issued by the ETFs the risks to the ETFs’ shareholders in the event of a "flash crash." Plaintiffs seek unspecified monetary damages. The Plaintiffs’ complaint was dismissed in December 2016 and on January 6, 2017, plaintiffs filed an amended complaint. The defendants filed a motion for judgment on the pleadings dismissing that complaint. On September 18, 2017, the court dismissed the lawsuit.
On April 5, 2017, BlackRock, Inc., BlackRock Institutional Trust Company, N.A. (“BTC”), the BlackRock, Inc. Retirement Committee and various sub-committees, and a BlackRock employee were named as defendants in a purported class action lawsuit brought in the U.S.US District Court for the Northern District of California by a former employee on behalf of all participants and beneficiaries in the BlackRock employee 401(k) Plan (the “Plan”) participants and beneficiaries in the Plan from April 5, 2011 to the present. The lawsuit generally alleges that the defendants breached their duties towards Plan participants in violation of the Employee Retirement Income Security Act of 1974 by, among other things, offering
investment options that were overly expensive, underperformed unaffiliated peer funds, focused disproportionately on active versus passive strategies, and were unduly concentrated within investment options managed by BlackRock. While the complaint does not contain any specific amount in alleged damages, it claims that the purported underperformance and hidden fees cost Plan participants more than $60 million. On October 10,18, 2017, the plaintiffs filed an Amended Complaint, which, among other things, addsadded as defendants certain current and former members of the BlackRock Retirement and Investment Committees. The Amended Complaint also includesincluded a new purported class claim on behalf of investors in certain Collective Trust Funds (“CTFs”)CTFs managed by BTC. Specifically, the plaintiffs allege that BTC, exercisedas fiduciary authority over its compensation forto the CTFs, engaged in self-dealing by, most significantly, selecting itself as the securities lending servicesagent on terms that the plaintiffs claim were excessive. The Amended Complaint also alleged that BlackRock took undue risks in its management of securities lending cash reinvestment vehicles during the financial crisis. On August 23, 2018, the court granted permission to the CTFs. Theplaintiffs to file a Second Amended Complaint (“SAC”) which added as defendants believe the claimsBlackRock, Inc. Management Development and Compensation Committee, the Plan’s independent investment consultant and the Plan’s Administrative Committee and its members. On October 22, 2018, BlackRock filed a motion to dismiss the SAC, and on June 3, 2019, the plaintiffs filed a motion seeking to certify both the Plan and the CTF classes. On September 3, 2019, the court granted BlackRock’s motion to dismiss part of the plaintiffs’ claim seeking to recover alleged losses in this lawsuit are without meritthe securities lending vehicles but denied the motion to dismiss in all other respects. On February 11, 2020, the court denied the plaintiffs’ motion to certify the CTF class and intendgranted their motion to vigorously defendcertify the action.
Plan class. On April 27, 2020, the Ninth Circuit denied the plaintiffs’ request to immediately appeal the class certification ruling. On September 24, 2020, the parties cross-moved for summary judgment, both of which were denied on January 12, 2021. On February 5, 2021, the parties reached a settlement in principle for $9.65 million which, if approved by the court, will resolve the lawsuit. On March 23, 2021, the plaintiffs filed a motion for preliminary approval of the settlement, which remains pending.
Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability arising out of regulatory matters or lawsuits will have a material effect on BlackRock’s results of operations, financial position, or cash flows. However, there is no assurance as to whether any such pending or threatened matters will have a material effect on BlackRock’s results of operations, financial position or cash flows in any future reporting period. Due to uncertainties surrounding the outcome of these matters, management cannot reasonably estimate the possible loss or range of loss that may arise from these matters.
Indemnifications. In the ordinary course of business or in connection with certain acquisition agreements, BlackRock enters into contracts pursuant to which it may agree to indemnify third parties in certain circumstances. The terms of these indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined or the likelihood of any liability is considered remote. Consequently, no liability has been recorded on the condensed consolidated statements of financial condition.
27
In connection with securities lending transactions, BlackRock has issued certain indemnificationsagreed to indemnify certain securities lending clients against potential loss resulting from a borrower’s failure to fulfill its obligations under the securities lending agreement should the value of the collateral pledged by the borrower at the time of default be insufficient to cover the borrower’s obligation under the securities lending agreement. At September 30, 2017,The amount of securities on loan as of March 31, 2021 and subject to this type of indemnification was $292 billion. In the Company indemnified certain of its clients for their securitiesCompany’s capacity as lending loan balances of approximately $197.6 billion. The Company held, as agent, cash and securities totaling $210.6$312 billion were held as collateral for indemnified securities on loan at September 30, 2017.March 31, 2021. The fair value of these indemnifications was not material at September 30, 2017.March 31, 2021.
16. Revenue
The table below presents detail of revenue for the three months ended March 31, 2021 and 2020 and includes the product mix of investment advisory, administration fees and securities lending revenue, and performance fees.
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Investment advisory, administration fees and securities lending revenue: |
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Active | $ | 576 |
|
| $ | 398 |
|
ETFs |
| 1,068 |
|
|
| 879 |
|
Non-ETF Index |
| 176 |
|
|
| 163 |
|
Equity subtotal |
| 1,820 |
|
|
| 1,440 |
|
Fixed income: |
|
|
|
|
|
|
|
Active |
| 525 |
|
|
| 481 |
|
ETFs |
| 295 |
|
|
| 259 |
|
Non-ETF Index |
| 113 |
|
|
| 112 |
|
Fixed income subtotal |
| 933 |
|
|
| 852 |
|
Multi-asset |
| 328 |
|
|
| 293 |
|
Alternatives: |
|
|
|
|
|
|
|
Illiquid alternatives |
| 168 |
|
|
| 148 |
|
Liquid alternatives |
| 147 |
|
|
| 112 |
|
Currency and commodities(1) |
| 53 |
|
|
| 32 |
|
Alternatives subtotal |
| 368 |
|
|
| 292 |
|
Long-term |
| 3,449 |
|
|
| 2,877 |
|
Cash management |
| 143 |
|
|
| 178 |
|
Total investment advisory, administration fees and securities lending revenue |
| 3,592 |
|
|
| 3,055 |
|
Investment advisory performance fees: |
|
|
|
|
|
|
|
Equity |
| 26 |
|
|
| 2 |
|
Fixed income |
| 14 |
|
|
| 2 |
|
Multi-asset |
| 8 |
|
|
| 1 |
|
Alternatives: |
|
|
|
|
|
|
|
Illiquid alternatives |
| 7 |
|
|
| 17 |
|
Liquid alternatives |
| 74 |
|
|
| 19 |
|
Alternatives subtotal |
| 81 |
|
|
| 36 |
|
Total performance fees |
| 129 |
|
|
| 41 |
|
Technology services revenue |
| 306 |
|
|
| 274 |
|
Distribution fees: |
|
|
|
|
|
|
|
Retrocessions |
| 238 |
|
|
| 169 |
|
12b-1 fees (US mutual fund distribution fees) |
| 85 |
|
|
| 91 |
|
Other |
| 17 |
|
|
| 16 |
|
Total distribution fees |
| 340 |
|
|
| 276 |
|
Advisory and other revenue: |
|
|
|
|
|
|
|
Advisory |
| 15 |
|
|
| 17 |
|
Other |
| 16 |
|
|
| 47 |
|
Total advisory and other revenue |
| 31 |
|
|
| 64 |
|
Total revenue | $ | 4,398 |
|
| $ | 3,710 |
|
|
|
|
|
|
|
|
|
(1) Amounts include commodity ETFs.
The tables below present the investment advisory, administration fees and securities lending revenue by client type and investment style:
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
By client type: |
|
|
|
|
|
|
|
Retail | $ | 1,125 |
|
| $ | 872 |
|
ETFs |
| 1,417 |
|
|
| 1,170 |
|
Institutional: |
|
|
|
|
|
|
|
Active |
| 650 |
|
|
| 574 |
|
Index |
| 257 |
|
|
| 261 |
|
Total institutional |
| 907 |
|
|
| 835 |
|
Long-term |
| 3,449 |
|
|
| 2,877 |
|
Cash management |
| 143 |
|
|
| 178 |
|
Total | $ | 3,592 |
|
| $ | 3,055 |
|
|
|
|
|
|
|
|
|
By investment style: |
|
|
|
|
|
|
|
Active | $ | 1,739 |
|
| $ | 1,427 |
|
Index and ETFs |
| 1,710 |
|
|
| 1,450 |
|
Long-term |
| 3,449 |
|
|
| 2,877 |
|
Cash management |
| 143 |
|
|
| 178 |
|
Total | $ | 3,592 |
|
| $ | 3,055 |
|
|
|
|
|
|
|
|
|
Investment advisory and administration fees – remaining performance obligation
The tables below present estimated investment advisory and administration fees expected to be recognized in the future related to the unsatisfied portion of the performance obligations at March 31, 2021 and 2020:
March 31, 2021
| Remainder of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(in millions) | 2021 |
|
|
| 2022 |
|
|
| 2023 |
|
|
| 2024 |
|
| Thereafter |
|
| Total |
| |||
Investment advisory and administration fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternatives(1)(2) | $ | 118 |
|
| $ | 154 |
|
| $ | 122 |
|
| $ | 75 |
|
| $ | 47 |
|
| $ | 516 |
|
March 31, 2020
| Remainder of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(in millions) | 2020 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2023 |
|
| Thereafter |
|
| Total |
| |||
Investment advisory and administration fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternatives(1)(2) | $ | 86 |
|
| $ | 103 |
|
| $ | 87 |
|
| $ | 74 |
|
| $ | 48 |
|
| $ | 398 |
|
(1) | Investment advisory and administration fees include management fees related to certain alternative products, which are based on contractual committed capital outstanding at March 31, 2021 and 2020. Actual management fees could be higher to the extent additional committed capital is raised. These fees are generally billed on a quarterly basis in arrears. |
(2) | The Company elected the following practical expedients and therefore does not include amounts related to (1) performance obligations with an original duration of one year or less, and (2) variable consideration related to future service periods. |
Change in Deferred Carried Interest Liability
The table below presents changes in the deferred carried interest liability, which is included in other liabilities on the condensed consolidated statements of financial condition, for the three months ended March 31, 2021 and 2020:
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Beginning balance | $ | 584 |
|
| $ | 483 |
|
Net increase (decrease) in unrealized allocations |
| 166 |
|
|
| 62 |
|
Performance fee revenue recognized |
| (2 | ) |
|
| (10 | ) |
Ending balance | $ | 748 |
|
| $ | 535 |
|
Technology services revenue – remaining performance obligation
The tables below present estimated technology services revenue expected to be recognized in the future related to the unsatisfied portion of the performance obligations at March 31, 2021 and 2020:
March 31, 2021
| Remainder of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(in millions) | 2021 |
|
|
| 2022 |
|
|
| 2023 |
|
|
| 2024 |
|
| Thereafter |
|
| Total |
| |||
Technology services revenue(1)(2) | $ | 90 |
|
| $ | 64 |
|
| $ | 37 |
|
| $ | 17 |
|
| $ | 11 |
|
| $ | 219 |
|
March 31, 2020
| Remainder of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(in millions) | 2020 |
|
|
| 2021 |
|
|
| 2022 |
|
|
| 2023 |
|
| Thereafter |
|
| Total |
| |||
Technology services revenue(1)(2) | $ | 103 |
|
| $ | 61 |
|
| $ | 38 |
|
| $ | 16 |
|
| $ | 9 |
|
| $ | 227 |
|
(1) | Technology services revenue primarily includes upfront payments from customers, which the Company generally recognizes as services are performed. |
(2) | The Company elected the following practical expedients and therefore does not include amounts related to (1) performance obligations with an original duration of one year or less, and (2) variable consideration related to future service periods. |
In addition to amounts disclosed in the tables above, certain technology services contracts require fixed minimum fees, which are billed on a monthly or quarterly basis in arrears. The Company recognizes such revenue as services are performed. As of March 31, 2021, the estimated fixed minimum fees for the remainder of the year approximated $550 million. The term for these contracts, which are either in their initial or renewal period, ranges from one to five years.
The table below presents changes in the technology services deferred revenue liability for the three months ended March 31, 2021 and 2020, which is included in other liabilities on the condensed consolidated statements of financial condition:
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Beginning balance | $ | 123 |
|
| $ | 116 |
|
Additions(1) |
| 18 |
|
|
| 30 |
|
Revenue recognized that was included in the beginning balance |
| (30 | ) |
|
| (32 | ) |
Ending balance | $ | 111 |
|
| $ | 114 |
|
(1) | Amounts are net of revenue recognized. |
12.
17. Stock-Based Compensation
Restricted Stock and RSUs.
Restricted stock and restricted stock units (“RSUs”) activity for the ninethree months ended September 30, 2017March 31, 2021 is summarized below.
Outstanding at |
| Restricted Stock and RSUs |
|
| Weighted- Average Grant Date Fair Value |
| Restricted Stock and RSUs |
|
| Weighted- Average Grant Date Fair Value |
| ||||
December 31, 2016 |
|
| 2,987,588 |
|
| $ | 318.04 |
| |||||||
December 31, 2020 |
| 2,139,930 |
|
| $ | 489.81 |
| ||||||||
Granted |
|
| 1,061,915 |
|
| $ | 377.36 |
|
| 778,142 |
|
| $ | 739.10 |
|
Converted |
|
| (1,363,701 | ) |
| $ | 320.27 |
|
| (698,057 | ) |
| $ | 508.18 |
|
Forfeited |
|
| (39,164 | ) |
| $ | 338.57 |
|
| (14,368 | ) |
| $ | 546.89 |
|
September 30, 2017(1) |
|
| 2,646,638 |
|
| $ | 340.39 |
| |||||||
March 31, 2021 |
| 2,205,647 |
|
| $ | 571.57 |
|
|
|
In January 2017,2021, the Company granted 699,991470,253 RSUs or shares of restricted stock to employees as part of 20162020 annual incentive compensation that vest ratably over three years from the date of grant and 277,313247,621 RSUs or shares of restricted stock to employees that cliff vest 100% on January 31, 2020.2024. The Company values restricted stock and RSUs at their grant-date fair value as measured by BlackRock’s common stock price. The total fair market value of RSUs/restricted stock granted to employees during the ninethree months ended September 30, 2017March 31, 2021 was $401$575 million.
At September 30, 2017,March 31, 2021, the intrinsic value of outstanding RSUs was $1.2$1.7 billion, reflecting a closing stock price of $447.09.$753.96.
At September 30, 2017,March 31, 2021, total unrecognized stock-based compensation expense related to unvested RSUs was $351$836 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 1.11.7 years.
Performance-Based RSUs.
Performance-based RSU activity for the ninethree months ended September 30, 2017March 31, 2021 is summarized below.
Outstanding at |
| Performance- Based RSUs |
|
| Weighted- Average Grant Date Fair Value |
| ||
December 31, 2016 |
|
| 610,371 |
|
| $ | 315.65 |
|
Granted |
|
| 294,584 |
|
| $ | 375.27 |
|
Forfeited |
|
| (1,430 | ) |
| $ | 296.12 |
|
September 30, 2017 |
|
| 903,525 |
|
| $ | 335.12 |
|
Outstanding at | Performance- Based RSUs |
|
| Weighted- Average Grant Date Fair Value |
| ||
December 31, 2020 |
| 700,217 |
|
| $ | 494.51 |
|
Granted |
| 162,029 |
|
| $ | 739.22 |
|
Additional shares granted due to attainment of performance measures |
| 4,545 |
|
| $ | 566.44 |
|
Converted |
| (193,872 | ) |
| $ | 566.44 |
|
March 31, 2021 |
| 672,919 |
|
| $ | 533.19 |
|
In January 2017,2021, the Company granted 293,385162,029 performance-based RSUs to certain employees that cliff vest 100% on January 31, 2020.2024. These awards are amortized over a service period of three years. The number of shares distributed at vesting could be higher or lower than the original grant based on the level of attainment of predetermined Company performance measures. In January 2021, the Company granted 4,545 additional RSUs to certain employees based on the attainment of Company performance measures during the performance period.
28
The Company initially values performance-based RSUs at their grant-date fair value as measured by BlackRock’s common stock price. The total grant-date fair market value of performance-based RSUs granted to employees during the ninethree months ended September 30, 2017March 31, 2021 was $111$122 million.
At September 30, 2017,March 31, 2021, the intrinsic value of outstanding performance-based RSUs was $404$507 million, reflecting a closing stock price of $447.09.$753.96.
At September 30, 2017,March 31, 2021, total unrecognized stock-based compensation expense related to unvested performance-based awards was $137$244 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 1.41.7 years.
Market Performance-based RSUs.
Market performance-based RSUs activity for the nine months ended September 30, 2017 is summarized below.
Outstanding at |
| Market Performance- Based RSUs |
|
| Weighted- Average Grant Date Fair Value |
| ||
December 31, 2016 |
|
| 803,474 |
|
| $ | 151.20 |
|
Converted |
|
| (517,138 | ) |
| $ | 126.76 |
|
September 30, 2017(1) |
|
| 286,336 |
|
| $ | 195.33 |
|
(1) The market performance-based RSUs require that separate 15%, 25% and 35% share price appreciation targets be achieved during the six-year term of the awards. The awards are split into three tranches and each tranche may vest if the specified target increase in share price is met. At September 30, 2017, approximately 0.3 million awards are expected to vest.
See Note 14, 18, Stock-Based Compensation, in the 20162020 Form 10-K for more information on market performance-based RSUs.
At September 30, 2017,Performance-based Stock Options.
Stock options outstanding at both March 31, 2021 and December 31, 2020 were 1,915,792 with a weighted-average exercise price of $513.50.
Vesting of the intrinsic valueperformance-based stock options is contingent upon the achievement of outstanding market performance-based RSUs was $128 million reflecting a closingobtaining 125% of BlackRock's grant-date stock price within five years from the grant date and the attainment of $447.09.Company performance measures during the four-year performance period. If both hurdles are achieved, the award will vest in 3 equal installments at the end of 2022, 2023 and 2024, respectively. The stock price hurdle was achieved in December of 2020.
At September 30, 2017,March 31, 2021, total unrecognized stock-based compensation expense related to unvested market performance-based awardsstock options was $4$72 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of less than one year.2.7 years. At March 31, 2021, the weighted-average remaining life of the awards is approximately 5.7 years.
Long-Term Incentive Plans Funded by PNC. Under a share surrender agreement, PNC committed to provide up to 4 million shares of BlackRock stock, held by PNC, to fund certain BlackRock long-term incentive plans (“LTIP”), including performance-based and market performance-based RSUs. The current share surrender agreement commits PNC to provide BlackRock Series C nonvoting participating preferred stock to fund the remaining committed shares. As of September 30, 2017, 3.8 million shares had been surrendered by PNC.
517,138 shares were surrendered by PNCSee Note 18, Stock-Based Compensation, in the first quarter of 2017.
At September 30, 2017, the remaining shares committed by PNC of 0.2 million were available to fund certain future long-term incentive awards.2020 Form 10-K for more information on performance-based stock options.
13.
18. Net Capital Requirements
The Company is required to maintain net capital in certain regulated subsidiaries within a number of jurisdictions, which is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries of the Company may be restricted in their ability to transfer cash between different jurisdictions and to their parents. Additionally, transfers of cash between international jurisdictions including repatriation to the United States, may have adverse tax consequences that could discourage such transfers.
29
At September 30, 2017,March 31, 2021, the Company was required to maintain approximately $1.7$2.3 billion in net capital in certain regulated subsidiaries, including BlackRock Institutional Trust Company, N.A.BTC (a wholly owned subsidiary of the Company that is chartered as a national bank whose powers are limited to trust and other fiduciary activities and which is subject to regulatory capital requirements administered by the US Office of the Comptroller of the Currency), entities regulated by the Financial Conduct Authority and Prudential Regulation Authority in the United Kingdom, and the Company’s broker-dealers. The Company was in compliance with all applicable regulatory net capital requirements.
14.19. Accumulated Other Comprehensive Income (Loss)
The following tables presenttable presents changes in accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2017March 31, 2021 and 2016:2020:
(in millions) |
| Foreign currency translation adjustments(1) |
|
| Other(2) |
|
| Total |
| |||
For the Three Months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017 |
| $ | (579 | ) |
| $ | 4 |
|
| $ | (575 | ) |
Net other comprehensive income (loss) for the three months ended September 30, 2017 |
|
| 102 |
|
|
| — |
|
|
| 102 |
|
September 30, 2017 |
| $ | (477 | ) |
| $ | 4 |
|
| $ | (473 | ) |
For the Nine Months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
| $ | (721 | ) |
| $ | 5 |
|
| $ | (716 | ) |
Net other comprehensive income (loss) for the nine months ended September 30, 2017 |
|
| 244 |
|
|
| (1 | ) |
|
| 243 |
|
September 30, 2017 |
| $ | (477 | ) |
| $ | 4 |
|
| $ | (473 | ) |
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Beginning balance | $ | (337 | ) |
| $ | (571 | ) |
Foreign currency translation adjustments(1) |
| (74 | ) |
|
| (239 | ) |
Ending balance | $ | (411 | ) |
| $ | (810 | ) |
(1) |
|
(2) Other includes amounts related to benefit plans and available-for-sale investments.
(in millions) |
| Foreign currency translation adjustments(1) |
|
| Other(2) |
|
| Total |
|
| |||
For the Three Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
| $ | (565 | ) |
| $ | 5 |
|
| $ | (560 | ) |
|
Net other comprehensive income (loss) for the three months ended September 30, 2016 |
|
| (38 | ) |
|
| — |
|
|
| (38 | ) |
|
September 30, 2016 |
| $ | (603 | ) |
| $ | 5 |
|
| $ | (598 | ) |
|
For the Nine Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
| $ | (452 | ) |
| $ | 4 |
|
| $ | (448 | ) |
|
Net other comprehensive income (loss) for the nine months ended September 30, 2016 |
|
| (151 | ) |
|
| 1 |
|
|
| (150 | ) |
|
September 30, 2016 |
| $ | (603 | ) |
| $ | 5 |
|
| $ | (598 | ) |
|
(1) Amount for the three and nine months ended September 30, 2016 includes a loss from a net investment hedge of $5 million (net of a tax benefit of $4 million) and $16 million (net of a tax benefit of $10 million), respectively.
(2) Other includes amounts related to benefit plans and available-for-sale investments.
30
Nonvoting Participating Preferred Stock. The Company’s preferred shares authorized, issued and outstanding consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Series A |
|
|
|
|
|
|
|
|
Shares authorized, $0.01 par value |
|
| 20,000,000 |
|
|
| 20,000,000 |
|
Shares issued and outstanding |
|
| — |
|
|
| — |
|
Series B |
|
|
|
|
|
|
|
|
Shares authorized, $0.01 par value |
|
| 150,000,000 |
|
|
| 150,000,000 |
|
Shares issued and outstanding(1) |
|
| 823,188 |
|
|
| 823,188 |
|
Series C |
|
|
|
|
|
|
|
|
Shares authorized, $0.01 par value |
|
| 6,000,000 |
|
|
| 6,000,000 |
|
Shares issued and outstanding(1) |
|
| 246,522 |
|
|
| 763,660 |
|
Series D |
|
|
|
|
|
|
|
|
Shares authorized, $0.01 par value |
|
| 20,000,000 |
|
|
| 20,000,000 |
|
Shares issued and outstanding |
|
| — |
|
|
| — |
|
|
|
Share Repurchases. The Company repurchased 2.1 million common shares in open market transactions under the share repurchase program for approximately $825 million during the nine months ended September 30, 2017. At September 30, 2017, there were 6.9 million shares still authorized to be repurchased.
PNC Capital Contribution. During the three months ended March 31, 2017, PNC surrendered2021, the Company repurchased 0.4 million common shares under the Company’s existing share repurchase program for approximately $300 million. At March 31, 2021, there were 4.6 million shares still authorized to BlackRock 517,138 shares of BlackRock Series C Preferred to fund certain LTIP awards.be repurchased under the program.
16. Restructuring Charge
A restructuring charge21. Income Taxes
The three months ended March 31, 2021 and 2020 income tax expense (benefit) reflected $39 million and $64 million, respectively, of $76 million ($53 million after-tax), comprised of $44 million of severance and $32 million of expensediscrete tax benefits, including benefits related to the accelerated amortization of previously granted deferred cash and equitystock-based compensation awards was recordedthat vest in the first quarter of 2016each year.
The three months ended March 31, 2020 income tax expense included discrete tax benefit of $241 million recognized in connection with a project to streamline and simplify the organization. There was no restructuring liability outstanding at September 30, 2017.charitable contribution of BlackRock’s remaining 20% stake in PennyMac Financial Services, Inc. (the “Charitable Contribution”).
31
Due to the similarities in terms between BlackRock nonvoting participating preferred stock and the Company’s common stock, the Company considers its participating preferred stock to be a common stock equivalent for purposes of earnings per share (“EPS”) calculations. As such, the Company has included the outstanding nonvoting participating preferred stock in the calculation of average basic and diluted shares outstanding.
The following table sets forth the computation of basic and diluted EPSearnings per share (“EPS”) for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 under the treasury stock method:
|
| Three Months Ended |
|
| Nine Months Ended |
| Three Months Ended |
| |||||||||||||||
|
| September 30, |
|
| September 30, |
| March 31, |
| |||||||||||||||
(in millions, except shares and per share data) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2021 |
|
| 2020 |
| ||||||
Net income attributable to BlackRock |
| $ | 947 |
|
| $ | 875 |
|
| $ | 2,666 |
|
| $ | 2,321 |
| |||||||
Net income attributable to BlackRock, Inc. | $ | 1,199 |
|
| $ | 806 |
| ||||||||||||||||
Basic weighted-average shares outstanding |
|
| 161,872,716 |
|
|
| 164,129,214 |
|
|
| 162,459,737 |
|
|
| 164,756,355 |
|
| 152,567,453 |
|
|
| 155,243,279 |
|
Dilutive effect of nonparticipating RSUs and stock options |
|
| 1,900,830 |
|
|
| 2,127,384 |
|
|
| 1,829,305 |
|
|
| 2,004,557 |
| |||||||
Dilutive effect of: |
|
|
|
|
|
|
| ||||||||||||||||
Nonparticipating RSUs |
| 1,284,020 |
|
|
| 1,173,447 |
| ||||||||||||||||
Stock options |
| 450,339 |
|
|
| — |
| ||||||||||||||||
Total diluted weighted-average shares outstanding |
|
| 163,773,546 |
|
|
| 166,256,598 |
|
|
| 164,289,042 |
|
|
| 166,760,912 |
|
| 154,301,812 |
|
|
| 156,416,726 |
|
Basic earnings per share |
| $ | 5.85 |
|
| $ | 5.33 |
|
| $ | 16.41 |
|
| $ | 14.09 |
| $ | 7.86 |
|
| $ | 5.19 |
|
Diluted earnings per share |
| $ | 5.78 |
|
| $ | 5.26 |
|
| $ | 16.23 |
|
| $ | 13.92 |
| $ | 7.77 |
|
| $ | 5.15 |
|
The amount of anti-dilutive RSUs was immaterial for the three months ended March 31, 2021. For the three months ended March 31, 2020, 603,639 RSUs were excluded from the calculation of diluted EPS because to include them would have an anti-dilutive effect. Certain performance-based RSUs were excluded from the diluted EPS calculation because the designated contingency was not met for the three months ended March 31, 2021 and 2020, respectively. In addition, performance-based stock options were excluded from the diluted EPS calculation for the three months ended March 31, 2020 because the designated contingency was not met.
18.
23. Segment Information
The Company’s management directs BlackRock’s operations as one1 business, the asset management business. The Company utilizes a consolidated approach to assess performance and allocate resources. As such, the Company operates in one business segment as defined in ASC 280-10.segment.
The following table illustrates investment advisory, administration fees, securities lending revenue and performance fees by product type, technology and risk management revenue, distribution fees, and advisory and other revenue for the three and nine months ended September 30, 2017 and 2016.
|
| Three Months Ended |
|
| Nine Months Ended |
|
| ||||||||||
|
| September 30, |
|
| September 30, |
|
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| ||||
Equity |
| $ | 1,457 |
|
| $ | 1,284 |
|
| $ | 4,134 |
|
| $ | 3,746 |
|
|
Fixed income |
|
| 749 |
|
|
| 695 |
|
|
| 2,153 |
|
|
| 1,975 |
|
|
Multi-asset |
|
| 291 |
|
|
| 286 |
|
|
| 857 |
|
|
| 866 |
|
|
Alternatives |
|
| 342 |
|
|
| 221 |
|
|
| 754 |
|
|
| 633 |
|
|
Cash management |
|
| 144 |
|
|
| 118 |
|
|
| 408 |
|
|
| 340 |
|
|
Total investment advisory, administration fees, securities lending revenue and performance fees |
|
| 2,983 |
|
|
| 2,604 |
|
|
| 8,306 |
|
|
| 7,560 |
|
|
Technology and risk management revenue |
|
| 175 |
|
|
| 152 |
|
|
| 497 |
|
|
| 439 |
|
|
Distribution fees |
|
| 5 |
|
|
| 10 |
|
|
| 17 |
|
|
| 32 |
|
|
Advisory and other revenue |
|
| 70 |
|
|
| 71 |
|
|
| 202 |
|
|
| 234 |
|
|
Total revenue |
| $ | 3,233 |
|
| $ | 2,837 |
|
| $ | 9,022 |
|
| $ | 8,265 |
|
|
The following table illustrates total revenue for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the customer resides or affiliated services are provided.
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
| |||||||||||||||
(in millions) |
| September 30, |
|
| September 30, |
|
| March 31, |
| |||||||||||||||
Revenue |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
| ||||||
Americas |
| $ | 2,126 |
|
| $ | 1,934 |
|
| $ | 6,077 |
|
| $ | 5,580 |
|
| $ | 2,810 |
|
| $ | 2,480 |
|
Europe |
|
| 946 |
|
|
| 773 |
|
|
| 2,496 |
|
|
| 2,287 |
|
|
| 1,387 |
|
|
| 1,067 |
|
Asia-Pacific |
|
| 161 |
|
|
| 130 |
|
|
| 449 |
|
|
| 398 |
|
|
| 201 |
|
|
| 163 |
|
Total revenue |
| $ | 3,233 |
|
| $ | 2,837 |
|
| $ | 9,022 |
|
| $ | 8,265 |
|
| $ | 4,398 |
|
| $ | 3,710 |
|
32
See Note 16, Revenue, for further information on the Company’s sources of revenue.
The following table illustrates long-lived assets that consist of goodwill and property and equipment at September 30, 2017March 31, 2021 and December 31, 20162020 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located.
(in millions) |
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
Long-lived Assets |
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
| ||||
Americas |
| $ | 13,546 |
|
| $ | 13,424 |
|
| $ | 14,572 |
|
| $ | 13,784 |
|
Europe |
|
| 166 |
|
|
| 163 |
|
|
| 1,353 |
|
|
| 1,360 |
|
Asia-Pacific |
|
| 85 |
|
|
| 90 |
|
|
| 94 |
|
|
| 88 |
|
Total long-lived assets |
| $ | 13,797 |
|
| $ | 13,677 |
|
| $ | 16,019 |
|
| $ | 15,232 |
|
Americas is primarily is comprised of the United States, Latin America and Canada, while Europe is primarily is comprised of the United Kingdom, the Netherlands, France and Luxembourg. Asia-Pacific is primarily is comprised of Hong Kong, Australia, Japan and Singapore.
19.24. Subsequent Events
In June 2017, the Company announced that it entered into an agreement for a minority investment in Scalable Capital, a digital investment manager in Europe. The transaction is expected to be completed in the fourth quarter of 2017, subject to customary regulatory approvals and closing conditions. This transaction is not expected to be material to the Company’s condensed consolidated statements of financial condition or results of operations.
The Company conducted a review for additional subsequent events and determined that no subsequent events had occurred that would require accrual or additional disclosures.
33
ItemItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This report, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions.
BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.
BlackRock has previously disclosed risk factors in its Securities and Exchange Commission (“SEC”) reports. These risk factors and those identified elsewhere in this report, among others, could cause actual results to differ materially from forward-looking statements or historical performance and include: (1) a pandemic or health crisis, including the COVID-19 pandemic, and its continued impact on financial institutions, the global economy or capital markets, as well as BlackRock’s products, clients, vendors and employees, and BlackRock’s results of operations, the full extent of which may be unknown; (2) the introduction, withdrawal, success and timing of business initiatives and strategies; (2)(3) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management (“AUM”); (3)(4) the relative and absolute investment performance of BlackRock’s investment products; (4)(5) BlackRock’s ability to develop new products and services that address client preferences; (6) the impact of increased competition; (5)(7) the impact of future acquisitions or divestitures; (6)(8) BlackRock’s ability to integrate acquired businesses successfully; (9) the unfavorable resolution of legal proceedings; (7)(10) the extent and timing of any share repurchases; (8)(11) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (9)(12) attempts to circumvent BlackRock’s operational control environment or the potential for human error in connection with BlackRock’s operational systems; (10)(13) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or The PNC Financial Services Group, Inc. (“PNC”); (11)BlackRock; (14) changes in law and policy and uncertainty pending any such changes; (12)(15) any failure to effectively manage conflicts of interest; (16) damage to BlackRock’s reputation; (17) terrorist activities, civil unrest, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (13)(18) the ability to attract and retain highly talented professionals; (14)(19) fluctuations in the carrying value of BlackRock’s economic investments; (15)(20) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (16)(21) BlackRock’s success in negotiating distribution arrangements and maintaining distribution channels for its products; (17)(22) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (18)(23) operational, technological and regulatory risks associated with BlackRock’s major technology partnerships; (24) any disruption to the operations of third parties whose functions are integral to BlackRock’s exchange-traded funds (“ETF”) platform; (19)(25) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (20)(26) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.
34
BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, “BlackRock” or the “Company”) is a leading publicly traded investment management firm with $5.977$9.01 trillion of AUM at September 30, 2017.March 31, 2021. With approximately 13,70016,700 employees in more than 30 countries who serve clients in over 100 countries across the globe, BlackRock provides a broad range of investment management and risk managementtechnology services to institutional and retail clients worldwide.
BlackRock’s diverse platform of alpha-seeking active, (alpha)index and index (beta)cash management investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Product offerings include single- and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares®ETFs, separate accounts, collective investmenttrust funds and other pooled investment vehicles. BlackRock also offers technology services, including the investment and risk management technology platform, Aladdin®, risk analytics,Aladdin Wealth, eFront, Cachematrix and FutureAdvisor, as well as advisory and technology services and solutions to a broad base of institutional and wealth management investors.clients.
BlackRock serves a diverse mix of institutional and retail clients across the globe. Clients include tax-exempt institutions, such as defined benefit and defined contribution pension plans, charities, foundations and endowments; official institutions, such as central banks, sovereign wealth funds, supranationals and other government entities; taxable institutions, including insurance companies, financial institutions, corporations and third-party fund sponsors, and retail investors.intermediaries.
BlackRock maintains a significant global sales and marketing presence that is focused on establishing and maintaining retail and institutional investment management and technology service relationships by marketing its services to investors directly and through third-party distribution relationships, including financial professionals and pension consultants,consultants.
Certain prior period presentations and establishing third-party distribution relationships.disclosures, while not required to be recast, were reclassified to ensure comparability with current period classifications.
At September 30, 2017, PNC held 21.4%
COVID-19 Impact
The COVID-19 pandemic continues to result in governmental authorities taking measures to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activity in certain jurisdictions, including closures. These measures may continue to, among other things, severely restrict global economic activity, which can disrupt supply chains, lower asset valuations, significantly increase unemployment and underemployment levels, decrease liquidity in markets for certain securities and cause significant volatility and disruption in the financial markets.
Towards the end of the Company’s voting common stock and 21.9%first quarter of 2020 the pandemic began to impact BlackRock’s business. While global markets have significantly recovered since then, the effects of the pandemic are ongoing, and such impact may continue in future quarters if conditions persist or worsen. BlackRock is actively monitoring COVID-19 developments and their potential impact on the Company’s capital stock,employees, business and operations, particularly in jurisdictions where BlackRock has significant employee populations and/or business activity.
The aggregate extent to which includes outstanding commonCOVID-19, and nonvoting preferred stock.
Certain items previously reported have been reclassified to conformthe related impact on the global economy, affect BlackRock’s business, results of operations and financial condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any recovery period, the shifting epicenter, and emergence of new variants, of the COVID-19 virus, the continuing prevalence of severe, unconstrained and/or escalating rates of infection in certain countries and regions, the availability, adoption and the efficacy of treatments and vaccines, future actions taken by governmental authorities, central banks and other third parties (including new financial regulation and other regulatory reform) in response to the current period presentation. For morepandemic, and the effects on BlackRock’s products, clients, vendors and employees. See Part II, Item 1A - Risk Factors, of this filing for further information on the current period’s reclassification, see “Discussionpossible future impact of Financial Results – Revenue” herein.
OTHER DEVELOPMENTSthe COVID-19 pandemic on BlackRock’s business, results of operations and financial condition.
Acquisitions
In June 2017, the Company completed the acquisition of the equity infrastructure franchise of First Reserve (“First Reserve Transaction”), expanding the Company’s energy and power infrastructure platform. Total consideration for the transaction was approximately $193 million, including $120 million of contingent consideration at fair value at time of close.
In July 2017, the Company completed the acquisition of Cachematrix (“Cachematrix Transaction”), a leading provider of financial technology which simplifies the cash management process for banks and their corporate clients in a streamlined, open-architecture platform. Total consideration for the transaction was approximately $38 million.
In June 2017, the Company announced that it entered into an agreement for a minority investment in Scalable Capital, a digital investment manager in Europe. The transaction is expected to be completed in the fourth quarter of 2017, subject to customary regulatory approvals and closing conditions. This transaction is not expected to be material to the Company’s condensed consolidated statements of financial condition or results of operations.
United Kingdom Exit from European Union
FollowingOn December 31, 2020, the June 2016 vote to exitUnited Kingdom (“UK”) and the European Union (“EU”), the United Kingdom served notice under Article 50 of the Treaty on European Union on March 29, 2017 reverted to initiate the process of exiting from the EU, commonly referred to as "Brexit".being distinct regulatory, legal and customs territories. The outcome of the negotiations between the United KingdomUK and the EU concluded a free trade agreement, known as the “EU-UK Trade and Cooperation Agreement”. The agreement does not include any substantive provisions governing cross-border trade in financial services between the UK and the EU. The UK and the EU have also concluded a memorandum of understanding governing aspects of the relationship between the jurisdictions' regulators with respect to financial services, but this has not yet been ratified or published. As a result, since January 1, 2021, cross-border financial services trade between the UK and the EU has been governed by their respective financial services regulations and market access regimes. BlackRock has implemented a number of steps to prepare for this outcome. These steps, which are and have been time consuming and costly and may add complexity to BlackRock’s future European operations, include effecting organizational, governance and operational changes, applying for and receiving additional licenses and permissions in the EU, and engaging in client communications. In addition, depending on how the future relationship between the UK and the EU develops, BlackRock may experience further organizational and operational challenges and incur additional costs in connection with Brexit is highly uncertainits European operations, particularly with regard to delegation and information regardingoutsourcing, which may impede the long-term consequences is expected to become clearer over time as negotiations progress.Company’s growth or impact its financial performance.
Acquisition
On February 1, 2021, the Company acquired 100% of the equity interests of Aperio Group, LLC (the “Aperio Transaction” or “Aperio”), a pioneer in customizing tax-optimized index equity separately managed accounts (“SMAs”) for approximately $1.1 billion in cash, using existing cash resources. The Company continues to prepare for a rangeacquisition of potential outcomes in connection with Brexit.
35
EXECUTIVE SUMMARYAperio increased BlackRock’s SMA assets under management and expanded the breadth of the Company’s capabilities via tax-managed strategies across factors, broad market indexing, and investor Environmental, Social, and Governance preferences across all asset classes.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions, except shares and per share data) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
GAAP basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
| $ | 3,233 |
|
| $ | 2,837 |
|
| $ | 9,022 |
|
| $ | 8,265 |
|
Total expense |
|
| 1,839 |
|
|
| 1,628 |
|
|
| 5,239 |
|
|
| 4,920 |
|
Operating income |
|
| 1,394 |
|
|
| 1,209 |
|
|
| 3,783 |
|
|
| 3,345 |
|
Operating margin |
|
| 43.1 | % |
|
| 42.6 | % |
|
| 41.9 | % |
|
| 40.5 | % |
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests |
|
| (2 | ) |
|
| (1 | ) |
|
| (27 | ) |
|
| (70 | ) |
Income tax expense |
|
| (445 | ) |
|
| (333 | ) |
|
| (1,090 | ) |
|
| (954 | ) |
Net income attributable to BlackRock |
| $ | 947 |
|
| $ | 875 |
|
| $ | 2,666 |
|
| $ | 2,321 |
|
Diluted earnings per common share |
| $ | 5.78 |
|
| $ | 5.26 |
|
| $ | 16.23 |
|
| $ | 13.92 |
|
Effective tax rate |
|
| 32.0 | % |
|
| 27.6 | % |
|
| 29.0 | % |
|
| 29.1 | % |
As adjusted(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
| $ | 1,398 |
|
| $ | 1,216 |
|
| $ | 3,795 |
|
| $ | 3,442 |
|
Operating margin |
|
| 45.0 | % |
|
| 44.8 | % |
|
| 43.9 | % |
|
| 43.5 | % |
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests |
|
| (2 | ) |
|
| (1 | ) |
|
| (27 | ) |
|
| (70 | ) |
Net income attributable to BlackRock |
| $ | 969 |
|
| $ | 854 |
|
| $ | 2,694 |
|
| $ | 2,362 |
|
Diluted earnings per common share |
| $ | 5.92 |
|
| $ | 5.14 |
|
| $ | 16.40 |
|
| $ | 14.16 |
|
Effective tax rate |
|
| 30.6 | % |
|
| 29.7 | % |
|
| 28.5 | % |
|
| 30.0 | % |
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under management (end of period) |
| $ | 5,976,892 |
|
| $ | 5,117,421 |
|
| $ | 5,976,892 |
|
| $ | 5,117,421 |
|
Diluted weighted-average common shares outstanding(2) |
|
| 163,773,546 |
|
|
| 166,256,598 |
|
|
| 164,289,042 |
|
|
| 166,760,912 |
|
Common and preferred shares outstanding (end of period) |
|
| 161,597,770 |
|
|
| 163,858,070 |
|
|
| 161,597,770 |
|
|
| 163,858,070 |
|
Book value per share(3) |
| $ | 185.91 |
|
| $ | 176.40 |
|
| $ | 185.91 |
|
| $ | 176.40 |
|
Cash dividends declared and paid per share |
| $ | 2.50 |
|
| $ | 2.29 |
|
| $ | 7.50 |
|
| $ | 6.87 |
|
EXECUTIVE SUMMARY
| Three Months Ended |
|
| |||||
| March 31, |
|
| |||||
(in millions, except shares and per share data) | 2021 |
|
| 2020 |
|
| ||
GAAP basis: |
|
|
|
|
|
|
|
|
Total revenue | $ | 4,398 |
|
| $ | 3,710 |
|
|
Total expense |
| 2,853 |
|
|
| 3,026 |
|
|
Operating income | $ | 1,545 |
|
| $ | 684 |
|
|
Operating margin |
| 35.1 | % |
|
| 18.4 | % |
|
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests |
| (28 | ) |
|
| 108 |
|
|
Income tax benefit (expense) |
| (318 | ) |
|
| 14 |
|
|
Net income attributable to BlackRock | $ | 1,199 |
|
| $ | 806 |
|
|
Diluted earnings per common share | $ | 7.77 |
|
| $ | 5.15 |
|
|
Effective tax rate |
| 20.9 | % |
|
| (1.7 | )% |
|
As adjusted(1): |
|
|
|
|
|
|
|
|
Operating income | $ | 1,545 |
|
| $ | 1,273 |
|
|
Operating margin |
| 44.4 | % |
|
| 41.7 | % |
|
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests | $ | (28 | ) |
| $ | (14 | ) |
|
Net income attributable to BlackRock | $ | 1,199 |
|
| $ | 1,032 |
|
|
Diluted earnings per common share | $ | 7.77 |
|
| $ | 6.60 |
|
|
Effective tax rate |
| 20.9 | % |
|
| 18.0 | % |
|
Other: |
|
|
|
|
|
|
|
|
AUM (end of period) | $ | 9,007,411 |
|
| $ | 6,466,668 |
|
|
Diluted weighted-average common shares outstanding(2) |
| 154,301,812 |
|
|
| 156,416,726 |
|
|
Shares outstanding (end of period) |
| 152,635,930 |
|
|
| 155,085,806 |
|
|
Book value per share(3) | $ | 231.79 |
|
| $ | 212.87 |
|
|
Cash dividends declared and paid per share | $ | 4.13 |
|
| $ | 3.63 |
|
|
|
| As adjusted items are described in more detail in Non-GAAP Financial Measures. |
| Nonvoting participating preferred shares are considered to be common stock equivalents for purposes of determining basic and diluted earnings per share calculations. As of March 31, 2021, there were no shares of preferred stock outstanding. |
| Total BlackRock stockholders’ equity divided by total |
THREE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2021 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2016MARCH 31, 2020
GAAP.Operating income of $1,394$1,545 million increased $185$861 million and operating margin of 43.1%35.1% increased 501,670 bps from the thirdfirst quarter of 2016.2020. Increases in operating income and operating margin reflected the impact of $589 million related to the previously reported charitable contribution of BlackRock’s remaining 20% stake in PennyMac Financial Services, Inc. (the “Charitable Contribution”) in the first quarter of 2020. Operating income and operating margin growthalso reflected higher year-over-year baseinvestment advisory and administration fees, performance fees and technology and risk managementservices revenue, partially offset by higher employee compensation and benefits expense higher direct fund expense, and higher general and administration expense.
Third quarter 2017 income tax expense included net noncash expenseproduct launch costs in 2021, including the impact of $19$178 million related to the revaluation of certain deferred income tax liabilities as a result of domestic state and local changes. Third quarter 2016 income tax expense included a $26 million net noncash tax benefit, primarily related to the revaluation of certain deferred income tax liabilities as a result of legislation enacted in the United Kingdom, and domestic state and local income tax changes. Third quarter 2016 income tax expense also included nonrecurring tax benefits of $16 million primarily due to the resolution of certain outstanding tax matters. See Income Tax Expense within Discussion of Financial Results for more information.
Earnings per diluted common share increased $0.52, or 10%, from the third quarter of 2016, driven primarily by higher operating income and the benefit of share repurchases, partially offset by higher income tax expense.
36
As Adjusted. Operating income of $1,398 million increased $182 million from the third quarter of 2016, and operating margin of 45.0% increased 20 bps from the third quarter of 2016. Income tax expense for the third quarter of 2017 and 2016 excluded the $19 million net noncash expense and $26 million net noncash benefit, respectively, described above. Earnings per diluted common share increased $0.78, or 15%, from the third quarter of 2016.
NINE MONTHS ENDED SEPTEMBER 30, 2017 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2016
GAAP. Operating income of $3,783 million increased $438 million and operating margin of 41.9% increased 140 bps from the nine months ended September 30, 2016. Operating income and operating margin growth primarily reflected higher year-over-year base fees, performance fees, and technology and risk management revenue, partially offset by higher compensation and benefits, higher direct fund expense, and higher general and administration expense. The nine months ended September 30, 2017 also included approximately $22 million of expense associated with the strategic repositioningMarch 2021 close of the active equity platform. Operating income for the nine months ended September 30, 2016 included a restructuring charge of $76 million in connection with a project to streamline$4.9 billion BlackRock Innovation and simplify the organization. Growth Trust.
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interestinterests (“NCI”), increased $43 decreased $136 million driven by higher net gains on investments. Nonoperating results forfrom the nine months ended September 30, 2017 includedfirst quarter of 2020, reflecting the impact of a “make-whole” redemption premiumpre-tax gain of $14approximately $240 million in connection with a recapitalization of iCapital Network, Inc. (“iCapital”) and $122 million pre-tax gain related to the refinancingCharitable Contribution in the first quarter of $700 million2020. Nonoperating income (expense) less net income (loss) attributable to NCI also included higher mark-to-market gains on the Company’s co-investment portfolio, largely offset by the revaluation of 6.25% notes, which were paid prior to their September 2017 maturity. certain minority investments in the first quarter of 2021.
IncomeFirst quarter 2021 and 2020 income tax expense for the nine months ended September 30, 2017 included an $81(benefit) reflected $39 million and $64 million, respectively, of discrete tax benefit reflecting the adoption of new accounting guidancebenefits, including benefits related to stock-based compensation awards that vestedvest in the first quarter of 2017 and the $19 million net noncash expense mentioned above.each year. Income tax expensebenefit for the nine months ended September 30, 2016first quarter of 2020 included a discrete tax benefit of $241 million recognized in connection with the $26 million net noncash benefit mentioned above and nonrecurring tax benefits of $35 million.Charitable Contribution. See Income Tax Expense within Discussion of Financial Results for more information.
Earnings per diluted common share increased $2.31,$2.62, or 17%51%, from the nine months ended September 30, 2016, driven primarilyfirst quarter of 2020, reflecting the impact of the Charitable Contribution incurred in the first quarter of 2020. The increase in earnings per diluted common share also included higher revenue and a lower diluted share count, partially offset by higher netproduct launch costs, lower nonoperating income, and a higher effective tax rate in the benefit of share repurchases.current quarter.
As Adjusted.Adjusted. Operating income of $3,795$1,545 million increased $353$272 million and operating margin of 43.9%44.4% increased 40270 bps from the nine months ended September 30, 2016. first quarter of 2020. Earnings per diluted common share increased $1.17, or 18%, from the first quarter of 2020,primarily due to higher operating income and a lower diluted share count, partially offset by lower nonoperating income and a higher effective tax rate in the current quarter.The pre-tax restructuring charge of $76 million described above wasfinancial impact related to the Charitable Contribution has been excluded from as adjusted results for the nine months ended September 30, 2016. Income tax expense for the nine months ended September 30, 2017 and 2016 excluded the previously described net noncash expensefirst quarter of $19 million and net noncash benefit of $26 million, respectively, and included the nonrecurring tax benefits described above. Earnings per diluted common share increased $2.24, or 16%, from the nine months ended September 30, 2016.2020.
See Non-GAAP Financial Measures for further information on as adjusted items and the reconciliation to accounting principles generally accepted in the United States (“GAAP“GAAP”).
For further discussion of BlackRock’s revenue, expense, nonoperating results and income tax expense, see Discussion of Financial Results herein.
37
BlackRock reports its financial results in accordance with GAAP; however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be helpful, for both management and investors, in evaluating BlackRock’s financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include all of BlackRock’s revenue and expense. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP measures may not be comparable to other similarly titled measures of other companies.
Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock’s financial performance. Adjustments to GAAP financial measures (“non-GAAP adjustments”) include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.
Computations for all periods are derived from the condensed consolidated statements of income as follows:
(1) Operating income, as adjusted, and operating margin, as adjusted:
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Operating income, GAAP basis | $ | 1,545 |
|
| $ | 684 |
|
Non-GAAP expense adjustment: |
|
|
|
|
|
|
|
Charitable Contribution |
| — |
|
|
| 589 |
|
Operating income, as adjusted |
| 1,545 |
|
|
| 1,273 |
|
Product launch costs and commissions |
| 185 |
|
|
| 87 |
|
Operating income used for operating margin measurement | $ | 1,730 |
|
| $ | 1,360 |
|
Revenue, GAAP basis | $ | 4,398 |
|
| $ | 3,710 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Distribution fees |
| (340 | ) |
|
| (276 | ) |
Investment advisory fees |
| (165 | ) |
|
| (169 | ) |
Revenue used for operating margin measurement | $ | 3,893 |
|
| $ | 3,265 |
|
Operating margin, GAAP basis |
| 35.1 | % |
|
| 18.4 | % |
Operating margin, as adjusted |
| 44.4 | % |
|
| 41.7 | % |
|
|
|
|
|
|
|
|
Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock’s financial performance over time, and, therefore, provide useful disclosure to investors.Management believes that operating margin, as adjusted, reflects the Company’s long-term ability to manage ongoing costs in relation to its revenues. The Company uses operating margin, as adjusted, to assess the Company’s financial performance and to determine the long-term and annual compensation of the Company’s senior-level employees. Furthermore, this metric is used to evaluate the Company’s relative performance against industry peers, as it eliminates margin variability arising from the accounting of revenues and expenses related to distributing different product structures in multiple distribution channels utilized by asset managers.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Operating income, GAAP basis |
| $ | 1,394 |
|
| $ | 1,209 |
|
| $ | 3,783 |
|
| $ | 3,345 |
|
Non-GAAP expense adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charge |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76 |
|
PNC LTIP funding obligation |
|
| 4 |
|
|
| 7 |
|
|
| 12 |
|
|
| 21 |
|
Operating income, as adjusted |
| $ | 1,398 |
|
| $ | 1,216 |
|
| $ | 3,795 |
|
| $ | 3,442 |
|
Revenue, GAAP basis |
| $ | 3,233 |
|
| $ | 2,837 |
|
| $ | 9,022 |
|
| $ | 8,265 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution and servicing costs |
|
| (123 | ) |
|
| (114 | ) |
|
| (361 | ) |
|
| (320 | ) |
Amortization of deferred sales commissions |
|
| (4 | ) |
|
| (8 | ) |
|
| (13 | ) |
|
| (27 | ) |
Revenue used for operating margin measurement |
| $ | 3,106 |
|
| $ | 2,715 |
|
| $ | 8,648 |
|
| $ | 7,918 |
|
Operating margin, GAAP basis |
|
| 43.1 | % |
|
| 42.6 | % |
|
| 41.9 | % |
|
| 40.5 | % |
Operating margin, as adjusted |
|
| 45.0 | % |
|
| 44.8 | % |
|
| 43.9 | % |
|
| 43.5 | % |
Operating income, as adjusted, includes non-GAAP expense adjustments. The portion of compensation expense associated with certain long-term incentive plans (“LTIP”) funded, or to be funded, through share distributions to participants of BlackRock stock held by PNC has been excluded because it ultimately does not impact BlackRock’s book value. For the nine months ended September 30, 2016, a restructuring charge comprised of severance and accelerated amortization expense of previously granted deferred compensation awards has been excluded to provide an analysis of BlackRock’s ongoing operations and to ensure comparability among periods presented.
• | Operating income used for measuring operating margin, as adjusted, |
38
| • |
|
(2) Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted:
(2)
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Nonoperating income (expense), GAAP basis | $ | 46 |
|
| $ | (71 | ) |
Less: Net income (loss) attributable to NCI |
| 74 |
|
|
| (179 | ) |
Nonoperating income (expense), net of NCI |
| (28 | ) |
|
| 108 |
|
Less: Gain related to the Charitable Contribution |
| — |
|
|
| 122 |
|
Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted | $ | (28 | ) |
| $ | (14 | ) |
Management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, is an effective measure for reviewing BlackRock’s nonoperating contribution to its results and provides comparability of this information among reporting periods. Management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, provides a useful measure, for both management and investors, of BlackRock’s nonoperating results, which ultimately impact BlackRock’s book value. During the three months ended March 31, 2020, the noncash, nonoperating pre-tax gain of $122 million related to the Charitable Contribution has been excluded from nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, due to its nonrecurring nature.
(3) Net income attributable to BlackRock, Inc., as adjusted:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions, except per share data) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net income attributable to BlackRock, Inc., GAAP basis |
| $ | 947 |
|
| $ | 875 |
|
| $ | 2,666 |
|
| $ | 2,321 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charge (including $23 tax benefit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 53 |
|
PNC LTIP funding obligation, net of tax |
|
| 3 |
|
|
| 5 |
|
|
| 9 |
|
|
| 14 |
|
Income tax matters |
|
| 19 |
|
|
| (26 | ) |
|
| 19 |
|
|
| (26 | ) |
Net income attributable to BlackRock, Inc., as adjusted |
| $ | 969 |
|
| $ | 854 |
|
| $ | 2,694 |
|
| $ | 2,362 |
|
Diluted weighted-average common shares outstanding(3) |
|
| 163.8 |
|
|
| 166.3 |
|
|
| 164.3 |
|
|
| 166.8 |
|
Diluted earnings per common share, GAAP basis(3) |
| $ | 5.78 |
|
| $ | 5.26 |
|
| $ | 16.23 |
|
| $ | 13.92 |
|
Diluted earnings per common share, as adjusted(3) |
| $ | 5.92 |
|
| $ | 5.14 |
|
| $ | 16.40 |
|
| $ | 14.16 |
|
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions, except per share data) | 2021 |
|
| 2020 |
| ||
Net income attributable to BlackRock, Inc., GAAP basis | $ | 1,199 |
|
| $ | 806 |
|
Non-GAAP adjustment: |
|
|
|
|
|
|
|
Charitable Contribution, net of tax |
| — |
|
|
| 226 |
|
Net income attributable to BlackRock, Inc., as adjusted | $ | 1,199 |
|
| $ | 1,032 |
|
Diluted weighted-average common shares outstanding (4) |
| 154.3 |
|
|
| 156.4 |
|
Diluted earnings per common share, GAAP basis (4) | $ | 7.77 |
|
| $ | 5.15 |
|
Diluted earnings per common share, as adjusted (4) | $ | 7.77 |
|
| $ | 6.60 |
|
Management believes net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock’s profitability and financial performance. Net income attributable to BlackRock, Inc., as adjusted, equals net income attributable to BlackRock, Inc., GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.
See aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, and nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, for information on the PNC LTIP funding obligation and the restructuring charge.Charitable Contribution.
For each period presented, the non-GAAP adjustment related to the restructuring charge and PNC LTIP funding obligation wasThe three months ended March 31, 2020 included a discrete tax effected at the respective blended rates applicable to the adjustments. Amounts for income tax matters represent net noncash (benefits) expense primarily associatedbenefit of $241 million recognized in connection with the revaluation of certain deferredCharitable Contribution. The discrete tax liabilities related to intangible assets and goodwill. Amounts havebenefit has been excluded from the as adjusted results as these items will not have a cash flow impact anddue to ensure comparability among periods presented. the non-recurring nature of the Charitable Contribution.
Per share amounts reflect net income attributable to BlackRock, Inc., as adjusted divided by diluted weighted averageweighted-average common shares outstanding.
(3)(4) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations. At March 31, 2021, there were no shares of preferred stock outstanding.
39
AUM for reporting purposes generally is based upon how investment advisory and administration fees are calculated for each portfolio. Net asset values, total assets, committed assets or other measures may be used to determine portfolio AUM.
AUM and Net Inflows (Outflows) by Client Type |
| ||||||||||||||||||||||||||||||||||||||||||||||
AUM and Net Inflows (Outflows) by Client Type and Product Type | AUM and Net Inflows (Outflows) by Client Type and Product Type |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| AUM |
|
| Net inflows (outflows) |
| AUM |
|
| Net inflows (outflows) |
| ||||||||||||||||||||||||||||||||||||
|
| September 30, |
|
| June 30, |
|
| December 31, |
|
| September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Twelve Months Ended September 30, |
| March 31, |
|
| December 31, |
|
| March 31, |
|
| Three Months Ended March 31, |
|
| Twelve Months Ended March 31, |
| ||||||||||||
(in millions) |
| 2017 |
|
| 2017 |
|
| 2016 |
|
| 2016 |
|
| 2017 |
|
| 2017 |
|
| 2017 |
| 2021 |
|
| 2020 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
| ||||||||||||
Retail |
| $ | 608,521 |
|
| $ | 586,756 |
|
| $ | 541,952 |
|
| $ | 554,778 |
|
| $ | 7,367 |
|
| $ | 18,501 |
|
| $ | 16,055 |
| $ | 934,177 |
|
| $ | 845,917 |
|
| $ | 608,824 |
|
| $ | 36,511 |
|
| $ | 107,593 |
|
iShares ETFs |
|
| 1,640,437 |
|
|
| 1,528,236 |
|
|
| 1,287,879 |
|
|
| 1,246,166 |
|
|
| 52,306 |
|
|
| 190,541 |
|
|
| 239,841 |
| |||||||||||||||||||
ETFs |
| 2,813,524 |
|
|
| 2,669,007 |
|
|
| 1,852,190 |
|
|
| 68,490 |
|
|
| 239,545 |
| ||||||||||||||||||||||||||||
Institutional: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
| 1,105,224 |
|
|
| 1,075,855 |
|
|
| 1,009,974 |
|
|
| 1,039,653 |
|
|
| 155 |
|
|
| 3,735 |
|
|
| 10,043 |
|
| 1,524,430 |
|
|
| 1,524,462 |
|
|
| 1,230,092 |
|
|
| 16,533 |
|
|
| 50,020 |
|
Index |
|
| 2,194,701 |
|
|
| 2,093,193 |
|
|
| 1,901,681 |
|
|
| 1,877,501 |
|
|
| 15,976 |
|
|
| 36,883 |
|
|
| 71,486 |
|
| 3,009,150 |
|
|
| 2,948,683 |
|
|
| 2,178,499 |
|
|
| 11,106 |
|
|
| 11,491 |
|
Total institutional |
|
| 3,299,925 |
|
|
| 3,169,048 |
|
|
| 2,911,655 |
|
|
| 2,917,154 |
|
|
| 16,131 |
|
|
| 40,618 |
|
|
| 81,529 |
| |||||||||||||||||||
Institutional subtotal |
| 4,533,580 |
|
|
| 4,473,145 |
|
|
| 3,408,591 |
|
|
| 27,639 |
|
|
| 61,511 |
| ||||||||||||||||||||||||||||
Long-term |
| 8,281,281 |
|
|
| 7,988,069 |
|
|
| 5,869,605 |
|
|
| 132,640 |
|
|
| 408,649 |
| ||||||||||||||||||||||||||||
Cash management |
| 703,916 |
|
|
| 666,252 |
|
|
| 594,089 |
|
|
| 39,190 |
|
|
| 100,098 |
| ||||||||||||||||||||||||||||
Advisory(1) |
| 22,214 |
|
|
| 22,359 |
|
|
| 2,974 |
|
|
| (187 | ) |
|
| 18,748 |
| ||||||||||||||||||||||||||||
Total | $ | 9,007,411 |
|
| $ | 8,676,680 |
|
| $ | 6,466,668 |
|
| $ | 171,643 |
|
| $ | 527,495 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
AUM and Net Inflows (Outflows) by Investment Style and Product Type | AUM and Net Inflows (Outflows) by Investment Style and Product Type |
| |||||||||||||||||||||||||||||||||||||||||||||
| AUM |
|
| Net inflows (outflows) |
| ||||||||||||||||||||||||||||||||||||||||||
| March 31, |
|
| December 31, |
|
| March 31, |
|
| Three Months Ended March 31, |
|
| Twelve Months Ended March 31, |
| |||||||||||||||||||||||||||||||||
(in millions) | 2021 |
|
| 2020 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
| |||||||||||||||||||||||||||||||||
Active | $ | 2,297,642 |
|
| $ | 2,250,887 |
|
| $ | 1,758,548 |
|
| $ | 58,954 |
|
| $ | 155,638 |
| ||||||||||||||||||||||||||||
Index and ETFs |
| 5,983,639 |
|
|
| 5,737,182 |
|
|
| 4,111,057 |
|
|
| 73,686 |
|
|
| 253,011 |
| ||||||||||||||||||||||||||||
Long-term |
|
| 5,548,883 |
|
|
| 5,284,040 |
|
|
| 4,741,486 |
|
|
| 4,718,098 |
|
|
| 75,804 |
|
|
| 249,660 |
|
|
| 337,425 |
|
| 8,281,281 |
|
|
| 7,988,069 |
|
|
| 5,869,605 |
|
|
| 132,640 |
|
|
| 408,649 |
|
Cash management |
|
| 425,423 |
|
|
| 402,575 |
|
|
| 403,584 |
|
|
| 388,982 |
|
|
| 20,381 |
|
|
| 14,854 |
|
|
| 32,526 |
|
| 703,916 |
|
|
| 666,252 |
|
|
| 594,089 |
|
|
| 39,190 |
|
|
| 100,098 |
|
Advisory(1) |
|
| 2,586 |
|
|
| 2,658 |
|
|
| 2,782 |
|
|
| 10,341 |
|
|
| (73 | ) |
|
| (188 | ) |
|
| (7,573 | ) |
| 22,214 |
|
|
| 22,359 |
|
|
| 2,974 |
|
|
| (187 | ) |
|
| 18,748 |
|
Total |
| $ | 5,976,892 |
|
| $ | 5,689,273 |
|
| $ | 5,147,852 |
|
| $ | 5,117,421 |
|
| $ | 96,112 |
|
| $ | 264,326 |
|
| $ | 362,378 |
| $ | 9,007,411 |
|
| $ | 8,676,680 |
|
| $ | 6,466,668 |
|
| $ | 171,643 |
|
| $ | 527,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUM and Net Inflows (Outflows) by Product Type | AUM and Net Inflows (Outflows) by Product Type |
| AUM and Net Inflows (Outflows) by Product Type |
| |||||||||||||||||||||||||||||||||||||||||||
|
| AUM |
|
| Net inflows (outflows) |
| AUM |
|
| Net inflows (outflows) |
| ||||||||||||||||||||||||||||||||||||
|
| September 30, |
|
| June 30, |
|
| December 31, |
|
| September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Twelve Months Ended September 30, |
| March 31, |
|
| December 31, |
|
| March 31, |
|
| Three Months Ended March 31, |
|
| Twelve Months Ended March 31, |
| ||||||||||||
(in millions) |
| 2017 |
|
| 2017 |
|
| 2016 |
|
| 2016 |
|
| 2017 |
|
| 2017 |
|
| 2017 |
| 2021 |
|
| 2020 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
| ||||||||||||
Equity |
| $ | 3,172,465 |
|
| $ | 3,014,696 |
|
| $ | 2,657,176 |
|
| $ | 2,566,039 |
|
| $ | 11,935 |
|
| $ | 94,362 |
|
| $ | 152,328 |
| $ | 4,745,781 |
|
| $ | 4,419,806 |
|
| $ | 2,959,662 |
|
| $ | 49,861 |
|
| $ | 95,693 |
|
Fixed income |
|
| 1,788,420 |
|
|
| 1,704,624 |
|
|
| 1,572,365 |
|
|
| 1,628,268 |
|
|
| 59,549 |
|
|
| 135,837 |
|
|
| 161,144 |
|
| 2,620,460 |
|
|
| 2,674,488 |
|
|
| 2,235,815 |
|
|
| 60,839 |
|
|
| 254,173 |
|
Multi-asset |
|
| 457,027 |
|
|
| 436,736 |
|
|
| 395,007 |
|
|
| 402,261 |
|
|
| 4,334 |
|
|
| 15,406 |
|
|
| 20,262 |
|
| 677,372 |
|
|
| 658,733 |
|
|
| 494,177 |
|
|
| 13,753 |
|
|
| 22,576 |
|
Alternatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core |
|
| 99,168 |
|
|
| 97,551 |
|
|
| 88,630 |
|
|
| 88,731 |
|
|
| (504 | ) |
|
| 2,353 |
|
|
| 3,569 |
| |||||||||||||||||||
Illiquid alternatives |
| 92,207 |
|
|
| 85,770 |
|
|
| 75,101 |
|
|
| 6,225 |
|
|
| 14,541 |
| ||||||||||||||||||||||||||||
Liquid alternatives |
| 76,266 |
|
|
| 73,218 |
|
|
| 58,127 |
|
|
| 2,354 |
|
|
| 7,339 |
| ||||||||||||||||||||||||||||
Currency and commodities(2) |
|
| 31,803 |
|
|
| 30,433 |
|
|
| 28,308 |
|
|
| 32,799 |
|
|
| 490 |
|
|
| 1,702 |
|
|
| 122 |
|
| 69,195 |
|
|
| 76,054 |
|
|
| 46,723 |
|
|
| (392 | ) |
|
| 14,327 |
|
Subtotal |
|
| 130,971 |
|
|
| 127,984 |
|
|
| 116,938 |
|
|
| 121,530 |
|
|
| (14 | ) |
|
| 4,055 |
|
|
| 3,691 |
| |||||||||||||||||||
Alternatives subtotal |
| 237,668 |
|
|
| 235,042 |
|
|
| 179,951 |
|
|
| 8,187 |
|
|
| 36,207 |
| ||||||||||||||||||||||||||||
Long-term |
|
| 5,548,883 |
|
|
| 5,284,040 |
|
|
| 4,741,486 |
|
|
| 4,718,098 |
|
|
| 75,804 |
|
|
| 249,660 |
|
|
| 337,425 |
|
| 8,281,281 |
|
|
| 7,988,069 |
|
|
| 5,869,605 |
|
|
| 132,640 |
|
|
| 408,649 |
|
Cash management |
|
| 425,423 |
|
|
| 402,575 |
|
|
| 403,584 |
|
|
| 388,982 |
|
|
| 20,381 |
|
|
| 14,854 |
|
|
| 32,526 |
|
| 703,916 |
|
|
| 666,252 |
|
|
| 594,089 |
|
|
| 39,190 |
|
|
| 100,098 |
|
Advisory(1) |
|
| 2,586 |
|
|
| 2,658 |
|
|
| 2,782 |
|
|
| 10,341 |
|
|
| (73 | ) |
|
| (188 | ) |
|
| (7,573 | ) |
| 22,214 |
|
|
| 22,359 |
|
|
| 2,974 |
|
|
| (187 | ) |
|
| 18,748 |
|
Total |
| $ | 5,976,892 |
|
| $ | 5,689,273 |
|
| $ | 5,147,852 |
|
| $ | 5,117,421 |
|
| $ | 96,112 |
|
| $ | 264,326 |
|
| $ | 362,378 |
| $ | 9,007,411 |
|
| $ | 8,676,680 |
|
| $ | 6,466,668 |
|
| $ | 171,643 |
|
| $ | 527,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUM and Net Inflows (Outflows) by Investment Style |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| AUM |
|
| Net inflows (outflows) |
| |||||||||||||||||||||||||||||||||||||||||
|
| September 30, |
|
| June 30, |
|
| December 31, |
|
| September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Twelve Months Ended September 30, |
| ||||||||||||||||||||||||||
(in millions) |
| 2017 |
|
| 2017 |
|
| 2016 |
|
| 2016 |
|
| 2017 |
|
| 2017 |
|
| 2017 |
| ||||||||||||||||||||||||||
Active |
| $ | 1,645,352 |
|
| $ | 1,598,591 |
|
| $ | 1,501,052 |
|
| $ | 1,547,473 |
|
| $ | 5,796 |
|
| $ | 11,489 |
|
| $ | 10,946 |
| |||||||||||||||||||
Index and iShares ETFs |
|
| 3,903,531 |
|
|
| 3,685,449 |
|
|
| 3,240,434 |
|
|
| 3,170,625 |
|
|
| 70,008 |
|
|
| 238,171 |
|
|
| 326,479 |
| |||||||||||||||||||
Long-term |
|
| 5,548,883 |
|
|
| 5,284,040 |
|
|
| 4,741,486 |
|
|
| 4,718,098 |
|
|
| 75,804 |
|
|
| 249,660 |
|
|
| 337,425 |
| |||||||||||||||||||
Cash management |
|
| 425,423 |
|
|
| 402,575 |
|
|
| 403,584 |
|
|
| 388,982 |
|
|
| 20,381 |
|
|
| 14,854 |
|
|
| 32,526 |
| |||||||||||||||||||
Advisory(1) |
|
| 2,586 |
|
|
| 2,658 |
|
|
| 2,782 |
|
|
| 10,341 |
|
|
| (73 | ) |
|
| (188 | ) |
|
| (7,573 | ) | |||||||||||||||||||
Total |
| $ | 5,976,892 |
|
| $ | 5,689,273 |
|
| $ | 5,147,852 |
|
| $ | 5,117,421 |
|
| $ | 96,112 |
|
| $ | 264,326 |
|
| $ | 362,378 |
|
(1) | Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $4.1 billion of ETFs AUM held in advisory accounts associated with the Federal Reserve Bank of New York (“FRBNY”) assignment as of March 31, 2021 (disclosed via FRBNY reporting as of April 12, 2021) are included within ETFs AUM or Fixed Income AUM above. These holdings are excluded from Advisory AUM. |
(2) | Amounts include commodity |
40
Component Changes in AUM for the Three Months Ended September 30, 2017March 31, 2021
The following table presents the component changes in AUM by client type and product type for the three months ended September 30, 2017.March 31, 2021.
|
| June 30, |
|
| Net inflows |
|
| Market |
|
| FX |
|
| September 30, |
|
| Average |
| December 31, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| March 31, |
|
| Average |
| ||||||||||||
(in millions) |
| 2017 |
|
| (outflows) |
|
| change |
|
| impact(1) |
|
| 2017 |
|
| AUM(2) |
| 2020 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2021 |
|
| AUM(3) |
| |||||||||||||
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| $ | 215,808 |
|
| $ | 1,734 |
|
| $ | 6,110 |
|
| $ | 2,016 |
|
| $ | 225,668 |
|
| $ | 220,944 |
| $ | 338,434 |
|
| $ | 14,334 |
|
| $ | 41,324 |
|
| $ | 14,643 |
|
| $ | (1,020 | ) |
| $ | 407,715 |
|
| $ | 373,077 |
|
Fixed income |
|
| 240,932 |
|
|
| 4,613 |
|
|
| 1,569 |
|
|
| 1,234 |
|
|
| 248,348 |
|
|
| 245,193 |
|
| 340,468 |
|
|
| 14,797 |
|
|
| — |
|
|
| (3,780 | ) |
|
| (1,845 | ) |
|
| 349,640 |
|
|
| 345,893 |
|
Multi-asset |
|
| 113,903 |
|
|
| 1,046 |
|
|
| 2,796 |
|
|
| 317 |
|
|
| 118,062 |
|
|
| 116,183 |
|
| 132,624 |
|
|
| 3,995 |
|
|
| — |
|
|
| 2,677 |
|
|
| (181 | ) |
|
| 139,115 |
|
|
| 135,402 |
|
Alternatives |
|
| 16,113 |
|
|
| (26 | ) |
|
| 224 |
|
|
| 132 |
|
|
| 16,443 |
|
|
| 17,198 |
|
| 34,391 |
|
|
| 3,385 |
|
|
| — |
|
|
| 39 |
|
|
| (108 | ) |
|
| 37,707 |
|
|
| 35,979 |
|
Retail subtotal |
|
| 586,756 |
|
|
| 7,367 |
|
|
| 10,699 |
|
|
| 3,699 |
|
|
| 608,521 |
|
|
| 599,518 |
|
| 845,917 |
|
|
| 36,511 |
|
|
| 41,324 |
|
|
| 13,579 |
|
|
| (3,154 | ) |
|
| 934,177 |
|
|
| 890,351 |
|
iShares ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Equity |
|
| 1,139,850 |
|
|
| 33,102 |
|
|
| 50,806 |
|
|
| 4,637 |
|
|
| 1,228,395 |
|
|
| 1,184,488 |
|
| 1,905,101 |
|
|
| 66,422 |
|
|
| — |
|
|
| 111,882 |
|
|
| (5,587 | ) |
|
| 2,077,818 |
|
|
| 1,974,558 |
|
Fixed income |
|
| 364,991 |
|
|
| 17,526 |
|
|
| 1,055 |
|
|
| 2,695 |
|
|
| 386,267 |
|
|
| 376,880 |
|
| 690,033 |
|
|
| 1,605 |
|
|
| — |
|
|
| (20,971 | ) |
|
| (2,838 | ) |
|
| 667,829 |
|
|
| 680,376 |
|
Multi-asset |
|
| 3,240 |
|
|
| 169 |
|
|
| 77 |
|
|
| 5 |
|
|
| 3,491 |
|
|
| 3,359 |
|
| 6,268 |
|
|
| 567 |
|
|
| — |
|
|
| 109 |
|
|
| 14 |
|
|
| 6,958 |
|
|
| 6,539 |
|
Alternatives |
|
| 20,155 |
|
|
| 1,509 |
|
|
| 576 |
|
|
| 44 |
|
|
| 22,284 |
|
|
| 21,283 |
|
| 67,605 |
|
|
| (104 | ) |
|
| — |
|
|
| (6,530 | ) |
|
| (52 | ) |
|
| 60,919 |
|
|
| 66,169 |
|
iShares ETFs subtotal |
|
| 1,528,236 |
|
|
| 52,306 |
|
|
| 52,514 |
|
|
| 7,381 |
|
|
| 1,640,437 |
|
|
| 1,586,010 |
| |||||||||||||||||||||||||||
ETFs subtotal |
| 2,669,007 |
|
|
| 68,490 |
|
|
| — |
|
|
| 84,490 |
|
|
| (8,463 | ) |
|
| 2,813,524 |
|
|
| 2,727,642 |
| ||||||||||||||||||||||||
Institutional: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 126,446 |
|
|
| (3,296 | ) |
|
| 5,866 |
|
|
| 1,350 |
|
|
| 130,366 |
|
|
| 128,842 |
|
| 169,522 |
|
|
| 467 |
|
|
| — |
|
|
| 7,088 |
|
|
| (996 | ) |
|
| 176,081 |
|
|
| 171,927 |
|
Fixed income |
|
| 553,652 |
|
|
| 496 |
|
|
| 4,513 |
|
|
| 3,366 |
|
|
| 562,027 |
|
|
| 559,121 |
|
| 716,269 |
|
|
| 2,264 |
|
|
| — |
|
|
| (22,394 | ) |
|
| (3,665 | ) |
|
| 692,474 |
|
|
| 704,175 |
|
Multi-asset |
|
| 311,921 |
|
|
| 3,477 |
|
|
| 7,827 |
|
|
| 4,508 |
|
|
| 327,733 |
|
|
| 320,619 |
|
| 511,242 |
|
|
| 8,483 |
|
|
| — |
|
|
| 6,646 |
|
|
| (4,151 | ) |
|
| 522,220 |
|
|
| 514,123 |
|
Alternatives |
|
| 83,836 |
|
|
| (522 | ) |
|
| 1,161 |
|
|
| 623 |
|
|
| 85,098 |
|
|
| 83,851 |
|
| 127,429 |
|
|
| 5,319 |
|
|
| — |
|
|
| 1,416 |
|
|
| (509 | ) |
|
| 133,655 |
|
|
| 129,964 |
|
Active subtotal |
|
| 1,075,855 |
|
|
| 155 |
|
|
| 19,367 |
|
|
| 9,847 |
|
|
| 1,105,224 |
|
|
| 1,092,433 |
|
| 1,524,462 |
|
|
| 16,533 |
|
|
| — |
|
|
| (7,244 | ) |
|
| (9,321 | ) |
|
| 1,524,430 |
|
|
| 1,520,189 |
|
Index: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 1,532,592 |
|
|
| (19,605 | ) |
|
| 65,291 |
|
|
| 9,758 |
|
|
| 1,588,036 |
|
|
| 1,562,897 |
|
| 2,006,749 |
|
|
| (31,362 | ) |
|
| — |
|
|
| 120,531 |
|
|
| (11,751 | ) |
|
| 2,084,167 |
|
|
| 2,026,675 |
|
Fixed income |
|
| 545,049 |
|
|
| 36,914 |
|
|
| (1,451 | ) |
|
| 11,266 |
|
|
| 591,778 |
|
|
| 572,049 |
|
| 927,718 |
|
|
| 42,173 |
|
|
| — |
|
|
| (46,816 | ) |
|
| (12,558 | ) |
|
| 910,517 |
|
|
| 916,050 |
|
Multi-asset |
|
| 7,672 |
|
|
| (358 | ) |
|
| 389 |
|
|
| 38 |
|
|
| 7,741 |
|
|
| 7,824 |
|
| 8,599 |
|
|
| 708 |
|
|
| — |
|
|
| (1 | ) |
|
| (227 | ) |
|
| 9,079 |
|
|
| 8,603 |
|
Alternatives |
|
| 7,880 |
|
|
| (975 | ) |
|
| 156 |
|
|
| 85 |
|
|
| 7,146 |
|
|
| 7,544 |
|
| 5,617 |
|
|
| (413 | ) |
|
| — |
|
|
| 234 |
|
|
| (51 | ) |
|
| 5,387 |
|
|
| 5,510 |
|
Index subtotal |
|
| 2,093,193 |
|
|
| 15,976 |
|
|
| 64,385 |
|
|
| 21,147 |
|
|
| 2,194,701 |
|
|
| 2,150,314 |
|
| 2,948,683 |
|
|
| 11,106 |
|
|
| — |
|
|
| 73,948 |
|
|
| (24,587 | ) |
|
| 3,009,150 |
|
|
| 2,956,838 |
|
Institutional subtotal |
|
| 3,169,048 |
|
|
| 16,131 |
|
|
| 83,752 |
|
|
| 30,994 |
|
|
| 3,299,925 |
|
|
| 3,242,747 |
|
| 4,473,145 |
|
|
| 27,639 |
|
|
| — |
|
|
| 66,704 |
|
|
| (33,908 | ) |
|
| 4,533,580 |
|
|
| 4,477,027 |
|
Long-term |
|
| 5,284,040 |
|
|
| 75,804 |
|
|
| 146,965 |
|
|
| 42,074 |
|
|
| 5,548,883 |
|
|
| 5,428,275 |
|
| 7,988,069 |
|
|
| 132,640 |
|
|
| 41,324 |
|
|
| 164,773 |
|
|
| (45,525 | ) |
|
| 8,281,281 |
|
|
| 8,095,020 |
|
Cash management |
|
| 402,575 |
|
|
| 20,381 |
|
|
| 224 |
|
|
| 2,243 |
|
|
| 425,423 |
|
|
| 415,082 |
|
| 666,252 |
|
|
| 39,190 |
|
|
| — |
|
|
| (127 | ) |
|
| (1,399 | ) |
|
| 703,916 |
|
|
| 664,958 |
|
Advisory |
|
| 2,658 |
|
|
| (73 | ) |
|
| (98 | ) |
|
| 99 |
|
|
| 2,586 |
|
|
| 2,621 |
|
| 22,359 |
|
|
| (187 | ) |
|
| — |
|
|
| 35 |
|
|
| 7 |
|
|
| 22,214 |
|
|
| 22,373 |
|
Total |
| $ | 5,689,273 |
|
| $ | 96,112 |
|
| $ | 147,091 |
|
| $ | 44,416 |
|
| $ | 5,976,892 |
|
| $ | 5,845,978 |
| $ | 8,676,680 |
|
| $ | 171,643 |
|
| $ | 41,324 |
|
| $ | 164,681 |
|
| $ | (46,917 | ) |
| $ | 9,007,411 |
|
| $ | 8,782,351 |
|
(1) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.
(3) Advisory AUM represents long-term portfolio liquidation assignments.
41
The following table presents component changes in AUM by investment style and product type for the three months ended September 30, 2017.
| June 30, |
|
| Net inflows |
|
| Market |
|
| FX |
|
| September 30, |
|
| Average |
| ||||||
(in millions) | 2017 |
|
| (outflows) |
|
| change |
|
| impact(1) |
|
| 2017 |
|
| AUM(2) |
| ||||||
Active: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity | $ | 290,196 |
|
| $ | (3,015 | ) |
| $ | 10,433 |
|
| $ | 2,562 |
|
| $ | 300,176 |
|
| $ | 295,895 |
|
Fixed income |
| 782,622 |
|
|
| 4,836 |
|
|
| 6,079 |
|
|
| 4,303 |
|
|
| 797,840 |
|
|
| 792,042 |
|
Multi-asset |
| 425,824 |
|
|
| 4,523 |
|
|
| 10,623 |
|
|
| 4,825 |
|
|
| 445,795 |
|
|
| 436,802 |
|
Alternatives |
| 99,949 |
|
|
| (548 | ) |
|
| 1,385 |
|
|
| 755 |
|
|
| 101,541 |
|
|
| 101,049 |
|
Active subtotal |
| 1,598,591 |
|
|
| 5,796 |
|
|
| 28,520 |
|
|
| 12,445 |
|
|
| 1,645,352 |
|
|
| 1,625,788 |
|
Index and iShares ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iShares ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| 1,139,850 |
|
|
| 33,102 |
|
|
| 50,806 |
|
|
| 4,637 |
|
|
| 1,228,395 |
|
|
| 1,184,488 |
|
Fixed income |
| 364,991 |
|
|
| 17,526 |
|
|
| 1,055 |
|
|
| 2,695 |
|
|
| 386,267 |
|
|
| 376,880 |
|
Multi-asset |
| 3,240 |
|
|
| 169 |
|
|
| 77 |
|
|
| 5 |
|
|
| 3,491 |
|
|
| 3,359 |
|
Alternatives |
| 20,155 |
|
|
| 1,509 |
|
|
| 576 |
|
|
| 44 |
|
|
| 22,284 |
|
|
| 21,283 |
|
iShares ETFs subtotal |
| 1,528,236 |
|
|
| 52,306 |
|
|
| 52,514 |
|
|
| 7,381 |
|
|
| 1,640,437 |
|
|
| 1,586,010 |
|
Non-ETF Index: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| 1,584,650 |
|
|
| (18,152 | ) |
|
| 66,834 |
|
|
| 10,562 |
|
|
| 1,643,894 |
|
|
| 1,616,788 |
|
Fixed income |
| 557,011 |
|
|
| 37,187 |
|
|
| (1,448 | ) |
|
| 11,563 |
|
|
| 604,313 |
|
|
| 584,321 |
|
Multi-asset |
| 7,672 |
|
|
| (358 | ) |
|
| 389 |
|
|
| 38 |
|
|
| 7,741 |
|
|
| 7,824 |
|
Alternatives |
| 7,880 |
|
|
| (975 | ) |
|
| 156 |
|
|
| 85 |
|
|
| 7,146 |
|
|
| 7,544 |
|
Non-ETF Index subtotal |
| 2,157,213 |
|
|
| 17,702 |
|
|
| 65,931 |
|
|
| 22,248 |
|
|
| 2,263,094 |
|
|
| 2,216,477 |
|
Index & iShares ETFs subtotal |
| 3,685,449 |
|
|
| 70,008 |
|
|
| 118,445 |
|
|
| 29,629 |
|
|
| 3,903,531 |
|
|
| 3,802,487 |
|
Long-term |
| 5,284,040 |
|
|
| 75,804 |
|
|
| 146,965 |
|
|
| 42,074 |
|
|
| 5,548,883 |
|
|
| 5,428,275 |
|
Cash management |
| 402,575 |
|
|
| 20,381 |
|
|
| 224 |
|
|
| 2,243 |
|
|
| 425,423 |
|
|
| 415,082 |
|
Advisory(3) |
| 2,658 |
|
|
| (73 | ) |
|
| (98 | ) |
|
| 99 |
|
|
| 2,586 |
|
|
| 2,621 |
|
Total | $ | 5,689,273 |
|
| $ | 96,112 |
|
| $ | 147,091 |
|
| $ | 44,416 |
|
| $ | 5,976,892 |
|
| $ | 5,845,978 |
|
The following table presents component changes in AUM by product type for the three months ended September 30, 2017.
| June 30, |
|
| Net inflows |
|
| Market |
|
| FX |
|
| September 30, |
|
| Average |
| ||||||
(in millions) | 2017 |
|
| (outflows) |
|
| change |
|
| impact(1) |
|
| 2017 |
|
| AUM(2) |
| ||||||
Equity | $ | 3,014,696 |
|
| $ | 11,935 |
|
| $ | 128,073 |
|
| $ | 17,761 |
|
| $ | 3,172,465 |
|
| $ | 3,097,171 |
|
Fixed income |
| 1,704,624 |
|
|
| 59,549 |
|
|
| 5,686 |
|
|
| 18,561 |
|
|
| 1,788,420 |
|
|
| 1,753,243 |
|
Multi-asset |
| 436,736 |
|
|
| 4,334 |
|
|
| 11,089 |
|
|
| 4,868 |
|
|
| 457,027 |
|
|
| 447,985 |
|
Alternatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core |
| 97,551 |
|
|
| (504 | ) |
|
| 1,355 |
|
|
| 766 |
|
|
| 99,168 |
|
|
| 98,746 |
|
Currency and commodities(4) |
| 30,433 |
|
|
| 490 |
|
|
| 762 |
|
|
| 118 |
|
|
| 31,803 |
|
|
| 31,130 |
|
Alternatives subtotal |
| 127,984 |
|
|
| (14 | ) |
|
| 2,117 |
|
|
| 884 |
|
|
| 130,971 |
|
|
| 129,876 |
|
Long-term |
| 5,284,040 |
|
|
| 75,804 |
|
|
| 146,965 |
|
|
| 42,074 |
|
|
| 5,548,883 |
|
|
| 5,428,275 |
|
Cash management |
| 402,575 |
|
|
| 20,381 |
|
|
| 224 |
|
|
| 2,243 |
|
|
| 425,423 |
|
|
| 415,082 |
|
Advisory(3) |
| 2,658 |
|
|
| (73 | ) |
|
| (98 | ) |
|
| 99 |
|
|
| 2,586 |
|
|
| 2,621 |
|
Total | $ | 5,689,273 |
|
| $ | 96,112 |
|
| $ | 147,091 |
|
| $ | 44,416 |
|
| $ | 5,976,892 |
|
| $ | 5,845,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
| Amounts include AUM attributable to the Aperio Transaction. |
(2) | Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes. |
(3) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months. |
| Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $4.1 billion of ETFs AUM held in advisory accounts associated with the FRBNY assignment as of March 31, 2021 (disclosed via FRBNY reporting as of April 12, 2021) are included within Fixed Income ETFs AUM above. These holdings are excluded from Advisory AUM. |
|
|
AUM increased $287.6 billion, or 5%, to $6.0 trillion at September 30, 2017 from $5.7 trillion at June 30, 2017, driven by net market appreciation, positive net inflows andThe following table presents the impact of foreign exchange movements.
Net market appreciation of $147.1 billion was driven by higher U.S. and global equity markets.
Long-term net inflows of $75.8 billion included $52.3 billion, $16.1 billion and $7.4 billion from iShares ETFs, institutional clients and retail clients, respectively. Net flows in long-term products are described below.
42
|
Institutional index net inflows of $16 billion included fixed income net inflows of $36.9 billion, driven by demand for liability-driven solutions, partially offset by equity net outflows of $19.6 billion.
Retail net inflows of $7.4 billion reflected net inflows of $3.7 billion in the United States and $3.7 billion internationally. Fixed income net inflows of $4.6 billion were diversified across the Company’s top-performing active platform, led by net inflows into unconstrained, municipal and emerging market debt strategies. Equity net inflows of $1.7 billion reflected inflows into index mutual funds. Multi-asset net inflows of $1 billion were largely due to inflows into the Multi-asset Income fund family, partially offset by outflows from world allocation strategies.
Cash management AUM increased 6% to $425.4 billion, driven by $20.4 billion of net inflows.
AUM increased $44.4 billion due to the impact of foreign exchange movements, primarily resulting from the weakening of the U.S. dollar against the British pound and the Euro.
43
Component Changescomponent changes in AUM by investment style and product type for the Nine Months Ended September 30, 2017three months ended March 31, 2021.
| December 31, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| March 31, |
|
| Average |
| ||||||
(in millions) | 2020 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2021 |
|
| AUM(3) |
| |||||||
Active: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity | $ | 410,189 |
|
| $ | 21,020 |
|
| $ | — |
|
| $ | 14,593 |
|
| $ | (2,022 | ) |
| $ | 443,780 |
|
| $ | 425,842 |
|
Fixed income |
| 1,035,015 |
|
|
| 16,752 |
|
|
| — |
|
|
| (25,059 | ) |
|
| (5,540 | ) |
|
| 1,021,168 |
|
|
| 1,028,651 |
|
Multi-asset |
| 643,864 |
|
|
| 12,478 |
|
|
| — |
|
|
| 9,323 |
|
|
| (4,332 | ) |
|
| 661,333 |
|
|
| 649,520 |
|
Alternatives |
| 161,819 |
|
|
| 8,704 |
|
|
| — |
|
|
| 1,455 |
|
|
| (617 | ) |
|
| 171,361 |
|
|
| 165,943 |
|
Active subtotal |
| 2,250,887 |
|
|
| 58,954 |
|
|
| — |
|
|
| 312 |
|
|
| (12,511 | ) |
|
| 2,297,642 |
|
|
| 2,269,956 |
|
Index and ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| 1,905,101 |
|
|
| 66,422 |
|
|
| — |
|
|
| 111,882 |
|
|
| (5,587 | ) |
|
| 2,077,818 |
|
|
| 1,974,558 |
|
Fixed income |
| 690,033 |
|
|
| 1,605 |
|
|
| — |
|
|
| (20,971 | ) |
|
| (2,838 | ) |
|
| 667,829 |
|
|
| 680,376 |
|
Multi-asset |
| 6,268 |
|
|
| 567 |
|
|
| — |
|
|
| 109 |
|
|
| 14 |
|
|
| 6,958 |
|
|
| 6,539 |
|
Alternatives |
| 67,605 |
|
|
| (104 | ) |
|
| — |
|
|
| (6,530 | ) |
|
| (52 | ) |
|
| 60,919 |
|
|
| 66,169 |
|
ETFs subtotal |
| 2,669,007 |
|
|
| 68,490 |
|
|
| — |
|
|
| 84,490 |
|
|
| (8,463 | ) |
|
| 2,813,524 |
|
|
| 2,727,642 |
|
Non-ETF Index: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| 2,104,516 |
|
|
| (37,581 | ) |
|
| 41,324 |
|
|
| 127,669 |
|
|
| (11,745 | ) |
|
| 2,224,183 |
|
|
| 2,145,837 |
|
Fixed income |
| 949,440 |
|
|
| 42,482 |
|
|
| — |
|
|
| (47,931 | ) |
|
| (12,528 | ) |
|
| 931,463 |
|
|
| 937,467 |
|
Multi-asset |
| 8,601 |
|
|
| 708 |
|
|
| — |
|
|
| (1 | ) |
|
| (227 | ) |
|
| 9,081 |
|
|
| 8,608 |
|
Alternatives |
| 5,618 |
|
|
| (413 | ) |
|
| — |
|
|
| 234 |
|
|
| (51 | ) |
|
| 5,388 |
|
|
| 5,510 |
|
Non-ETF Index subtotal |
| 3,068,175 |
|
|
| 5,196 |
|
|
| 41,324 |
|
|
| 79,971 |
|
|
| (24,551 | ) |
|
| 3,170,115 |
|
|
| 3,097,422 |
|
Index & ETFs subtotal |
| 5,737,182 |
|
|
| 73,686 |
|
|
| 41,324 |
|
|
| 164,461 |
|
|
| (33,014 | ) |
|
| 5,983,639 |
|
|
| 5,825,064 |
|
Long-term |
| 7,988,069 |
|
|
| 132,640 |
|
|
| 41,324 |
|
|
| 164,773 |
|
|
| (45,525 | ) |
|
| 8,281,281 |
|
|
| 8,095,020 |
|
Cash management |
| 666,252 |
|
|
| 39,190 |
|
|
| — |
|
|
| (127 | ) |
|
| (1,399 | ) |
|
| 703,916 |
|
|
| 664,958 |
|
Advisory(4) |
| 22,359 |
|
|
| (187 | ) |
|
| — |
|
|
| 35 |
|
|
| 7 |
|
|
| 22,214 |
|
|
| 22,373 |
|
Total | $ | 8,676,680 |
|
| $ | 171,643 |
|
| $ | 41,324 |
|
| $ | 164,681 |
|
| $ | (46,917 | ) |
| $ | 9,007,411 |
|
| $ | 8,782,351 |
|
The following table presents the component changes in AUM by clientproduct type and product for the ninethree months ended September 30, 2017.March 31, 2021.
|
| December 31, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| September 30, |
|
| Average |
| ||||||
(in millions) |
| 2016 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2017 |
|
| AUM(3) |
| |||||||
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| $ | 196,221 |
|
| $ | 3,009 |
|
| $ | - |
|
| $ | 20,892 |
|
| $ | 5,546 |
|
| $ | 225,668 |
|
| $ | 212,224 |
|
Fixed income |
|
| 222,256 |
|
|
| 16,497 |
|
|
| - |
|
|
| 6,003 |
|
|
| 3,592 |
|
|
| 248,348 |
|
|
| 236,065 |
|
Multi-asset |
|
| 107,997 |
|
|
| (847 | ) |
|
| - |
|
|
| 10,005 |
|
|
| 907 |
|
|
| 118,062 |
|
|
| 112,831 |
|
Alternatives |
|
| 15,478 |
|
|
| (158 | ) |
|
| - |
|
|
| 725 |
|
|
| 398 |
|
|
| 16,443 |
|
|
| 16,522 |
|
Retail subtotal |
|
| 541,952 |
|
|
| 18,501 |
|
|
| - |
|
|
| 37,625 |
|
|
| 10,443 |
|
|
| 608,521 |
|
|
| 577,642 |
|
iShares ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 951,252 |
|
|
| 129,488 |
|
|
| - |
|
|
| 134,562 |
|
|
| 13,093 |
|
|
| 1,228,395 |
|
|
| 1,095,500 |
|
Fixed income |
|
| 314,707 |
|
|
| 58,779 |
|
|
| - |
|
|
| 5,105 |
|
|
| 7,676 |
|
|
| 386,267 |
|
|
| 351,985 |
|
Multi-asset |
|
| 3,149 |
|
|
| 61 |
|
|
| - |
|
|
| 272 |
|
|
| 9 |
|
|
| 3,491 |
|
|
| 3,122 |
|
Alternatives |
|
| 18,771 |
|
|
| 2,213 |
|
|
| - |
|
|
| 1,138 |
|
|
| 162 |
|
|
| 22,284 |
|
|
| 20,470 |
|
iShares ETFs subtotal |
|
| 1,287,879 |
|
|
| 190,541 |
|
|
| - |
|
|
| 141,077 |
|
|
| 20,940 |
|
|
| 1,640,437 |
|
|
| 1,471,077 |
|
Institutional: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 120,699 |
|
|
| (12,357 | ) |
|
| - |
|
|
| 18,023 |
|
|
| 4,001 |
|
|
| 130,366 |
|
|
| 126,223 |
|
Fixed income |
|
| 536,727 |
|
|
| (2,967 | ) |
|
| - |
|
|
| 17,705 |
|
|
| 10,562 |
|
|
| 562,027 |
|
|
| 551,117 |
|
Multi-asset |
|
| 276,933 |
|
|
| 16,692 |
|
|
| - |
|
|
| 21,531 |
|
|
| 12,577 |
|
|
| 327,733 |
|
|
| 301,793 |
|
Alternatives |
|
| 75,615 |
|
|
| 2,367 |
|
|
| 3,264 |
|
|
| 2,021 |
|
|
| 1,831 |
|
|
| 85,098 |
|
|
| 79,818 |
|
Active subtotal |
|
| 1,009,974 |
|
|
| 3,735 |
|
|
| 3,264 |
|
|
| 59,280 |
|
|
| 28,971 |
|
|
| 1,105,224 |
|
|
| 1,058,951 |
|
Index: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 1,389,004 |
|
|
| (25,778 | ) |
|
| - |
|
|
| 193,874 |
|
|
| 30,936 |
|
|
| 1,588,036 |
|
|
| 1,504,119 |
|
Fixed income |
|
| 498,675 |
|
|
| 63,528 |
|
|
| - |
|
|
| 97 |
|
|
| 29,478 |
|
|
| 591,778 |
|
|
| 540,163 |
|
Multi-asset |
|
| 6,928 |
|
|
| (500 | ) |
|
| - |
|
|
| 1,098 |
|
|
| 215 |
|
|
| 7,741 |
|
|
| 7,518 |
|
Alternatives |
|
| 7,074 |
|
|
| (367 | ) |
|
| - |
|
|
| 194 |
|
|
| 245 |
|
|
| 7,146 |
|
|
| 7,538 |
|
Index subtotal |
|
| 1,901,681 |
|
|
| 36,883 |
|
|
| - |
|
|
| 195,263 |
|
|
| 60,874 |
|
|
| 2,194,701 |
|
|
| 2,059,338 |
|
Institutional subtotal |
|
| 2,911,655 |
|
|
| 40,618 |
|
|
| 3,264 |
|
|
| 254,543 |
|
|
| 89,845 |
|
|
| 3,299,925 |
|
|
| 3,118,289 |
|
Long-term |
|
| 4,741,486 |
|
|
| 249,660 |
|
|
| 3,264 |
|
|
| 433,245 |
|
|
| 121,228 |
|
|
| 5,548,883 |
|
|
| 5,167,008 |
|
Cash management |
|
| 403,584 |
|
|
| 14,854 |
|
|
| - |
|
|
| 850 |
|
|
| 6,135 |
|
|
| 425,423 |
|
|
| 406,729 |
|
Advisory(4) |
|
| 2,782 |
|
|
| (188 | ) |
|
| - |
|
|
| (189 | ) |
|
| 181 |
|
|
| 2,586 |
|
|
| 2,691 |
|
Total |
| $ | 5,147,852 |
|
| $ | 264,326 |
|
| $ | 3,264 |
|
| $ | 433,906 |
|
| $ | 127,544 |
|
| $ | 5,976,892 |
|
| $ | 5,576,428 |
|
| December 31, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| March 31, |
|
| Average |
| ||||||
(in millions) | 2020 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2021 |
|
| AUM(3) |
| |||||||
Equity | $ | 4,419,806 |
|
| $ | 49,861 |
|
| $ | 41,324 |
|
| $ | 254,144 |
|
| $ | (19,354 | ) |
| $ | 4,745,781 |
|
| $ | 4,546,237 |
|
Fixed income |
| 2,674,488 |
|
|
| 60,839 |
|
|
| — |
|
|
| (93,961 | ) |
|
| (20,906 | ) |
|
| 2,620,460 |
|
|
| 2,646,494 |
|
Multi-asset |
| 658,733 |
|
|
| 13,753 |
|
|
| — |
|
|
| 9,431 |
|
|
| (4,545 | ) |
|
| 677,372 |
|
|
| 664,667 |
|
Alternatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquid alternatives |
| 85,770 |
|
|
| 6,225 |
|
|
| — |
|
|
| 601 |
|
|
| (389 | ) |
|
| 92,207 |
|
|
| 88,042 |
|
Liquid alternatives |
| 73,218 |
|
|
| 2,354 |
|
|
| — |
|
|
| 791 |
|
|
| (97 | ) |
|
| 76,266 |
|
|
| 74,975 |
|
Currency and commodities(5) |
| 76,054 |
|
|
| (392 | ) |
|
| — |
|
|
| (6,233 | ) |
|
| (234 | ) |
|
| 69,195 |
|
|
| 74,605 |
|
Alternatives subtotal |
| 235,042 |
|
|
| 8,187 |
|
|
| — |
|
|
| (4,841 | ) |
|
| (720 | ) |
|
| 237,668 |
|
|
| 237,622 |
|
Long-term |
| 7,988,069 |
|
|
| 132,640 |
|
|
| 41,324 |
|
|
| 164,773 |
|
|
| (45,525 | ) |
|
| 8,281,281 |
|
|
| 8,095,020 |
|
Cash management |
| 666,252 |
|
|
| 39,190 |
|
|
| — |
|
|
| (127 | ) |
|
| (1,399 | ) |
|
| 703,916 |
|
|
| 664,958 |
|
Advisory(4) |
| 22,359 |
|
|
| (187 | ) |
|
| — |
|
|
| 35 |
|
|
| 7 |
|
|
| 22,214 |
|
|
| 22,373 |
|
Total | $ | 8,676,680 |
|
| $ | 171,643 |
|
| $ | 41,324 |
|
| $ | 164,681 |
|
| $ | (46,917 | ) |
| $ | 9,007,411 |
|
| $ | 8,782,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amount represents AUM acquired in the First Reserve Transaction.
| Amounts include AUM attributable to the Aperio Transaction. |
(2) | Foreign exchange reflects the impact of translating |
(3) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing |
(4) | Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. |
44
The following table presents component changes in AUM by investment style and product type for the nine months ended September 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| September 30, |
|
| Average |
| ||||||
(in millions) | 2016 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2017 |
|
| AUM(3) |
| |||||||
Active: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity | $ | 275,033 |
|
| $ | (17,475 | ) |
| $ | - |
|
| $ | 34,966 |
|
| $ | 7,652 |
|
| $ | 300,176 |
|
| $ | 289,036 |
|
Fixed income |
| 749,996 |
|
|
| 10,910 |
|
|
| - |
|
|
| 23,502 |
|
|
| 13,432 |
|
|
| 797,840 |
|
|
| 775,996 |
|
Multi-asset |
| 384,930 |
|
|
| 15,845 |
|
|
| - |
|
|
| 31,536 |
|
|
| 13,484 |
|
|
| 445,795 |
|
|
| 414,624 |
|
Alternatives |
| 91,093 |
|
|
| 2,209 |
|
|
| 3,264 |
|
|
| 2,746 |
|
|
| 2,229 |
|
|
| 101,541 |
|
|
| 96,339 |
|
Active subtotal |
| 1,501,052 |
|
|
| 11,489 |
|
|
| 3,264 |
|
|
| 92,750 |
|
|
| 36,797 |
|
|
| 1,645,352 |
|
|
| 1,575,995 |
|
Index and iShares ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iShares ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| 951,252 |
|
|
| 129,488 |
|
|
| - |
|
|
| 134,562 |
|
|
| 13,093 |
|
|
| 1,228,395 |
|
|
| 1,095,500 |
|
Fixed income |
| 314,707 |
|
|
| 58,779 |
|
|
| - |
|
|
| 5,105 |
|
|
| 7,676 |
|
|
| 386,267 |
|
|
| 351,985 |
|
Multi-asset |
| 3,149 |
|
|
| 61 |
|
|
| - |
|
|
| 272 |
|
|
| 9 |
|
|
| 3,491 |
|
|
| 3,122 |
|
Alternatives |
| 18,771 |
|
|
| 2,213 |
|
|
| - |
|
|
| 1,138 |
|
|
| 162 |
|
|
| 22,284 |
|
|
| 20,470 |
|
iShares ETFs subtotal |
| 1,287,879 |
|
|
| 190,541 |
|
|
| - |
|
|
| 141,077 |
|
|
| 20,940 |
|
|
| 1,640,437 |
|
|
| 1,471,077 |
|
Non-ETF Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| 1,430,891 |
|
|
| (17,651 | ) |
|
| - |
|
|
| 197,823 |
|
|
| 32,831 |
|
|
| 1,643,894 |
|
|
| 1,553,530 |
|
Fixed income |
| 507,662 |
|
|
| 66,148 |
|
|
| - |
|
|
| 303 |
|
|
| 30,200 |
|
|
| 604,313 |
|
|
| 551,349 |
|
Multi-asset |
| 6,928 |
|
|
| (500 | ) |
|
| - |
|
|
| 1,098 |
|
|
| 215 |
|
|
| 7,741 |
|
|
| 7,518 |
|
Alternatives |
| 7,074 |
|
|
| (367 | ) |
|
| - |
|
|
| 194 |
|
|
| 245 |
|
|
| 7,146 |
|
|
| 7,539 |
|
Non-ETF Index subtotal |
| 1,952,555 |
|
|
| 47,630 |
|
|
| - |
|
|
| 199,418 |
|
|
| 63,491 |
|
|
| 2,263,094 |
|
|
| 2,119,936 |
|
Index & iShares ETFs subtotal |
| 3,240,434 |
|
|
| 238,171 |
|
|
| - |
|
|
| 340,495 |
|
|
| 84,431 |
|
|
| 3,903,531 |
|
|
| 3,591,013 |
|
Long-term |
| 4,741,486 |
|
|
| 249,660 |
|
|
| 3,264 |
|
|
| 433,245 |
|
|
| 121,228 |
|
|
| 5,548,883 |
|
|
| 5,167,008 |
|
Cash management |
| 403,584 |
|
|
| 14,854 |
|
|
| - |
|
|
| 850 |
|
|
| 6,135 |
|
|
| 425,423 |
|
|
| 406,729 |
|
Advisory(4) |
| 2,782 |
|
|
| (188 | ) |
|
| - |
|
|
| (189 | ) |
|
| 181 |
|
|
| 2,586 |
|
|
| 2,691 |
|
Total | $ | 5,147,852 |
|
| $ | 264,326 |
|
| $ | 3,264 |
|
| $ | 433,906 |
|
| $ | 127,544 |
|
| $ | 5,976,892 |
|
| $ | 5,576,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents component changes in AUM by product type for the nine months ended September 30, 2017.
|
| December 31, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| September 30, |
|
| Average |
| ||||||
(in millions) |
| 2016 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2017 |
|
| AUM(3) |
| |||||||
Equity |
| $ | 2,657,176 |
|
| $ | 94,362 |
|
| $ | - |
|
| $ | 367,351 |
|
| $ | 53,576 |
|
| $ | 3,172,465 |
|
| $ | 2,938,066 |
|
Fixed income |
|
| 1,572,365 |
|
|
| 135,837 |
|
|
| - |
|
|
| 28,910 |
|
|
| 51,308 |
|
|
| 1,788,420 |
|
|
| 1,679,330 |
|
Multi-asset |
|
| 395,007 |
|
|
| 15,406 |
|
|
| - |
|
|
| 32,906 |
|
|
| 13,708 |
|
|
| 457,027 |
|
|
| 425,264 |
|
Alternatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core |
|
| 88,630 |
|
|
| 2,353 |
|
|
| 3,264 |
|
|
| 2,753 |
|
|
| 2,168 |
|
|
| 99,168 |
|
|
| 93,963 |
|
Currency and commodities(5) |
|
| 28,308 |
|
|
| 1,702 |
|
|
| - |
|
|
| 1,325 |
|
|
| 468 |
|
|
| 31,803 |
|
|
| 30,385 |
|
Alternatives subtotal |
|
| 116,938 |
|
|
| 4,055 |
|
|
| 3,264 |
|
|
| 4,078 |
|
|
| 2,636 |
|
|
| 130,971 |
|
|
| 124,348 |
|
Long-term |
|
| 4,741,486 |
|
|
| 249,660 |
|
|
| 3,264 |
|
|
| 433,245 |
|
|
| 121,228 |
|
|
| 5,548,883 |
|
|
| 5,167,008 |
|
Cash management |
|
| 403,584 |
|
|
| 14,854 |
|
|
| - |
|
|
| 850 |
|
|
| 6,135 |
|
|
| 425,423 |
|
|
| 406,729 |
|
Advisory(4) |
|
| 2,782 |
|
|
| (188 | ) |
|
| - |
|
|
| (189 | ) |
|
| 181 |
|
|
| 2,586 |
|
|
| 2,691 |
|
Total |
| $ | 5,147,852 |
|
| $ | 264,326 |
|
| $ | 3,264 |
|
| $ | 433,906 |
| �� | $ | 127,544 |
|
| $ | 5,976,892 |
|
| $ | 5,576,428 |
|
|
|
(2) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
|
|
|
|
|
|
AUM increased $829.0$330.7 billion or 16%, to $6.0$9.01 trillion at September 30, 2017 from $5.1 trillion at DecemberMarch 31, 2016, 2021, driven by net market appreciation, positive net inflows, the impact of foreign exchange movementsnet market appreciation and AUM acquired in the First Reserve Transaction.Aperio Transaction, partially offset by the negative impact of foreign exchange movements.
Net market appreciation of $433.9 billion was primarily driven by higher U.S. and global equity markets.
45
Long-term net inflows of $249.7$132.6 billion were comprisedincluded $68.5 billion, $36.5 billion and $27.6 billion of net inflows of $190.5 billion, $40.6 billioninto ETFs, retail and $18.5 billion from iShares ETFs, institutional clients and retail clients,products, respectively. Net flows in long-term products are described below.
iShares ETFs net inflows of $190.5 billion were led by equity net inflows of $129.5 billion, driven by both U.S. and international equity market exposures. Fixed income net inflows of $58.8 billion reflected inflows into corporate investment grade, emerging markets debt and treasury bond funds.
Institutional index net inflows of $36.9 billion were driven by fixed income net inflows of $63.5 billion, partially offset by equity net outflows of $25.8 billion.
Retail net inflows of $18.5 billion reflected net inflows of $12.2 billion internationally and $6.3 billion in the United States. Retail net inflows were led by fixed income net inflows of $16.5 billion, reflecting inflows into emerging markets, municipal bond funds and unconstrained strategies.
• | ETFs net inflows of $68.5 billion reflected continued growth in core equity and sustainable ETFs and inflows into precision exposures. Net inflows were positive across all asset classes, led by equity net inflows of $66.4 billion. By region, ETFs inflows were diversified with $44.6 billion of net inflows in US-listed ETFs and $19 billion of net inflows in European-listed ETFs. |
| • | Retail net inflows of $36.5 billion were positive in both the US and internationally, and across all major asset classes. Flows were led by fixed income and equity net inflows of $14.8 billion and $14.3 billion, respectively. |
• | Institutional active net inflows of |
• | Institutional index net inflows of $11.1 billion were primarily |
Cash management AUM increased 5% to $425.4$703.9 billion, driven by $14.9net inflows of $39.2 billion.
Net market appreciation of $164.7 billion of net inflows.was primarily driven by global equity market appreciation, partially offset by fixed income market declines.
AUM increased $127.5decreased $46.9 billion due to the negative impact of foreign exchange movements, primarily resulting fromdue to the weakeningstrengthening of the U.S.US dollar, largely against the British poundEuro and the Euro.Japanese yen.
46
Component Changes in AUM for the Twelve Months Ended September 30, 2017March 31, 2021
The following table presents the component changes in AUM by client type and product type for the twelve months ended September 30, 2017.March 31, 2021.
|
| September 30, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| September 30, |
|
| Average |
| March 31, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| March 31, |
|
| Average |
| ||||||||||||
(in millions) |
| 2016 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2017 |
|
| AUM(3) |
| 2020 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2021 |
|
| AUM(3) |
| ||||||||||||||
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| $ | 196,131 |
|
| $ | 4,751 |
|
| $ | - |
|
| $ | 22,417 |
|
| $ | 2,369 |
|
| $ | 225,668 |
|
| $ | 207,806 |
| $ | 204,742 |
|
| $ | 44,571 |
|
| $ | 41,324 |
|
| $ | 110,169 |
|
| $ | 6,909 |
|
| $ | 407,715 |
|
| $ | 296,733 |
|
Fixed income |
|
| 230,842 |
|
|
| 14,666 |
|
|
| - |
|
|
| 1,204 |
|
|
| 1,636 |
|
|
| 248,348 |
|
|
| 234,080 |
|
| 278,057 |
|
|
| 45,994 |
|
|
| — |
|
|
| 20,643 |
|
|
| 4,946 |
|
|
| 349,640 |
|
|
| 318,547 |
|
Multi-asset |
|
| 111,369 |
|
|
| (2,548 | ) |
|
| - |
|
|
| 8,891 |
|
|
| 350 |
|
|
| 118,062 |
|
|
| 111,957 |
|
| 101,032 |
|
|
| 7,073 |
|
|
| — |
|
|
| 30,113 |
|
|
| 897 |
|
|
| 139,115 |
|
|
| 121,220 |
|
Alternatives |
|
| 16,436 |
|
|
| (814 | ) |
|
| - |
|
|
| 693 |
|
|
| 128 |
|
|
| 16,443 |
|
|
| 16,435 |
|
| 24,993 |
|
|
| 9,955 |
|
|
| — |
|
|
| 2,331 |
|
|
| 428 |
|
|
| 37,707 |
|
|
| 31,213 |
|
Retail subtotal |
|
| 554,778 |
|
|
| 16,055 |
|
|
| - |
|
|
| 33,205 |
|
|
| 4,483 |
|
|
| 608,521 |
|
|
| 570,278 |
|
| 608,824 |
|
|
| 107,593 |
|
|
| 41,324 |
|
|
| 163,256 |
|
|
| 13,180 |
|
|
| 934,177 |
|
|
| 767,713 |
|
iShares ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Equity |
|
| 891,010 |
|
|
| 180,138 |
|
|
| - |
|
|
| 150,283 |
|
|
| 6,964 |
|
|
| 1,228,395 |
|
|
| 1,049,435 |
|
| 1,253,690 |
|
|
| 132,281 |
|
|
| — |
|
|
| 679,068 |
|
|
| 12,779 |
|
|
| 2,077,818 |
|
|
| 1,658,862 |
|
Fixed income |
|
| 329,462 |
|
|
| 58,453 |
|
|
| - |
|
|
| (5,239 | ) |
|
| 3,591 |
|
|
| 386,267 |
|
|
| 345,114 |
|
| 554,009 |
|
|
| 92,136 |
|
|
| — |
|
|
| 13,449 |
|
|
| 8,235 |
|
|
| 667,829 |
|
|
| 649,739 |
|
Multi-asset |
|
| 2,506 |
|
|
| 755 |
|
|
| - |
|
|
| 223 |
|
|
| 7 |
|
|
| 3,491 |
|
|
| 2,999 |
|
| 4,499 |
|
|
| 1,189 |
|
|
| — |
|
|
| 1,190 |
|
|
| 80 |
|
|
| 6,958 |
|
|
| 5,622 |
|
Alternatives |
|
| 23,188 |
|
|
| 495 |
|
|
| - |
|
|
| (1,448 | ) |
|
| 49 |
|
|
| 22,284 |
|
|
| 20,724 |
|
| 39,992 |
|
|
| 13,939 |
|
|
| — |
|
|
| 6,831 |
|
|
| 157 |
|
|
| 60,919 |
|
|
| 60,194 |
|
iShares ETFs subtotal |
|
| 1,246,166 |
|
|
| 239,841 |
|
|
| - |
|
|
| 143,819 |
|
|
| 10,611 |
|
|
| 1,640,437 |
|
|
| 1,418,272 |
| |||||||||||||||||||||||||||
ETFs subtotal |
| 1,852,190 |
|
|
| 239,545 |
|
|
| — |
|
|
| 700,538 |
|
|
| 21,251 |
|
|
| 2,813,524 |
|
|
| 2,374,417 |
| ||||||||||||||||||||||||||||
Institutional: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 123,770 |
|
|
| (15,161 | ) |
|
| - |
|
|
| 20,675 |
|
|
| 1,082 |
|
|
| 130,366 |
|
|
| 124,915 |
|
| 112,440 |
|
|
| 1,334 |
|
|
| — |
|
|
| 58,411 |
|
|
| 3,896 |
|
|
| 176,081 |
|
|
| 149,489 |
|
Fixed income |
|
| 560,799 |
|
|
| (1,700 | ) |
|
| - |
|
|
| 3,168 |
|
|
| (240 | ) |
|
| 562,027 |
|
|
| 550,908 |
|
| 625,345 |
|
|
| 22,770 |
|
|
| — |
|
|
| 33,391 |
|
|
| 10,968 |
|
|
| 692,474 |
|
|
| 682,312 |
|
Multi-asset |
|
| 280,406 |
|
|
| 22,351 |
|
|
| - |
|
|
| 19,126 |
|
|
| 5,850 |
|
|
| 327,733 |
|
|
| 295,524 |
|
| 381,416 |
|
|
| 13,928 |
|
|
| — |
|
|
| 112,304 |
|
|
| 14,572 |
|
|
| 522,220 |
|
|
| 462,609 |
|
Alternatives |
|
| 74,678 |
|
|
| 4,553 |
|
|
| 3,264 |
|
|
| 2,092 |
|
|
| 511 |
|
|
| 85,098 |
|
|
| 78,678 |
|
| 110,891 |
|
|
| 11,988 |
|
|
| — |
|
|
| 7,556 |
|
|
| 3,220 |
|
|
| 133,655 |
|
|
| 120,861 |
|
Active subtotal |
|
| 1,039,653 |
|
|
| 10,043 |
|
|
| 3,264 |
|
|
| 45,061 |
|
|
| 7,203 |
|
|
| 1,105,224 |
|
|
| 1,050,025 |
|
| 1,230,092 |
|
|
| 50,020 |
|
|
| — |
|
|
| 211,662 |
|
|
| 32,656 |
|
|
| 1,524,430 |
|
|
| 1,415,271 |
|
Index: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 1,355,128 |
|
|
| (17,400 | ) |
|
| - |
|
|
| 246,625 |
|
|
| 3,683 |
|
|
| 1,588,036 |
|
|
| 1,468,656 |
|
| 1,388,790 |
|
|
| (82,493 | ) |
|
| — |
|
|
| 741,420 |
|
|
| 36,450 |
|
|
| 2,084,167 |
|
|
| 1,793,919 |
|
Fixed income |
|
| 507,165 |
|
|
| 89,725 |
|
|
| - |
|
|
| (15,805 | ) |
|
| 10,693 |
|
|
| 591,778 |
|
|
| 528,790 |
|
| 778,404 |
|
|
| 93,273 |
|
|
| — |
|
|
| (2,241 | ) |
|
| 41,081 |
|
|
| 910,517 |
|
|
| 860,592 |
|
Multi-asset |
|
| 7,980 |
|
|
| (296 | ) |
|
| - |
|
|
| 371 |
|
|
| (314 | ) |
|
| 7,741 |
|
|
| 7,603 |
|
| 7,230 |
|
|
| 386 |
|
|
| — |
|
|
| 1,479 |
|
|
| (16 | ) |
|
| 9,079 |
|
|
| 8,192 |
|
Alternatives |
|
| 7,228 |
|
|
| (543 | ) |
|
| - |
|
|
| 408 |
|
|
| 53 |
|
|
| 7,146 |
|
|
| 7,440 |
|
| 4,075 |
|
|
| 325 |
|
|
| — |
|
|
| 879 |
|
|
| 108 |
|
|
| 5,387 |
|
|
| 4,867 |
|
Index subtotal |
|
| 1,877,501 |
|
|
| 71,486 |
|
|
| - |
|
|
| 231,599 |
|
|
| 14,115 |
|
|
| 2,194,701 |
|
|
| 2,012,489 |
|
| 2,178,499 |
|
|
| 11,491 |
|
|
| — |
|
|
| 741,537 |
|
|
| 77,623 |
|
|
| 3,009,150 |
|
|
| 2,667,570 |
|
Institutional subtotal |
|
| 2,917,154 |
|
|
| 81,529 |
|
|
| 3,264 |
|
|
| 276,660 |
|
|
| 21,318 |
|
|
| 3,299,925 |
|
|
| 3,062,514 |
|
| 3,408,591 |
|
|
| 61,511 |
|
|
| — |
|
|
| 953,199 |
|
|
| 110,279 |
|
|
| 4,533,580 |
|
|
| 4,082,841 |
|
Long-term |
|
| 4,718,098 |
|
|
| 337,425 |
|
|
| 3,264 |
|
|
| 453,684 |
|
|
| 36,412 |
|
|
| 5,548,883 |
|
|
| 5,051,064 |
|
| 5,869,605 |
|
|
| 408,649 |
|
|
| 41,324 |
|
|
| 1,816,993 |
|
|
| 144,710 |
|
|
| 8,281,281 |
|
|
| 7,224,971 |
|
Cash management |
|
| 388,982 |
|
|
| 32,526 |
|
|
| - |
|
|
| 1,074 |
|
|
| 2,841 |
|
|
| 425,423 |
|
|
| 404,180 |
|
| 594,089 |
|
|
| 100,098 |
|
|
| — |
|
|
| 70 |
|
|
| 9,659 |
|
|
| 703,916 |
|
|
| 646,190 |
|
Advisory(4) |
|
| 10,341 |
|
|
| (7,573 | ) |
|
| - |
|
|
| (137 | ) |
|
| (45 | ) |
|
| 2,586 |
|
|
| 4,323 |
|
| 2,974 |
|
|
| 18,748 |
|
|
| — |
|
|
| 431 |
|
|
| 61 |
|
|
| 22,214 |
|
|
| 17,984 |
|
Total |
| $ | 5,117,421 |
|
| $ | 362,378 |
|
| $ | 3,264 |
|
| $ | 454,621 |
|
| $ | 39,208 |
|
| $ | 5,976,892 |
|
| $ | 5,459,567 |
| $ | 6,466,668 |
|
| $ | 527,495 |
|
| $ | 41,324 |
|
| $ | 1,817,494 |
|
| $ | 154,430 |
|
| $ | 9,007,411 |
|
| $ | 7,889,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amount represents AUM acquired in the First Reserve Transaction.
| Amounts include AUM attributable to the Aperio Transaction. |
(2) | Foreign exchange reflects the impact of translating |
(3) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months. |
(4) | Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $4.1 billion of ETFs AUM held in advisory accounts associated with the FRBNY assignment as of March 31, 2021 (disclosed via FRBNY reporting as of April 12, 2021) are included within Fixed Income ETFsAUM above. These holdings are excluded from Advisory AUM. |
47
The following table presents the component changes in AUM by investment style and product type for the twelve months ended September 30, 2017.March 31, 2021.
| September 30, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| September 30, |
|
| Average |
| March 31, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| March 31, |
|
| Average |
| ||||||||||||
(in millions) | 2016 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2017 |
|
| AUM(3) |
| 2020 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2021 |
|
| AUM(3) |
| ||||||||||||||
Active: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity | $ | 281,726 |
|
| $ | (22,023 | ) |
| $ | - |
|
| $ | 38,028 |
|
| $ | 2,445 |
|
| $ | 300,176 |
|
| $ | 285,819 |
| $ | 252,758 |
|
| $ | 47,354 |
|
| $ | — |
|
| $ | 136,792 |
|
| $ | 6,876 |
|
| $ | 443,780 |
|
| $ | 355,594 |
|
Fixed income |
| 782,858 |
|
|
| 9,427 |
|
|
| - |
|
|
| 4,516 |
|
|
| 1,039 |
|
|
| 797,840 |
|
|
| 774,433 |
|
| 887,458 |
|
|
| 65,347 |
|
|
| — |
|
|
| 53,929 |
|
|
| 14,434 |
|
|
| 1,021,168 |
|
|
| 981,422 |
|
Multi-asset |
| 391,775 |
|
|
| 19,803 |
|
|
| - |
|
|
| 28,017 |
|
|
| 6,200 |
|
|
| 445,795 |
|
|
| 407,481 |
|
| 482,450 |
|
|
| 20,995 |
|
|
| — |
|
|
| 142,419 |
|
|
| 15,469 |
|
|
| 661,333 |
|
|
| 583,827 |
|
Alternatives |
| 91,114 |
|
|
| 3,739 |
|
|
| 3,264 |
|
|
| 2,785 |
|
|
| 639 |
|
|
| 101,541 |
|
|
| 95,113 |
|
| 135,882 |
|
|
| 21,942 |
|
|
| — |
|
|
| 9,889 |
|
|
| 3,648 |
|
|
| 171,361 |
|
|
| 152,073 |
|
Active subtotal |
| 1,547,473 |
|
|
| 10,946 |
|
|
| 3,264 |
|
|
| 73,346 |
|
|
| 10,323 |
|
|
| 1,645,352 |
|
|
| 1,562,846 |
|
| 1,758,548 |
|
|
| 155,638 |
|
|
| — |
|
|
| 343,029 |
|
|
| 40,427 |
|
|
| 2,297,642 |
|
|
| 2,072,916 |
|
Index and iShares ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
iShares ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Index and ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
ETFs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Equity |
| 891,010 |
|
|
| 180,138 |
|
|
| - |
|
|
| 150,283 |
|
|
| 6,964 |
|
|
| 1,228,395 |
|
|
| 1,049,435 |
|
| 1,253,690 |
|
|
| 132,281 |
|
|
| — |
|
|
| 679,068 |
|
|
| 12,779 |
|
|
| 2,077,818 |
|
|
| 1,658,862 |
|
Fixed income |
| 329,462 |
|
|
| 58,453 |
|
|
| - |
|
|
| (5,239 | ) |
|
| 3,591 |
|
|
| 386,267 |
|
|
| 345,114 |
|
| 554,009 |
|
|
| 92,136 |
|
|
| — |
|
|
| 13,449 |
|
|
| 8,235 |
|
|
| 667,829 |
|
|
| 649,739 |
|
Multi-asset |
| 2,506 |
|
|
| 755 |
|
|
| - |
|
|
| 223 |
|
|
| 7 |
|
|
| 3,491 |
|
|
| 2,999 |
|
| 4,499 |
|
|
| 1,189 |
|
|
| — |
|
|
| 1,190 |
|
|
| 80 |
|
|
| 6,958 |
|
|
| 5,622 |
|
Alternatives |
| 23,188 |
|
|
| 495 |
|
|
| - |
|
|
| (1,448 | ) |
|
| 49 |
|
|
| 22,284 |
|
|
| 20,724 |
|
| 39,992 |
|
|
| 13,939 |
|
|
| — |
|
|
| 6,831 |
|
|
| 157 |
|
|
| 60,919 |
|
|
| 60,194 |
|
iShares ETFs subtotal |
| 1,246,166 |
|
|
| 239,841 |
|
|
| - |
|
|
| 143,819 |
|
|
| 10,611 |
|
|
| 1,640,437 |
|
|
| 1,418,272 |
| |||||||||||||||||||||||||||
ETFs subtotal |
| 1,852,190 |
|
|
| 239,545 |
|
|
| — |
|
|
| 700,538 |
|
|
| 21,251 |
|
|
| 2,813,524 |
|
|
| 2,374,417 |
| |||||||||||||||||||||||||||
Non-ETF Index: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
| 1,393,303 |
|
|
| (5,787 | ) |
|
| - |
|
|
| 251,689 |
|
|
| 4,689 |
|
|
| 1,643,894 |
|
|
| 1,515,558 |
|
| 1,453,214 |
|
|
| (83,942 | ) |
|
| 41,324 |
|
|
| 773,208 |
|
|
| 40,379 |
|
|
| 2,224,183 |
|
|
| 1,884,547 |
|
Fixed income |
| 515,948 |
|
|
| 93,264 |
|
|
| - |
|
|
| (15,949 | ) |
|
| 11,050 |
|
|
| 604,313 |
|
|
| 539,345 |
|
| 794,348 |
|
|
| 96,690 |
|
|
| — |
|
|
| (2,136 | ) |
|
| 42,561 |
|
|
| 931,463 |
|
|
| 880,029 |
|
Multi-asset |
| 7,980 |
|
|
| (296 | ) |
|
| - |
|
|
| 371 |
|
|
| (314 | ) |
|
| 7,741 |
|
|
| 7,603 |
|
| 7,228 |
|
|
| 392 |
|
|
| — |
|
|
| 1,477 |
|
|
| (16 | ) |
|
| 9,081 |
|
|
| 8,194 |
|
Alternatives |
| 7,228 |
|
|
| (543 | ) |
|
| - |
|
|
| 408 |
|
|
| 53 |
|
|
| 7,146 |
|
|
| 7,440 |
|
| 4,077 |
|
|
| 326 |
|
|
| — |
|
|
| 877 |
|
|
| 108 |
|
|
| 5,388 |
|
|
| 4,868 |
|
Non-ETF Index subtotal |
| 1,924,459 |
|
|
| 86,638 |
|
|
| - |
|
|
| 236,519 |
|
|
| 15,478 |
|
|
| 2,263,094 |
|
|
| 2,069,946 |
|
| 2,258,867 |
|
|
| 13,466 |
|
|
| 41,324 |
|
|
| 773,426 |
|
|
| 83,032 |
|
|
| 3,170,115 |
|
|
| 2,777,638 |
|
Index & iShares ETFs subtotal |
| 3,170,625 |
|
|
| 326,479 |
|
|
| - |
|
|
| 380,338 |
|
|
| 26,089 |
|
|
| 3,903,531 |
|
|
| 3,488,218 |
| |||||||||||||||||||||||||||
Index & ETFs subtotal |
| 4,111,057 |
|
|
| 253,011 |
|
|
| 41,324 |
|
|
| 1,473,964 |
|
|
| 104,283 |
|
|
| 5,983,639 |
|
|
| 5,152,055 |
| |||||||||||||||||||||||||||
Long-term |
| 4,718,098 |
|
|
| 337,425 |
|
|
| 3,264 |
|
|
| 453,684 |
|
|
| 36,412 |
|
|
| 5,548,883 |
|
|
| 5,051,064 |
|
| 5,869,605 |
|
|
| 408,649 |
|
|
| 41,324 |
|
|
| 1,816,993 |
|
|
| 144,710 |
|
|
| 8,281,281 |
|
|
| 7,224,971 |
|
Cash management |
| 388,982 |
|
|
| 32,526 |
|
|
| - |
|
|
| 1,074 |
|
|
| 2,841 |
|
|
| 425,423 |
|
|
| 404,180 |
|
| 594,089 |
|
|
| 100,098 |
|
|
| — |
|
|
| 70 |
|
|
| 9,659 |
|
|
| 703,916 |
|
|
| 646,190 |
|
Advisory(4) |
| 10,341 |
|
|
| (7,573 | ) |
|
| - |
|
|
| (137 | ) |
|
| (45 | ) |
|
| 2,586 |
|
|
| 4,323 |
|
| 2,974 |
|
|
| 18,748 |
|
|
| — |
|
|
| 431 |
|
|
| 61 |
|
|
| 22,214 |
|
|
| 17,984 |
|
Total | $ | 5,117,421 |
|
| $ | 362,378 |
|
| $ | 3,264 |
|
| $ | 454,621 |
|
| $ | 39,208 |
|
| $ | 5,976,892 |
|
| $ | 5,459,567 |
| $ | 6,466,668 |
|
| $ | 527,495 |
|
| $ | 41,324 |
|
| $ | 1,817,494 |
|
| $ | 154,430 |
|
| $ | 9,007,411 |
|
| $ | 7,889,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the component changes in AUM by product type for the twelve months ended September 30, 2017.March 31, 2021.
|
| September 30, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| September 30, |
|
| Average |
| March 31, |
|
| Net inflows |
|
|
|
|
|
| Market |
|
| FX |
|
| March 31, |
|
| Average |
| ||||||||||||
(in millions) |
| 2016 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2017 |
|
| AUM(3) |
| 2020 |
|
| (outflows) |
|
| Acquisition(1) |
|
| change |
|
| impact(2) |
|
| 2021 |
|
| AUM(3) |
| ||||||||||||||
Equity |
| $ | 2,566,039 |
|
| $ | 152,328 |
|
| $ | - |
|
| $ | 440,000 |
|
| $ | 14,098 |
|
| $ | 3,172,465 |
|
| $ | 2,850,812 |
| $ | 2,959,662 |
|
| $ | 95,693 |
|
| $ | 41,324 |
|
| $ | 1,589,068 |
|
| $ | 60,034 |
|
| $ | 4,745,781 |
|
| $ | 3,899,003 |
|
Fixed income |
|
| 1,628,268 |
|
|
| 161,144 |
|
|
| - |
|
|
| (16,672 | ) |
|
| 15,680 |
|
|
| 1,788,420 |
|
|
| 1,658,892 |
|
| 2,235,815 |
|
|
| 254,173 |
|
|
| — |
|
|
| 65,242 |
|
|
| 65,230 |
|
|
| 2,620,460 |
|
|
| 2,511,190 |
|
Multi-asset |
|
| 402,261 |
|
|
| 20,262 |
|
|
| - |
|
|
| 28,611 |
|
|
| 5,893 |
|
|
| 457,027 |
|
|
| 418,083 |
|
| 494,177 |
|
|
| 22,576 |
|
|
| — |
|
|
| 145,086 |
|
|
| 15,533 |
|
|
| 677,372 |
|
|
| 597,643 |
|
Alternatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core |
|
| 88,731 |
|
|
| 3,569 |
|
|
| 3,264 |
|
|
| 2,773 |
|
|
| 831 |
|
|
| 99,168 |
|
|
| 92,758 |
| |||||||||||||||||||||||||||
Illiquid alternatives |
| 75,101 |
|
|
| 14,541 |
|
|
| — |
|
|
| 852 |
|
|
| 1,713 |
|
|
| 92,207 |
|
|
| 81,264 |
| ||||||||||||||||||||||||||||
Liquid alternatives |
| 58,127 |
|
|
| 7,339 |
|
|
| — |
|
|
| 8,830 |
|
|
| 1,970 |
|
|
| 76,266 |
|
|
| 68,042 |
| ||||||||||||||||||||||||||||
Currency and commodities(5) |
|
| 32,799 |
|
|
| 122 |
|
|
| - |
|
|
| (1,028 | ) |
|
| (90 | ) |
|
| 31,803 |
|
|
| 30,519 |
|
| 46,723 |
|
|
| 14,327 |
|
|
| — |
|
|
| 7,915 |
|
|
| 230 |
|
|
| 69,195 |
|
|
| 67,829 |
|
Alternatives subtotal |
|
| 121,530 |
|
|
| 3,691 |
|
|
| 3,264 |
|
|
| 1,745 |
|
|
| 741 |
|
|
| 130,971 |
|
|
| 123,277 |
|
| 179,951 |
|
|
| 36,207 |
|
|
| — |
|
|
| 17,597 |
|
|
| 3,913 |
|
|
| 237,668 |
|
|
| 217,135 |
|
Long-term |
|
| 4,718,098 |
|
|
| 337,425 |
|
|
| 3,264 |
|
|
| 453,684 |
|
|
| 36,412 |
|
|
| 5,548,883 |
|
|
| 5,051,064 |
|
| 5,869,605 |
|
|
| 408,649 |
|
|
| 41,324 |
|
|
| 1,816,993 |
|
|
| 144,710 |
|
|
| 8,281,281 |
|
|
| 7,224,971 |
|
Cash management |
|
| 388,982 |
|
|
| 32,526 |
|
|
| - |
|
|
| 1,074 |
|
|
| 2,841 |
|
|
| 425,423 |
|
|
| 404,180 |
|
| 594,089 |
|
|
| 100,098 |
|
|
| — |
|
|
| 70 |
|
|
| 9,659 |
|
|
| 703,916 |
|
|
| 646,190 |
|
Advisory(4) |
|
| 10,341 |
|
|
| (7,573 | ) |
|
| - |
|
|
| (137 | ) |
|
| (45 | ) |
|
| 2,586 |
|
|
| 4,323 |
|
| 2,974 |
|
|
| 18,748 |
|
|
| — |
|
|
| 431 |
|
|
| 61 |
|
|
| 22,214 |
|
|
| 17,984 |
|
Total |
| $ | 5,117,421 |
|
| $ | 362,378 |
|
| $ | 3,264 |
|
| $ | 454,621 |
|
| $ | 39,208 |
|
| $ | 5,976,892 |
|
| $ | 5,459,567 |
| $ | 6,466,668 |
|
| $ | 527,495 |
|
| $ | 41,324 |
|
| $ | 1,817,494 |
|
| $ | 154,430 |
|
| $ | 9,007,411 |
|
| $ | 7,889,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amount represents AUM acquired in the First Reserve Transaction.
(2) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
| Amounts include AUM attributable to the Aperio Transaction. |
(2) | Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes. |
(3) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months. |
(4) | Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. Approximately $4.1 billion of ETFs AUM held in advisory accounts associated with the FRBNY assignment as of March 31, 2021 (disclosed via FRBNY reporting as of April 12, 2021) are included within Fixed Income ETFsAUM or Fixed Income AUM above. These holdings are excluded from Advisory AUM. |
(5) | Amounts include commodity |
AUM increased $859.5 billion, or 17%,$2.54 trillion to $6.0$9.01 trillion at September 30, 2017 from $5.1 trillion at September 30, 2016, March 31, 2021, driven by net market appreciation, positive net inflows, the positive impact of foreign exchange movements and AUM acquired in the First ReserveAperio Transaction.
Net market appreciation of $454.6 billion was primarily driven by higher U.S. and global equity markets.
Long-term net inflows of $337.4$408.6 billion were comprised of net inflows of $239.8$239.5 billion, $81.5$107.6 billion and $16.1$61.5 billion from iShares ETFs,, institutional clients retail and retailinstitutional clients, respectively. Net flows in long-term products are described below.
48
Institutional index net inflows of $71.5 billion were driven by fixed income net inflows of $89.7 billion, partially offset by equity net outflows of $17.4 billion.
• | Retail net inflows of $107.6 billion primarily reflected net inflows of $49 billion and $58.6 billion in the US and internationally, respectively. Retail net inflows reflected strength in thematic and global equity funds, global and US core fixed income funds, and alternative funds. |
Institutional active net inflows of $10.0 billion reflected multi-asset net inflows of $22.4 billion and alternatives net inflows of $4.6 billion, partially offset by equity net outflows of $15.2 billion. Multi-asset net inflows were driven by ongoing demand for the LifePath target-date series. Alternatives net inflows of $4.6 billion were led by inflows into infrastructure offerings. Equity net outflows of $15.2 billion were primarily from U.S. equity and global strategies.
• | Institutional active net inflows of $50 billion primarily reflected continued growth in LifePath target-date funds, active fixed income strategies and illiquid alternatives. |
Retail net inflows of $16.1 billion reflected net inflows of $11.5 billion internationally and $4.6 billion in the United States. Retail net inflows primarily reflected net inflows of $14.7 billion from fixed income products, led by core, unconstrained, emerging market and municipal bond strategies, and $4.8 billion from equity products.
• | Institutional index net inflows of $11.5 billion were primarily driven by fixed income net inflows of $93.3 billion, partially offset by $82.5 billion of net outflows from equity, as clients re-balanced portfolios after significant equity market gains or sought to immunize portfolios though Liability Driven Investment strategies. |
Cash management AUM increased 9% to $425.4$703.9 billion, driven by $32.5 billionnet inflows of net inflows.$100.1 billion.
Net market appreciation of $1.82 trillion was driven primarily by global equity market appreciation.
AUM increased $39.2$154.4 billion due to the positive impact of foreign exchange movements, primarily due toresulting from the weakening of the U.S.US dollar, largely against the British pound, the Euro and British pound, partially offset by the strengthening of the U.S. dollar against the Japanese yen.Canadian dollar.
49
DISCUSSION OF FINANCIAL RESULTS
The Company’s results of operations for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 are discussed below. For a further description of the Company’s revenue and expense, see the Company’s Annual Report on Form 10-K for the year ended December 31, 20162020 (“20162020 Form 10-K”).
Revenue
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Investment advisory, administration fees and securities lending revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
| $ | 421 |
|
| $ | 409 |
|
| $ | 1,235 |
|
| $ | 1,201 |
|
iShares ETFs |
|
| 836 |
|
|
| 691 |
|
|
| 2,333 |
|
|
| 1,970 |
|
Non-ETF index |
|
| 170 |
|
|
| 170 |
|
|
| 509 |
|
|
| 508 |
|
Equity subtotal |
|
| 1,427 |
|
|
| 1,270 |
|
|
| 4,077 |
|
|
| 3,679 |
|
Fixed income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
| 442 |
|
|
| 427 |
|
|
| 1,281 |
|
|
| 1,237 |
|
iShares ETFs |
|
| 210 |
|
|
| 188 |
|
|
| 595 |
|
|
| 512 |
|
Non-ETF index |
|
| 88 |
|
|
| 78 |
|
|
| 257 |
|
|
| 217 |
|
Fixed income subtotal |
|
| 740 |
|
|
| 693 |
|
|
| 2,133 |
|
|
| 1,966 |
|
Multi-asset |
|
| 289 |
|
|
| 285 |
|
|
| 843 |
|
|
| 860 |
|
Alternatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core |
|
| 169 |
|
|
| 156 |
|
|
| 469 |
|
|
| 488 |
|
Currency and commodities |
|
| 23 |
|
|
| 24 |
|
|
| 67 |
|
|
| 61 |
|
Alternatives subtotal |
|
| 192 |
|
|
| 180 |
|
|
| 536 |
|
|
| 549 |
|
Long-term |
|
| 2,648 |
|
|
| 2,428 |
|
|
| 7,589 |
|
|
| 7,054 |
|
Cash management |
|
| 144 |
|
|
| 118 |
|
|
| 408 |
|
|
| 340 |
|
Total base fees |
|
| 2,792 |
|
|
| 2,546 |
|
|
| 7,997 |
|
|
| 7,394 |
|
Investment advisory performance fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
| 30 |
|
|
| 14 |
|
|
| 57 |
|
|
| 67 |
|
Fixed income |
|
| 9 |
|
|
| 2 |
|
|
| 20 |
|
|
| 9 |
|
Multi-asset |
|
| 2 |
|
|
| 1 |
|
|
| 14 |
|
|
| 6 |
|
Alternatives |
|
| 150 |
|
|
| 41 |
|
|
| 218 |
|
|
| 84 |
|
Total performance fees |
|
| 191 |
|
|
| 58 |
|
|
| 309 |
|
|
| 166 |
|
Technology and risk management revenue(1) |
|
| 175 |
|
|
| 152 |
|
|
| 497 |
|
|
| 439 |
|
Distribution fees |
|
| 5 |
|
|
| 10 |
|
|
| 17 |
|
|
| 32 |
|
Advisory and other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory(1) |
|
| 25 |
|
|
| 22 |
|
|
| 74 |
|
|
| 78 |
|
Other |
|
| 45 |
|
|
| 49 |
|
|
| 128 |
|
|
| 156 |
|
Advisory and other revenue |
|
| 70 |
|
|
| 71 |
|
|
| 202 |
|
|
| 234 |
|
Total revenue |
| $ | 3,233 |
|
| $ | 2,837 |
|
| $ | 9,022 |
|
| $ | 8,265 |
|
|
|
50
The table below listspresents detail of revenue for the assetthree months ended March 31, 2021 and 2020 and includes the product type mix of investment advisory and administration fees (collectively “base fees”), and securities lending revenue and performance fees.
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Investment advisory, administration fees and securities lending revenue: |
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Active | $ | 576 |
|
| $ | 398 |
|
ETFs |
| 1,068 |
|
|
| 879 |
|
Non-ETF Index |
| 176 |
|
|
| 163 |
|
Equity subtotal |
| 1,820 |
|
|
| 1,440 |
|
Fixed income: |
|
|
|
|
|
|
|
Active |
| 525 |
|
|
| 481 |
|
ETFs |
| 295 |
|
|
| 259 |
|
Non-ETF Index |
| 113 |
|
|
| 112 |
|
Fixed income subtotal |
| 933 |
|
|
| 852 |
|
Multi-asset |
| 328 |
|
|
| 293 |
|
Alternatives: |
|
|
|
|
|
|
|
Illiquid alternatives |
| 168 |
|
|
| 148 |
|
Liquid alternatives |
| 147 |
|
|
| 112 |
|
Currency and commodities(1) |
| 53 |
|
|
| 32 |
|
Alternatives subtotal |
| 368 |
|
|
| 292 |
|
Long-term |
| 3,449 |
|
|
| 2,877 |
|
Cash management |
| 143 |
|
|
| 178 |
|
Total investment advisory, administration fees and securities lending revenue |
| 3,592 |
|
|
| 3,055 |
|
Investment advisory performance fees: |
|
|
|
|
|
|
|
Equity |
| 26 |
|
|
| 2 |
|
Fixed income |
| 14 |
|
|
| 2 |
|
Multi-asset |
| 8 |
|
|
| 1 |
|
Alternatives: |
|
|
|
|
|
|
|
Illiquid alternatives |
| 7 |
|
|
| 17 |
|
Liquid alternatives |
| 74 |
|
|
| 19 |
|
Alternatives subtotal |
| 81 |
|
|
| 36 |
|
Total performance fees |
| 129 |
|
|
| 41 |
|
Technology services revenue |
| 306 |
|
|
| 274 |
|
Distribution fees: |
|
|
|
|
|
|
|
Retrocessions |
| 238 |
|
|
| 169 |
|
12b-1 fees (US mutual fund distribution fees) |
| 85 |
|
|
| 91 |
|
Other |
| 17 |
|
|
| 16 |
|
Total distribution fees |
| 340 |
|
|
| 276 |
|
Advisory and other revenue: |
|
|
|
|
|
|
|
Advisory |
| 15 |
|
|
| 17 |
|
Other |
| 16 |
|
|
| 47 |
|
Total advisory and other revenue |
| 31 |
|
|
| 64 |
|
Total revenue | $ | 4,398 |
|
| $ | 3,710 |
|
|
|
|
|
|
|
|
|
(1) | Amounts include commodity ETFs. |
The table below lists a percentage breakdown of base fees and securities lending revenue (collectively “base fees”) and mix of average AUM by product type:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended March 31, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| Mix of Base Fees |
|
|
| Mix of Average AUM by Asset Class(1) |
|
| Mix of Base Fees |
|
|
| Mix of Average AUM by Asset Class(2) |
| Percentage of Base Fees and Securities Lending Revenue |
|
|
| Percentage of Average AUM by Product Type(1) |
| ||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
|
| 2017 |
|
| 2016 |
| 2021 |
|
| 2020 |
|
|
| 2021 |
|
| 2020 |
| ||||||||||||
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
| 15 | % |
|
| 16 | % |
|
|
| 5 | % |
|
| 6 | % |
|
| 15 | % |
|
| 16 | % |
|
|
| 5 | % |
|
| 6 | % |
| 16 | % |
|
| 12 | % |
|
|
| 5 | % |
|
| 4 | % |
iShares ETFs |
|
| 30 | % |
|
| 27 | % |
|
|
| 20 | % |
|
| 17 | % |
|
| 29 | % |
|
| 27 | % |
|
|
| 20 | % |
|
| 17 | % | ||||||||||||||||
Non-ETF index |
|
| 6 | % |
|
| 7 | % |
|
|
| 28 | % |
|
| 27 | % |
|
| 6 | % |
|
| 7 | % |
|
|
| 28 | % |
|
| 27 | % | ||||||||||||||||
ETFs |
| 30 | % |
|
| 29 | % |
|
|
| 23 | % |
|
| 21 | % | ||||||||||||||||||||||||||||||||||
Non-ETF Index |
| 5 | % |
|
| 5 | % |
|
|
| 24 | % |
|
| 24 | % | ||||||||||||||||||||||||||||||||||
Equity subtotal |
|
| 51 | % |
|
| 50 | % |
|
|
| 53 | % |
|
| 50 | % |
|
| 50 | % |
|
| 50 | % |
|
|
| 53 | % |
|
| 50 | % |
| 51 | % |
|
| 46 | % |
|
|
| 52 | % |
|
| 49 | % |
Fixed income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
| 16 | % |
|
| 17 | % |
|
|
| 13 | % |
|
| 15 | % |
|
| 17 | % |
|
| 16 | % |
|
|
| 13 | % |
|
| 16 | % |
| 15 | % |
|
| 16 | % |
|
|
| 10 | % |
|
| 12 | % |
iShares ETFs |
|
| 8 | % |
|
| 7 | % |
|
|
| 6 | % |
|
| 6 | % |
|
| 7 | % |
|
| 7 | % |
|
|
| 6 | % |
|
| 6 | % | ||||||||||||||||
Non-ETF index |
|
| 3 | % |
|
| 3 | % |
|
|
| 10 | % |
|
| 10 | % |
|
| 3 | % |
|
| 3 | % |
|
|
| 10 | % |
|
| 10 | % | ||||||||||||||||
ETFs |
| 8 | % |
|
| 8 | % |
|
|
| 8 | % |
|
| 8 | % | ||||||||||||||||||||||||||||||||||
Non-ETF Index |
| 3 | % |
|
| 4 | % |
|
|
| 11 | % |
|
| 12 | % | ||||||||||||||||||||||||||||||||||
Fixed income subtotal |
|
| 27 | % |
|
| 27 | % |
|
|
| 29 | % |
|
| 31 | % |
|
| 27 | % |
|
| 26 | % |
|
|
| 29 | % |
|
| 32 | % |
| 26 | % |
|
| 28 | % |
|
|
| 29 | % |
|
| 32 | % |
Multi-asset |
|
| 10 | % |
|
| 11 | % |
|
|
| 8 | % |
|
| 8 | % |
|
| 11 | % |
|
| 12 | % |
|
|
| 8 | % |
|
| 8 | % |
| 9 | % |
|
| 10 | % |
|
|
| 8 | % |
|
| 8 | % |
Alternatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core |
|
| 6 | % |
|
| 6 | % |
|
|
| 2 | % |
|
| 2 | % |
|
| 6 | % |
|
| 7 | % |
|
|
| 2 | % |
|
| 2 | % | ||||||||||||||||
Currency and commodities |
|
| 1 | % |
|
| 1 | % |
|
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
|
| 1 | % |
|
|
| 1 | % |
|
| 1 | % | ||||||||||||||||
Illiquid alternatives |
| 5 | % |
|
| 5 | % |
|
|
| 1 | % |
|
| 1 | % | ||||||||||||||||||||||||||||||||||
Liquid alternatives |
| 4 | % |
|
| 4 | % |
|
|
| 1 | % |
|
| 1 | % | ||||||||||||||||||||||||||||||||||
Currency and commodities(2) |
| 1 | % |
|
| 1 | % |
|
|
| 1 | % |
|
| 1 | % | ||||||||||||||||||||||||||||||||||
Alternatives subtotal |
|
| 7 | % |
|
| 7 | % |
|
|
| 3 | % |
|
| 3 | % |
|
| 7 | % |
|
| 8 | % |
|
|
| 3 | % |
|
| 3 | % |
| 10 | % |
|
| 10 | % |
|
|
| 3 | % |
|
| 3 | % |
Long-term |
|
| 95 | % |
|
| 95 | % |
|
|
| 93 | % |
|
| 92 | % |
|
| 95 | % |
|
| 96 | % |
|
|
| 93 | % |
|
| 93 | % |
| 96 | % |
|
| 94 | % |
|
|
| 92 | % |
|
| 92 | % |
Cash management |
|
| 5 | % |
|
| 5 | % |
|
|
| 7 | % |
|
| 8 | % |
|
| 5 | % |
|
| 4 | % |
|
|
| 7 | % |
|
| 7 | % |
| 4 | % |
|
| 6 | % |
|
|
| 8 | % |
|
| 8 | % |
Total excluding Advisory AUM |
|
| 100 | % |
|
| 100 | % |
|
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
|
| 100 | % |
|
| 100 | % |
| 100 | % |
|
| 100 | % |
|
|
| 100 | % |
|
| 100 | % |
(1) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months. |
|
|
Three Months Ended September 30, 2017March 31, 2021 Compared with Three Months Ended September 30, 2016March 31, 2020
Revenue increased $396$688 million, or 14%19%, from the third quarter of 2016, driven by growth inthree months ended March 31, 2020, reflecting higher base fees,and performance fees and 12% growth in technology and risk managementservices revenue.
Investment advisory, administration fees and securities lending revenue of $2,792$3,592 million increased $246$537 million from $2,546$3,055 million for the three months ended March 31, 2020, primarily driven by the positive impact of market beta and foreign exchange movements on average AUM and organic growth, partially offset by the impact of yield-related fee waivers on certain money market funds and strategic pricing changes to certain products, lower securities lending revenue, and the effect of one less day in the third quarterquarter. Securities lending revenue of 2016,$127 million decreased from $158 million for the three months ended March 31, 2020, primarily reflecting lower spreads, partially offset by higher average balances of securities on loan.
Investment advisory performance fees of $129 million increased $88 million from $41 million for the three months ended March 31, 2020, primarily reflecting higher revenue from liquid alternative and long-only products.
Technology services revenue of $306 million increased $32 million from $274 million for the three months ended March 31, 2020, primarily reflecting higher revenue from Aladdin.
Advisory and other revenue of $31 million decreased $33 million from $64 million for the three months ended March 31, 2020, primarily reflecting the impact of higher markets and organic growth on average AUM, partially offset by previously announced pricing changes to select investment products. Securities lending revenue was $150 million in the current quarter compared with $142 million in the third quarter of 2016.
Investment advisory performance fees of $191 million increased $133 million from the third quarter of 2016, primarily reflecting improved performance in a broad range of hedge and long-only funds, including strong performance from a single hedge fund with an annual performance measurement period that ends in the third quarter.
Technology and risk management revenue of $175 million increased $23 million from $152 million in the third quarter of 2016, reflecting ongoing demand for Aladdin and other technology offerings.
Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016
Revenue increased $757 million, or 9%, from the nine months ended September 30, 2016, driven by growth in base fees, performance fees, and technology and risk management revenue, partially offset by lower advisory and other revenue.
Investment advisory, administration fees and securities lending revenue of $7,997 million increased $603 million from $7,394 million for the nine months ended September 30, 2016, reflecting the impact of higher markets and organic growth on average AUM, and the effect of AUM acquired in the BofA® Global Capital Management transaction, partially offset by previously announced pricing changes to select investment products. Securities lending revenue was $447 million for the nine months ended September 30, 2017 compared with $441 million for the nine months ended September 30, 2016.
51
Investment advisory performance fees of $309 million increased $143 million from the nine months ended September 30, 2016, primarily reflecting improved performance in a broad range of hedge and long-only funds, including strong performance from a single hedge fund with an annual performance measurement period that ends in the third quarter.
Technology and risk management revenue of $497 million increased $58 million from $439 million for the nine months ended September 30, 2016 reflecting ongoing demand for Aladdin and other technology offerings.
Advisory and other revenue of $202 million decreased $32 million from $234 million for the nine months ended September 30, 2016, reflecting lower fees for distributing certain exchange-traded products, lower earnings from a strategic minority investmentCharitable Contribution and lower commissions for sales of certain funds.transition management assignments.
Expense
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Expense, GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
| $ | 1,088 |
|
| $ | 969 |
|
| $ | 3,108 |
|
| $ | 2,893 |
|
Distribution and servicing costs |
|
| 123 |
|
|
| 114 |
|
|
| 361 |
|
|
| 320 |
|
Amortization of deferred sales commissions |
|
| 4 |
|
|
| 8 |
|
|
| 13 |
|
|
| 27 |
|
Direct fund expense |
|
| 234 |
|
|
| 200 |
|
|
| 666 |
|
|
| 583 |
|
General and administration: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing and promotional |
|
| 76 |
|
|
| 72 |
|
|
| 231 |
|
|
| 232 |
|
Occupancy and office related |
|
| 68 |
|
|
| 65 |
|
|
| 202 |
|
|
| 208 |
|
Portfolio services |
|
| 68 |
|
|
| 57 |
|
|
| 195 |
|
|
| 164 |
|
Technology |
|
| 51 |
|
|
| 41 |
|
|
| 145 |
|
|
| 129 |
|
Professional services |
|
| 37 |
|
|
| 27 |
|
|
| 92 |
|
|
| 84 |
|
Communications |
|
| 8 |
|
|
| 9 |
|
|
| 24 |
|
|
| 29 |
|
Other general and administration |
|
| 55 |
|
|
| 41 |
|
|
| 125 |
|
|
| 100 |
|
Total general and administration expense |
|
| 363 |
|
|
| 312 |
|
|
| 1,014 |
|
|
| 946 |
|
Restructuring charge |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76 |
|
Amortization of intangible assets |
|
| 27 |
|
|
| 25 |
|
|
| 77 |
|
|
| 75 |
|
Total expense, GAAP |
| $ | 1,839 |
|
| $ | 1,628 |
|
| $ | 5,239 |
|
| $ | 4,920 |
|
Less non-GAAP expense adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNC LTIP funding obligation |
|
| 4 |
|
|
| 7 |
|
|
| 12 |
|
|
| 21 |
|
Restructuring charge |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76 |
|
Total non-GAAP expense adjustments |
|
| 4 |
|
|
| 7 |
|
|
| 12 |
|
|
| 97 |
|
Expense, as adjusted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
| $ | 1,084 |
|
| $ | 962 |
|
| $ | 3,096 |
|
| $ | 2,872 |
|
Distribution and servicing costs |
|
| 123 |
|
|
| 114 |
|
|
| 361 |
|
|
| 320 |
|
Amortization of deferred sales commissions |
|
| 4 |
|
|
| 8 |
|
|
| 13 |
|
|
| 27 |
|
Direct fund expense |
|
| 234 |
|
|
| 200 |
|
|
| 666 |
|
|
| 583 |
|
General and administration |
|
| 363 |
|
|
| 312 |
|
|
| 1,014 |
|
|
| 946 |
|
Amortization of intangible assets |
|
| 27 |
|
|
| 25 |
|
|
| 77 |
|
|
| 75 |
|
Total expense, as adjusted |
| $ | 1,835 |
|
| $ | 1,621 |
|
| $ | 5,227 |
|
| $ | 4,823 |
|
Expense
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Expense: |
|
|
|
|
|
|
|
Employee compensation and benefits | $ | 1,409 |
|
| $ | 1,137 |
|
Distribution and servicing costs: |
|
|
|
|
|
|
|
Retrocessions |
| 238 |
|
|
| 169 |
|
12b-1 costs |
| 83 |
|
|
| 89 |
|
Other |
| 184 |
|
|
| 187 |
|
Total distribution and servicing costs |
| 505 |
|
|
| 445 |
|
Direct fund expense |
| 320 |
|
|
| 277 |
|
General and administration expense: |
|
|
|
|
|
|
|
Marketing and promotional |
| 35 |
|
|
| 69 |
|
Occupancy and office related |
| 79 |
|
|
| 78 |
|
Portfolio services |
| 87 |
|
|
| 65 |
|
Technology |
| 104 |
|
|
| 88 |
|
Professional services |
| 39 |
|
|
| 44 |
|
Communications |
| 11 |
|
|
| 12 |
|
Foreign exchange remeasurement |
| 4 |
|
|
| 5 |
|
Contingent consideration fair value adjustments |
| 3 |
|
|
| 25 |
|
Product launch costs |
| 178 |
|
|
| 84 |
|
Charitable Contribution |
| — |
|
|
| 589 |
|
Other general and administration |
| 45 |
|
|
| 83 |
|
Total general and administration expense |
| 585 |
|
|
| 1,142 |
|
Amortization of intangible assets |
| 34 |
|
|
| 25 |
|
Total expense | $ | 2,853 |
|
| $ | 3,026 |
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017March 31, 2021 Compared with Three Months Ended September 30, 2016March 31, 2020
GAAP. Expense increased $211decreased $173 million from the thirdthree months ended March 31, 2020, largely driven by lower general and administration expense, reflecting the impact of the Charitable Contribution in the first quarter of 2016, driven primarily by2020. Expense also reflected higher product launch costs, higher employee compensation and benefits expense higher general and administration expense, and higher direct fund expense.volume-related expense in the first quarter of 2021.
Employee compensation and benefits expense increased $119$272 million or 12%, from the third quarter of 2016,three months ended March 31, 2020, primarily reflecting higher incentive compensation, driven primarily by higher operating income and higher performance fees, and operating income, andthe higher headcount. Employees at September 30, 2017 totaled approximately 13,700 compared with approximately 13,000 at September 30, 2016.mark-to-market impact of certain deferred compensation programs.
52
Direct fund expense increased $34$43 million from the third quarter of 2016,three months ended March 31, 2020, primarily reflecting higher average AUM.
General and administration expense increased $51 decreased $557 million from the third quarter of 2016, reflectingthree months ended March 31, 2020, largely driven by the Charitable Contribution in the year ago quarter. General and administration expense also reflected higher product launch costs, and higher portfolio services and technology expense, offset by lower marketing and professional services expense, as well as increased foreign exchange remeasurementpromotional expense and contingent consideration fair value adjustments.
As Adjusted. Expense, as adjusted, increased $214 million, or 13%, to $1,835 million from $1,621 million in the third quarter of 2016. The increase in total expense, as adjusted, is driven primarily by higher employee compensation and benefits expense, higher general and administration expense, and higher direct fund expense.
Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016
GAAP. Expense increased $319 million from the nine months ended September 30, 2016, driven primarily by higher employee compensation and benefits expense, higher direct fund expense, higher general and administration expense, and approximately $22 million of expense associated with the strategic repositioning of the active equity platform, partially offset by a restructuring charge recorded in the first quarter of 2016.
Employee compensation and benefits expense increased $215 million, or 7%, from the nine months ended September 30, 2016, reflecting higher incentive compensation, higher headcount, and approximately $20 million of severance and accelerated compensation expense associated with the repositioning of the active equity platform.
Distribution and servicing costs increased $41 million, or 13%, from the nine months ended September 30, 2016, reflecting higher average AUM and the effect of AUM acquired in the BofA Global Capital Management transaction.
Direct fund expense increased $83 million from the nine months ended September 30, 2016, reflecting higher average AUM.
General and administration expense increased $68 million from the nine months ended September 30, 2016, reflecting higher portfolio services and technology expense,adjustments, and the impact of foreign exchange remeasurement expense. costs related to certain legal matters incurred during the three months ended March 31, 2020.
As Adjusted. Expense, as adjusted,Amortization of intangible assets expense increased $404 million, or 8%, to $5,227$9 million from $4,823 million in the ninethree months ended September 30, 2016. The increase in total expense, as adjusted, is drivenMarch 31, 2020, primarily by higher employee compensation and benefit expense, higher direct fund expense, higher general and administration expense andreflecting amortization of intangible assets related to the $22 million expense associated with the repositioning of the active equity platform. The restructuring charge recorded in the first quarter of 2016 has been excluded from the as adjusted results. Aperio Transaction.
Nonoperating Results
The summary and reconciliation of U.S. GAAP nonoperating income (expense) to nonoperating income (expense), as adjustedless net income (loss) attributable to NCI for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 was as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| Three Months Ended |
| |||||||||||||||
|
| September 30, |
|
| September 30, |
| March 31, |
| |||||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2021 |
|
| 2020 |
| ||||||
Nonoperating income (expense), GAAP basis(1) |
| $ | 10 |
|
| $ | 1 |
|
| $ | 4 |
|
| $ | (72 | ) | $ | 46 |
|
| $ | (71 | ) |
Less: Net income (loss) attributable to NCI |
|
| 12 |
|
|
| 2 |
|
|
| 31 |
|
|
| (2 | ) |
| 74 |
|
|
| (179 | ) |
Nonoperating income (expense), as adjusted, net of NCI(2)(3) |
| $ | (2 | ) |
| $ | (1 | ) |
| $ | (27 | ) |
| $ | (70 | ) | |||||||
Nonoperating income (expense), net of NCI(2) | $ | (28 | ) |
| $ | 108 |
|
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in millions) | 2021 |
|
| 2020 |
| ||
Net gain (loss) on investments(1)(2) |
|
|
|
|
|
|
|
Private equity | $ | 22 |
|
| $ | (18 | ) |
Real assets |
| 3 |
|
|
| 5 |
|
Other alternatives(3) |
| 13 |
|
|
| (25 | ) |
Other investments(4) |
| (3 | ) |
|
| (150 | ) |
Subtotal |
| 35 |
|
|
| (188 | ) |
Gain related to the Charitable Contribution |
| — |
|
|
| 122 |
|
Other gains (losses)(5) |
| (27 | ) |
|
| 205 |
|
Total net gain (loss) on investments(1)(2) |
| 8 |
|
|
| 139 |
|
Interest and dividend income |
| 19 |
|
|
| 15 |
|
Interest expense |
| (55 | ) |
|
| (46 | ) |
Net interest expense |
| (36 | ) |
|
| (31 | ) |
Nonoperating income (expense)(1) | $ | (28 | ) |
| $ | 108 |
|
|
|
|
|
| Management believes nonoperating income (expense), |
The components of nonoperating income (expense), as adjusted, for the three and nine months ended September 30, 2017 and 2016 were as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net gain (loss) on investments(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private equity |
| $ | 7 |
|
| $ | 2 |
|
| $ | 21 |
|
| $ | 11 |
|
Real assets |
|
| 1 |
|
|
| 2 |
|
|
| 2 |
|
|
| 5 |
|
Other alternatives(3) |
|
| 11 |
|
|
| 9 |
|
|
| 34 |
|
|
| 13 |
|
Other investments(4) |
|
| 10 |
|
|
| 16 |
|
|
| 35 |
|
|
| 22 |
|
Subtotal |
|
| 29 |
|
|
| 29 |
|
|
| 92 |
|
|
| 51 |
|
Other gains |
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
Total net gain (loss) on investments(1)(2) |
|
| 29 |
|
|
| 29 |
|
|
| 97 |
|
|
| 51 |
|
Interest and dividend income |
|
| 15 |
|
|
| 22 |
|
|
| 35 |
|
|
| 33 |
|
Interest expense |
|
| (46 | ) |
|
| (52 | ) |
|
| (159 | ) |
|
| (154 | ) |
Net interest expense |
|
| (31 | ) |
|
| (30 | ) |
|
| (124 | ) |
|
| (121 | ) |
Nonoperating income (expense), as adjusted(1)(2) |
| $ | (2 | ) |
| $ | (1 | ) |
| $ | (27 | ) |
| $ | (70 | ) |
|
|
|
|
| Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions. |
| Amounts primarily include net gains (losses) related to unhedged equity, |
Interest expense for the nine months ended September 30, 2017 included a “make-whole” redemption premium of $14 million related to refinancing the $700 million 6.25% notes, which were repaid prior to their September 2017 maturity.
Income Tax Expense
|
| GAAP |
|
| As Adjusted |
| ||||||||||||||||||||||||||
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||
Operating income(1) |
| $ | 1,394 |
|
| $ | 1,209 |
|
| $ | 3,783 |
|
| $ | 3,345 |
|
| $ | 1,398 |
|
| $ | 1,216 |
|
| $ | 3,795 |
|
| $ | 3,442 |
|
Total nonoperating income (expense)(1)(2) |
|
| (2 | ) |
|
| (1 | ) |
|
| (27 | ) |
|
| (70 | ) |
|
| (2 | ) |
|
| (1 | ) |
|
| (27 | ) |
|
| (70 | ) |
Income before income taxes(2) |
| $ | 1,392 |
|
| $ | 1,208 |
|
| $ | 3,756 |
|
| $ | 3,275 |
|
| $ | 1,396 |
|
| $ | 1,215 |
|
| $ | 3,768 |
|
| $ | 3,372 |
|
Income tax expense |
| $ | 445 |
|
| $ | 333 |
|
| $ | 1,090 |
|
| $ | 954 |
|
| $ | 427 |
|
| $ | 361 |
|
| $ | 1,074 |
|
| $ | 1,010 |
|
Effective tax rate |
|
| 32.0 | % |
|
| 27.6 | % |
|
| 29.0 | % |
|
| 29.1 | % |
|
| 30.6 | % |
|
| 29.7 | % |
|
| 28.5 | % |
|
| 30.0 | % |
|
|
| Amount for the three months ended March 31, 2020 includes a nonoperating pre-tax gain of approximately $240 million in connection with a recapitalization of iCapital. Additional amounts primarily include noncash pre-tax gains (losses) related to the revaluation of certain other corporate minority investments. |
Income Tax Expense (Benefit)
| GAAP | As Adjusted(1) |
| ||||||||||||
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||
| March 31, |
|
| March 31, |
| ||||||||||
(in millions) | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Operating income(1) | $ | 1,545 |
|
| $ | 684 |
|
| $ | 1,545 |
|
| $ | 1,273 |
|
Total nonoperating income (expense)(1)(2) | $ | (28 | ) |
| $ | 108 |
|
| $ | (28 | ) |
| $ | (14 | ) |
Income before income taxes | $ | 1,517 |
|
| $ | 792 |
|
| $ | 1,517 |
|
| $ | 1,259 |
|
Income tax expense (benefit) | $ | 318 |
|
| $ | (14 | ) |
| $ | 318 |
|
| $ | 227 |
|
Effective tax rate |
| 20.9 | % |
|
| (1.7 | )% |
|
| 20.9 | % |
|
| 18.0 | % |
(1) | As adjusted items are described in more detail in Non-GAAP Financial Measures. |
(2) | Net of net income (loss) attributable to NCI. |
2017. The three and nine months ended September 30, 2017March 31, 2021 and 2020 income tax expense (GAAP)(benefit) reflected net noncash expense$39 million and $64 million, respectively, of $19 million related to the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes.
The nine months ended September 30, 2017 income tax expense (GAAP) also included an $81 million discrete tax benefit, reflecting the adoption of new accounting guidancebenefits, including benefits related to stock-based compensation awards that vestedvest in the first quarter of 2017. See Note 2, Significant Accounting Policies, for further information.each year.
The three months ended March 31, 2020 income tax benefit also included a discrete tax benefit of $241 million recognized in connection with the Charitable Contribution.
54
The as adjusted effective tax rate of 30.6% and 28.5% for the three and nine months ended September 30, 2017, respectively, excluded the net noncash expense of $19 million mentioned above as it will not have a cash flow impact and to ensure comparability among periods presented.
2016. The three and nine months ended September 30, 2016 income tax expense (GAAP) reflected:
a $26 million net noncash tax benefit, primarily related to the revaluation of certain deferred income tax liabilities as a result of legislation enacted in the United Kingdom, and domestic state and local tax changes, and
nonrecurring tax benefits, which totaled $16 million and $35 million for the three and nine months ended September 30, 2016, respectively.
The as adjusted effective tax rate of 29.7% and 30.0% for the three and nine months ended September 30, 2016, respectively, excluded the net noncash benefit of $26 million mentioned above, as it will not have a cash flow impact and to ensure comparability among periods presented.
55
BALANCE SHEETSTATEMENT OF FINANCIAL CONDITION OVERVIEW
As Adjusted Balance SheetStatement of Financial Condition
The following table presents a reconciliation of the condensed consolidated statement of financial condition presented on a GAAP basis to the condensed consolidated statement of financial condition, excluding the impact of separate account assets and separate account collateral held under securities lending agreements (directly related to lending separate account securities) and separate account liabilities and separate account collateral liabilities under securities lending agreements and consolidated sponsored investment funds, including consolidated VIEs.products.
The Company presents the as adjusted balance sheetstatement of financial condition as additional information to enable investors to exclude certain assets that have equal and offsetting liabilities or noncontrolling interests that ultimately do not have an impact on stockholders’ equity or cash flows. Management views the as adjusted balance sheet, astatement of financial condition, which contains non-GAAP financial measure,measures, as an economic presentation of the Company’s total assets and liabilities; however, it does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Separate Account Assets and Liabilities and Separate Account Collateral Held under Securities Lending Agreements
Separate account assets are maintained by BlackRock Life Limited, a wholly owned subsidiary of the Company that is a registered life insurance company in the United Kingdom, and represent segregated assets held for purposes of funding individual and group pension contracts. The Company records equal and offsetting separate account liabilities. The separate account assets are not available to creditors of the Company and the holders of the pension contracts have no recourse to the Company’s assets. The net investment income attributable to separate account assets accrues directly to the contract owners and is not reported on the condensed consolidated statements of income. While BlackRock has no economic interest in these assets or liabilities, BlackRock earns an investment advisory fee for the service of managing these assets on behalf of its clients.
In addition, the Company records on its condensed consolidated statements of financial condition the separate account collateral received under BlackRock Life Limited securities lending arrangements as its own asset in addition to an equal and offsetting separate account collateral liability for the obligation to return the collateral. The collateral is not available to creditors of the Company, and the borrowers under the securities lending arrangements have no recourse to the Company’s assets.
Consolidated Sponsored Investment FundsProducts
The Company consolidates certain sponsored investment fundsproducts accounted for as variable interest entities (“VIEs”) and voting rights entities (“VREs”) and VIEs,, (collectively, “Consolidated Sponsored Investment Funds”“consolidated sponsored investment products”). See Note 2, Significant Accounting Policies, in the notes to the consolidated financial statements contained in the 20162020 Form 10-K for more information on the Company’s consolidation policy.
56
The Company cannot readily access cash and cash equivalents or other assets held by Consolidated Sponsored Investment Fundsconsolidated sponsored investment products to use in its operating activities. In addition, the Company cannot readily sell investments held by Consolidated Sponsored Investment Fundsconsolidated sponsored investment products in order to obtain cash for use in the Company’s operations.
|
| September 30, 2017 |
|
| March 31, 2021 |
| ||||||||||||||||||||||||||
(in millions) |
| GAAP Basis |
|
| Separate Account Assets/ Collateral(1) |
|
| Consolidated Sponsored Investment Funds(2) |
|
| As Adjusted |
|
| GAAP Basis |
|
| Separate Account Assets/ Collateral(1) |
|
| Consolidated Sponsored Investment Products(2) |
|
| As Adjusted |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 6,165 |
|
| $ | — |
|
| $ | 63 |
|
| $ | 6,102 |
|
| $ | 6,267 |
|
| $ | — |
|
| $ | 242 |
|
| $ | 6,025 |
|
Accounts receivable |
|
| 3,183 |
|
|
| — |
|
|
| — |
|
|
| 3,183 |
|
|
| 3,825 |
|
|
| — |
|
|
| — |
|
|
| 3,825 |
|
Investments |
|
| 1,928 |
|
|
| — |
|
|
| 28 |
|
|
| 1,900 |
|
|
| 7,145 |
|
|
| — |
|
|
| 2,548 |
|
|
| 4,597 |
|
Assets of consolidated VIEs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Cash and cash equivalents |
|
| 82 |
|
|
| — |
|
|
| 82 |
|
|
| — |
| ||||||||||||||||
Investments |
|
| 1,286 |
|
|
| — |
|
|
| 238 |
|
|
| 1,048 |
| ||||||||||||||||
Other assets |
|
| 46 |
|
|
| — |
|
|
| 46 |
|
|
| — |
| ||||||||||||||||
Separate account assets and collateral held under securities lending agreements |
|
| 175,369 |
|
|
| 175,369 |
|
|
| — |
|
|
| — |
|
|
| 118,126 |
|
|
| 118,126 |
|
|
| — |
|
|
| — |
|
Other assets(3) |
|
| 1,882 |
|
|
| — |
|
|
| 8 |
|
|
| 1,874 |
|
|
| 4,632 |
|
|
| — |
|
|
| 88 |
|
|
| 4,544 |
|
Subtotal |
|
| 189,941 |
|
|
| 175,369 |
|
|
| 465 |
|
|
| 14,107 |
|
|
| 139,995 |
|
|
| 118,126 |
|
|
| 2,878 |
|
|
| 18,991 |
|
Goodwill and intangible assets, net |
|
| 30,626 |
|
|
| — |
|
|
| — |
|
|
| 30,626 |
|
|
| 33,864 |
|
|
| — |
|
|
| — |
|
|
| 33,864 |
|
Total assets |
| $ | 220,567 |
|
| $ | 175,369 |
|
| $ | 465 |
|
| $ | 44,733 |
|
| $ | 173,859 |
|
| $ | 118,126 |
|
| $ | 2,878 |
|
| $ | 52,855 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued compensation and benefits |
| $ | 1,614 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,614 |
|
| $ | 1,077 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,077 |
|
Accounts payable and accrued liabilities |
|
| 1,652 |
|
|
| — |
|
|
| — |
|
|
| 1,652 |
|
|
| 1,196 |
|
|
| — |
|
|
| — |
|
|
| 1,196 |
|
Liabilities of consolidated VIEs |
|
| 319 |
|
|
| — |
|
|
| 319 |
|
|
| — |
| ||||||||||||||||
Borrowings |
|
| 5,000 |
|
|
| — |
|
|
| — |
|
|
| 5,000 |
|
|
| 7,232 |
|
|
| — |
|
|
| — |
|
|
| 7,232 |
|
Separate account liabilities and collateral liabilities under securities lending agreements |
|
| 175,369 |
|
|
| 175,369 |
|
|
| — |
|
|
| — |
|
|
| 118,126 |
|
|
| 118,126 |
|
|
| — |
|
|
| — |
|
Deferred income tax liabilities(4) |
|
| 4,966 |
|
|
| — |
|
|
| — |
|
|
| 4,966 |
|
|
| 3,794 |
|
|
| — |
|
|
| — |
|
|
| 3,794 |
|
Other liabilities |
|
| 1,230 |
|
|
| — |
|
|
| (229 | ) |
|
| 1,459 |
|
|
| 4,594 |
|
|
| — |
|
|
| 418 |
|
|
| 4,176 |
|
Total liabilities |
|
| 190,150 |
|
|
| 175,369 |
|
|
| 90 |
|
|
| 14,691 |
|
|
| 136,019 |
|
|
| 118,126 |
|
|
| 418 |
|
|
| 17,475 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity |
|
| 30,042 |
|
|
| — |
|
|
| — |
|
|
| 30,042 |
| ||||||||||||||||
Total BlackRock, Inc. stockholders’ equity |
|
| 35,380 |
|
|
| — |
|
|
| — |
|
|
| 35,380 |
| ||||||||||||||||
Noncontrolling interests |
|
| 375 |
|
|
| — |
|
|
| 375 |
|
|
| — |
|
|
| 2,460 |
|
|
| — |
|
|
| 2,460 |
|
|
| — |
|
Total equity |
|
| 30,417 |
|
|
| — |
|
|
| 375 |
|
|
| 30,042 |
|
|
| 37,840 |
|
|
| — |
|
|
| 2,460 |
|
|
| 35,380 |
|
Total liabilities and equity |
| $ | 220,567 |
|
| $ | 175,369 |
|
| $ | 465 |
|
| $ | 44,733 |
|
| $ | 173,859 |
|
| $ | 118,126 |
|
| $ | 2,878 |
|
| $ | 52,855 |
|
(1) | Amounts represent segregated client assets |
(2) | Amounts represent the portion of assets and liabilities of |
(3) | Amounts include property and equipment and other assets. |
(4) |
|
The following discussion summarizes the significant changes in assets and liabilities on a GAAP basis. Please see the condensed consolidated statements of financial condition as of September 30, 2017March 31, 2021 and December 31, 20162020 contained in Part I, Item 1 of this filing. The discussion does not include changes related to assets and liabilities that are equal and offsetting and have no impact on BlackRock’s stockholders’ equity.
Assets. Cash and cash equivalents at September 30, 2017March 31, 2021 and December 31, 20162020 included $73$242 million and $53$206 million, respectively, of cash held by consolidated VREssponsored investment products (see Liquidity and Capital Resources for details on the change in cash and cash equivalents during the ninethree months ended September 30, 2017)March 31, 2021).
Accounts receivable at September 30, 2017March 31, 2021 increased $833$290 million from December 31, 20162020, primarily due to higher base and performance fee receivables. Investments, including the impact of consolidated sponsored investment products, increased $226 million from December 31, 2020 (for more information see Investments herein). Goodwill and intangible assets increased $1,050 million from December 31, 2020, primarily due to the Aperio Transaction, partially offset by amortization of intangible assets. Other assets (including operating lease right-of-use assets and property and equipment) increased $752 million from December 31, 2020, primarily due to an increase in unit trust receivables (substantially offset by an increase in unit trust payables recorded within accounts payable and accruedother liabilities) and higher BlackRock mutual funds, iShares ETFs and performance fee receivables. Investments were $1,928 million at September 30, 2017 (for more information see Investments herein). Goodwill and intangible assets increased $145 million from December 31, 2016, primarily due to the First Reserve Transaction and Cachematrix Transaction, partially offset by $77 million of amortization of intangible assets. Other assets (including property and equipment) increased $258 million from December 31, 2016, primarily related to an increase in current taxes receivable, certain strategic investments and other assets.
57
Liabilities. Accrued compensation and benefits at September 30, 2017March 31, 2021 decreased $266$1,422 million from December 31, 2016,2020, primarily due to 20162020 incentive compensation cash payments in the first quarter of 2017,2021, partially offset by 20172021 incentive compensation accruals. Accounts payable and accrued liabilities at September 30, 2017March 31, 2021 increased $558$168 million from December 31, 20162020, including the impact of fund launch costs in the current quarter. Other liabilities increased $902 million from December 31, 2020, primarily due to higher unit trust payables (substantially offset by an increase in unit trust receivables recorded within accounts receivable).
other assets) and higher other liabilities of consolidated sponsored investment products. Net deferred income tax liabilities at September 30, 2017March 31, 2021 increased $126$121 million partiallyfrom December 31, 2020, primarily due to the Aperio Transaction and the effects of temporary differences associated with stock-based compensation and intangibles. The change also reflects the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes. Other liabilities increased $223 million from December 31, 2016, primarily related to an increase in contingent liabilities related to the First Reserve Transaction, uncertain tax positions, and other operating liabilities.compensation.
Investments and Investments of Consolidated VIEs
The Company’s investments and investments of consolidated VIEs (collectively, “Total Investments”) were $1,928$7,145 million and $1,286$6,919 million respectively, at September 30, 2017. TotalMarch 31, 2021 and December 31, 2020, respectively. Investments include consolidated investments held by sponsored investment fundsproducts accounted for as VREs and VIEs. Management reviews BlackRock’s Total Investmentsinvestments on an “economic” basis, which eliminates the portion of Total Investmentsinvestments that does not impact BlackRock’s book value or net income attributable to BlackRock. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
The Company presents Total Investments,investments, as adjusted, to enable investors to understand the portion of Total Investmentsinvestments that is owned by the Company, net of NCI, as a gauge to measure the impact of changes in net nonoperating income (expense) on investments to net income (loss) attributable to BlackRock.
The Company further presents net “economic” investment exposure, net of deferred compensation investments and hedged investments, to reflect another helpful measure for investors. The economic impact of Total Investmentsinvestments held pursuant to deferred compensation arrangements is offset by a change in compensation expense. The impact of certain investments is substantially mitigated by swap hedges. Carried interest capital allocations are excluded as there is no impact to BlackRock’s stockholders’ equity until such amounts are realized as performance fees. Finally, the Company’s regulatory investment in Federal Reserve Bank stock, which is not subject to market or interest rate risk, is excluded from the Company’s net economic investment exposure.
58
|
| September 30, |
|
| December 31, |
| ||
(in millions) |
| 2017 |
|
| 2016 |
| ||
Investments, GAAP |
| $ | 1,928 |
|
| $ | 1,595 |
|
Investments held by consolidated VIEs, GAAP |
|
| 1,286 |
|
|
| 1,008 |
|
Total Investments |
|
| 3,214 |
|
|
| 2,603 |
|
Investments held by consolidated VIEs |
|
| (1,286 | ) |
|
| (1,008 | ) |
Investments held by consolidated VREs |
|
| (507 | ) |
|
| (465 | ) |
Net interest in consolidated VREs |
|
| 479 |
|
|
| 444 |
|
Net interest in consolidated VIEs(1) |
|
| 1,048 |
|
|
| 840 |
|
Total Investments, as adjusted |
|
| 2,948 |
|
|
| 2,414 |
|
Federal Reserve Bank stock |
|
| (90 | ) |
|
| (89 | ) |
Deferred compensation investments |
|
| (58 | ) |
|
| (66 | ) |
Hedged investments |
|
| (538 | ) |
|
| (614 | ) |
Carried interest (VIEs/VREs) |
|
| (280 | ) |
|
| (126 | ) |
Total “economic” investment exposure |
| $ | 1,982 |
|
| $ | 1,519 |
|
|
| March 31, |
|
| December 31, |
| ||
(in millions) |
| 2021 |
|
| 2020 |
| ||
Investments, GAAP |
| $ | 7,145 |
|
| $ | 6,919 |
|
Investments held by consolidated sponsored investment products |
|
| (5,100 | ) |
|
| (4,976 | ) |
Net interest in consolidated sponsored investment products(1) |
|
| 2,552 |
|
|
| 2,490 |
|
Investments, as adjusted |
|
| 4,597 |
|
|
| 4,433 |
|
Federal Reserve Bank stock |
|
| (95 | ) |
|
| (94 | ) |
Deferred compensation investments |
|
| — |
|
|
| (6 | ) |
Hedged investments |
|
| (778 | ) |
|
| (833 | ) |
Carried interest |
|
| (805 | ) |
|
| (627 | ) |
Total “economic” investment exposure(2) |
| $ | 2,919 |
|
| $ | 2,873 |
|
(1) |
|
(2) | Amounts exclude corporate minority investments included in other assets on the condensed consolidated statements of financial condition. |
The following table represents the carrying value of the Company’s economic investment exposure, by asset type, at September 30, 2017March 31, 2021 and December 31, 2016:2020:
|
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
| ||||
Equity(1) |
| $ | 943 |
|
| $ | 835 |
| ||||||||
Fixed income(2) |
|
| 838 |
|
|
| 958 |
| ||||||||
Multi-asset(3) |
|
| 138 |
|
|
| 127 |
| ||||||||
Alternatives: |
|
|
|
|
|
|
|
| ||||||||
Private equity |
| $ | 333 |
|
| $ | 334 |
|
|
| 462 |
|
|
| 418 |
|
Real assets |
|
| 304 |
|
|
| 94 |
|
|
| 241 |
|
|
| 251 |
|
Other alternatives(1) |
|
| 254 |
|
|
| 245 |
| ||||||||
Other investments(2) |
|
| 1,091 |
|
|
| 846 |
| ||||||||
Other alternatives(4) |
|
| 297 |
|
|
| 284 |
| ||||||||
Alternatives subtotal |
|
| 1,000 |
|
|
| 953 |
| ||||||||
Total “economic” investment exposure |
| $ | 1,982 |
|
| $ | 1,519 |
|
| $ | 2,919 |
|
| $ | 2,873 |
|
(1) |
|
(2) |
|
(3) | Multi-asset includes unhedged seed investments in multi-asset mutual funds/strategies. |
(4) | Other alternatives include direct hedge fund strategies and hedge fund solutions. |
As adjusted investment activity for the ninethree months ended September 30, 2017March 31, 2021 was as follows:
(in millions) |
|
|
|
| Three Months Ended March 31, 2021 |
| |
Total Investments, as adjusted, December 31, 2016 |
| $ | 2,414 |
| |||
Investments, as adjusted, beginning balance | $ | 4,433 |
| ||||
Purchases/capital contributions |
|
| 830 |
|
| 301 |
|
Sales/maturities |
|
| (603 | ) |
| (310 | ) |
Distributions(1) |
|
| (67 | ) |
| (42 | ) |
Market appreciation(depreciation)/earnings from equity method investments |
|
| 183 |
|
| 73 |
|
Carried interest capital allocations/(distributions)/acquired |
|
| 154 |
| |||
Carried interest capital allocations/(distributions) |
| 178 |
| ||||
Other |
|
| 37 |
|
| (36 | ) |
Total Investments, as adjusted, September 30, 2017 |
| $ | 2,948 |
| |||
Investments, as adjusted, ending balance | $ | 4,597 |
|
(1) Amount includes distributions representing return of capital and return on investments. (2) Amount includes the impact of foreign exchange movements. |
|
59
LIQUIDITY AND CAPITAL RESOURCES
BlackRock Cash Flows Excluding the Impact of Consolidated Sponsored Investment FundsProducts
The condensed consolidated statements of cash flows include the cash flows of the Consolidated Sponsored Investment Funds.consolidated sponsored investmentproducts. The Company uses an adjusted cash flow statement, which excludes the impact of Consolidated Sponsored Investment Funds,consolidated sponsored investmentproducts, as a supplemental non-GAAP measure to assess liquidity and capital requirements. The Company believes that its cash flows, excluding the impact of the Consolidated Sponsored Investment Funds,consolidated sponsored investmentproducts, provide investors with useful information on the cash flows of BlackRock relating to its ability to fund additional operating, investing and financing activities. BlackRock’s management does not advocate that investors consider such non-GAAP measures in isolation from, or as a substitute for, its cash flows presented in accordance with GAAP.
The following table presents a reconciliation of the condensed consolidated statements of cash flows presented on a GAAP basis to the condensed consolidated statements of cash flows, excluding the impact of the cash flows of Consolidated Sponsored Investment Funds:consolidated sponsored investmentproducts:
(in millions) |
| GAAP Basis |
|
| Impact on Cash Flows of Consolidated Sponsored Investment Funds |
|
| Cash Flows Excluding Impact of Consolidated Sponsored Investment Funds |
| |||
Cash and cash equivalents, December 31, 2016 |
| $ | 6,091 |
|
| $ | 53 |
|
| $ | 6,038 |
|
Cash flows from operating activities |
|
| 2,486 |
|
|
| (252 | ) |
|
| 2,738 |
|
Cash flows from investing activities |
|
| (490 | ) |
|
| (52 | ) |
|
| (438 | ) |
Cash flows from financing activities |
|
| (2,083 | ) |
|
| 324 |
|
|
| (2,407 | ) |
Effect of exchange rate changes on cash and cash equivalents |
|
| 161 |
|
|
| — |
|
|
| 161 |
|
Net change in cash and cash equivalents |
|
| 74 |
|
|
| 20 |
|
|
| 54 |
|
Cash and cash equivalents, September 30, 2017 |
| $ | 6,165 |
|
| $ | 73 |
|
| $ | 6,092 |
|
(in millions) | GAAP Basis |
|
| Impact on Cash Flows of Consolidated Sponsored Investment Products |
|
| Cash Flows Excluding Impact of Consolidated Sponsored Investment Products |
| |||
Cash, cash equivalents and restricted cash, December 31, 2020 | $ | 8,681 |
|
| $ | 206 |
|
| $ | 8,475 |
|
Net cash provided by/(used in) operating activities |
| (573 | ) |
|
| (559 | ) |
|
| (14 | ) |
Net cash provided by/(used in) investing activities |
| (1,150 | ) |
|
| (38 | ) |
|
| (1,112 | ) |
Net cash provided by/(used in) financing activities |
| (591 | ) |
|
| 633 |
|
|
| (1,224 | ) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
| (7 | ) |
|
| — |
|
|
| (7 | ) |
Net increase/(decrease) in cash, cash equivalents and restricted cash |
| (2,321 | ) |
|
| 36 |
|
|
| (2,357 | ) |
Cash, cash equivalents and restricted cash, March 31, 2021 | $ | 6,360 |
|
| $ | 242 |
|
| $ | 6,118 |
|
Sources of BlackRock’s operating cash primarily include investment advisory, administration fees and securities lending revenue, performance fees, revenue from technology and risk management services revenue, advisory and other revenue and distribution fees. BlackRock uses its cash to pay all operating expense,expenses, interest and principal on borrowings, income taxes, dividends on BlackRock’s capital stock, repurchases of the Company’s stock, acquisitions, capital expenditures and purchases of co-investments and seed investments.
For details of the Company’s GAAP cash flows from operating, investing and financing activities, see the Condensed Consolidated Statementscondensed consolidated statements of Cash Flowscash flows contained in Part I, Item 1 of this filing.
Cash flows fromprovided by/(used in) operating activities, excluding the impact of Consolidated Sponsored Investment Funds,consolidated sponsored investment products, primarily include the receipt of investment advisory and administration fees, securities lending revenue and performance fees offset by the payment of operating expenses incurred in the normal course of business, including year-end incentive compensation accrued for in the prior year.
Cash outflows fromflows used in investing activities, excluding the impact of Consolidated Sponsored Investment Funds,consolidated sponsored investment products, for the ninethree months ended September 30, 2017March 31, 2021 were $438 million$1.1 billion and primarily reflected $404 million$1.1 billion of investment purchases, $100cash outflows related to the Aperio Transaction, $48 million of purchases of property and equipment $73and $36 million related to the First Reserve Transaction and $29 million related to the Cachematrix Transaction,of net investment purchases, partially offset by $142$34 million of net proceedsdistributions of capital from sales and maturities of certain investments.equity method investees.
Cash outflows fromflows used in financing activities, excluding the impact of Consolidated Sponsored Investment Funds,consolidated sponsored investment products, for the ninethree months ended September 30, 2017March 31, 2021 were $2,407 million,$1.2 billion, primarily resulting from $1,133$661 million of cash dividend payments and $568 million of share repurchases, including $825$300 million in open market transactions and $308$268 million of employee tax withholdings related to employee stock transactions, $1,259 million of cash dividend payments and $700 million of repayments of long-term borrowings, partially offset by $697 million of proceeds from issuance of long-term borrowings.transactions.
60
The Company manages its financial condition and funding to maintain appropriate liquidity for the business. Liquidity resources at September 30, 2017March 31, 2021 and December 31, 20162020 were as follows:
|
| September 30, |
|
| December 31, |
| March 31, |
|
| December 31, |
| ||||
(in millions) |
| 2017 |
|
| 2016 |
| 2021 |
|
| 2020 |
| ||||
Cash and cash equivalents(1) |
| $ | 6,165 |
|
| $ | 6,091 |
| $ | 6,267 |
|
| $ | 8,664 |
|
Cash and cash equivalents held by consolidated VREs(2) |
|
| (73 | ) |
|
| (53 | ) | |||||||
Cash and cash equivalents held by consolidated sponsored investment products(2) |
| (242 | ) |
|
| (206 | ) | ||||||||
Subtotal |
|
| 6,092 |
|
|
| 6,038 |
|
| 6,025 |
|
|
| 8,458 |
|
Credit facility – undrawn |
|
| 4,000 |
|
|
| 4,000 |
|
| 4,400 |
|
|
| 4,000 |
|
Total liquidity resources |
| $ | 10,092 |
|
| $ | 10,038 |
| $ | 10,425 |
|
| $ | 12,458 |
|
(1) | The percentage of cash and cash equivalents held by the Company’s |
(2) | The Company cannot readily access such cash and cash equivalents to use in its operating activities. |
|
|
Total liquidity resources increased $54 milliondecreased $2 billion during the ninethree months ended September 30, 2017,March 31, 2021, primarily reflecting cash flows from operating activities,payments of 2020 year-end incentive awards, approximately $1.1 billion of cash outflow related to the Aperio Transaction, cash dividend payments of $661 million and share repurchases of $568 million, partially offset by cash paymentsflows from other operating activities and a $400 million increase in the aggregate commitment amount of 2016 year-end incentive awards, share repurchases of $1,133 million and cash dividend payments of $1,259 million. the credit facility.
A significant portion of the Company’s $2,948$4,597 million of Total Investments,investments, as adjusted, is illiquid in nature and, as such, cannot be readily convertible to cash.
The Company’s liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the three months ended March 31, 2021. The Company will continue to monitor its liquidity and capital resources due to the current pandemic.
Share Repurchases. In January 2017, During the Board of Directors approved an increase inthree months ended March 31, 2021, the Company repurchased 0.4 million common shares that may be repurchased under the Company’s existing share repurchase program to allow for the repurchase of an additional 6 million shares for a total up to 9 million shares of BlackRock common stock.
The Company repurchased 2.1 million common shares in open market transactions under the share repurchase program for approximately $825 million during the nine months ended September 30, 2017.$300 million. At September 30, 2017,March 31, 2021, there were 6.94.6 million shares still authorized to be repurchased.repurchased under the program.
Net Capital Requirements. The Company is required to maintain net capital in certain regulated subsidiaries within a number of jurisdictions, which is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries of the Company may be restricted in their ability to transfer cash between different jurisdictions and to their parents. Additionally, transfers of cash between international jurisdictions including repatriation to the United States, may have adverse tax consequences that could discourage such transfers.
BlackRock Institutional Trust Company, N.A. (“BTC”) is chartered as a national bank that does not accept client deposits or make commercial loans and whose powers are limited to trust and other fiduciary activities. BTC provides investment management and other fiduciary services, including investment advisory and securities lending agency services, to institutional clients. BTC is subject to regulatory capital and liquid asset requirements administered by the US Office of the Comptroller of the Currency.
At September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company was required to maintain approximately $1.7$2.3 billion and $1.4$2.2 billion, respectively, in net capital in certain regulated subsidiaries, including BTC, entities regulated by the Financial Conduct Authority and Prudential Regulation Authority in the United Kingdom, and the Company’s broker-dealers. The Company was in compliance with all applicable regulatory net capital requirements.
Short-Term Borrowings
20172021 Revolving Credit Facility. The In March 2021, the Company’s credit facility has anwas amended to increase the aggregate commitment amount of $4.0to $4.4 billion and was amended in April 2017 to extend the maturity date to April 2022March 2026 (the “2017“2021 credit facility”). In addition, the amendment incorporated certain sustainability-linked pricing metrics into the agreement. Specifically, the Company’s applicable interest rate and commitment fee are subject to upward or downward adjustments on an annual basis if the Company achieves, or fails to achieve, certain specified targets. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate, or an applicable replacement benchmark, plus a spread. The 20172021 credit facility permits the Company to request up to an additional $1.0 billion of borrowing capacity, subject to lender credit approval, increasing the overall size of the 20172021 credit facility to an aggregate principal amount not to exceed $5.0$5.4 billion. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate plus a spread. The 20172021 credit facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of less than 1 to 1 at September 30, 2017.March 31, 2021. The 20172021 credit facility provides back-up liquidity to fund ongoing working capital for general corporate purposes and various investment opportunities. At September 30, 2017,March 31, 2021, the Company had no amount outstanding under the 20172021 credit facility.
61
Commercial Paper Program. The Company can issue unsecured commercial paper notes (the “CP Notes”) on a private-placement basis up to a maximum aggregate amount outstanding at any time of $4.0$4 billion. The commercial paper program is currently supported by the 20172021 credit facility. At September 30, 2017,March 31, 2021, BlackRock had no CP Notes outstanding.
Long-Term Borrowings
At September 30, 2017,March 31, 2021, the principal amount of long-term borrowings outstanding was $5.0$7.3 billion. See Note 12, 15, Borrowings, in the 20162020 Form 10-K for more information on borrowings outstanding as of December 31, 2016.
In March 2017, the Company issued $700 million in aggregate principal amount of 3.20% senior unsecured and unsubordinated notes maturing on March 15, 2027 (the “2027 Notes”). Interest is payable semi-annually on March 15 and September 15 of each year, commencing September 15, 2017, and is approximately $22 million per year. The 2027 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a “make-whole” redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2027 Notes.
In April 2017, the net proceeds of the 2027 Notes were used to fully repay $700 million in aggregate principal amount outstanding of 6.25% notes prior to their maturity in September 2017.2020.
During the ninethree months ended September 30, 2017,March 31, 2021, the Company paid approximately $149$41 million of interest on long-term borrowings. Future principal repayments and interest requirements at September 30, 2017March 31, 2021 were as follows:
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
| Principal |
|
| Interest |
|
| Total Payments |
|
| Principal |
|
| Interest |
|
| Total Payments |
| ||||||
Remainder of 2017 |
| $ | — |
|
| $ | 54 |
|
| $ | 54 |
| ||||||||||||
2018 |
|
| — |
|
|
| 175 |
|
|
| 175 |
| ||||||||||||
2019 |
|
| 1,000 |
|
|
| 175 |
|
|
| 1,175 |
| ||||||||||||
2020 |
|
| — |
|
|
| 125 |
|
|
| 125 |
| ||||||||||||
2021 |
|
| 750 |
|
|
| 109 |
|
|
| 859 |
| ||||||||||||
Remainder of 2021 |
| $ | 750 |
|
| $ | 149 |
|
| $ | 899 |
| ||||||||||||
2022 |
|
| 750 |
|
|
| 80 |
|
|
| 830 |
|
|
| 750 |
|
|
| 161 |
|
|
| 911 |
|
2023 |
|
| — |
|
|
| 148 |
|
|
| 148 |
| ||||||||||||
2024 |
|
| 1,000 |
|
|
| 130 |
|
|
| 1,130 |
| ||||||||||||
2025(1) |
|
| 822 |
|
|
| 113 |
|
|
| 935 |
| ||||||||||||
2026 |
|
| — |
|
|
| 103 |
|
|
| 103 |
| ||||||||||||
Thereafter |
|
| 2,528 |
|
|
| 184 |
|
|
| 2,712 |
|
|
| 3,950 |
|
|
| 283 |
|
|
| 4,233 |
|
Total |
| $ | 5,028 |
|
| $ | 902 |
|
| $ | 5,930 |
|
| $ | 7,272 |
|
| $ | 1,087 |
|
| $ | 8,359 |
|
__________________________
| The amount of principal and interest payments for the 2025 Notes (issued in Euros) represents the expected payment amounts using the EUR/USD foreign exchange |
Commitments and Contingencies
Investment Commitments. At September 30, 2017,March 31, 2021, the Company had $328$841 million of various capital commitments to fund sponsored investment funds,products, including consolidated VIEs.sponsored investment products. These fundsproducts include private equity funds, real assets funds and opportunistic funds. This amount excludes additional commitments made by consolidated funds of funds to underlying third-party funds as third-party noncontrolling interest holders have the legal obligation to fund the respective commitments of such funds of funds. Generally, the timing of the funding of these commitments is unknown and the commitments are callable on demand at any time prior to the expiration of the commitment. These unfunded commitments are not recorded on the condensed consolidated statements of financial condition. These commitments do not include potential future commitments approved by the Company that are not yet legally binding. The Company intends to make additional capital commitments from time to time to fund additional investment products for, and with, its clients.
Lease Commitment. In May 2017, the Company entered into an agreement with 50 HYMC Owner LLC, for the lease of approximately 847,000 square feet of office space located at 50 Hudson Yards, New York, New York. The term of the lease is twenty years from the date that rental payments begin, expected to occur in May 2023, with the option to renew for a specified term.
62
Future minimum commitments of annual base rental payments under this operating lease are as follows:
(in millions) |
|
|
|
Year | Amount |
| |
2023 | $ | 34 |
|
2024 |
| 51 |
|
2025 |
| 51 |
|
2026 |
| 51 |
|
2027 |
| 51 |
|
Thereafter |
| 1,007 |
|
Total | $ | 1,245 |
|
Contingent Payments Related to Business Acquisitions. In connection with certain acquisitions, BlackRock is required to make contingent payments, subject to achieving specified performance targets, which may include revenue related tofrom acquired contracts or new capital commitments for certain products. contracts. The fair value of the remaining aggregate contingent payments at September 30, 2017March 31, 2021 totaled $228$21 million including $125 million related to the First Reserve Transaction, and is included in other liabilities on the condensed consolidated statements of financial condition.
Carried Interest Clawback. As a general partner in certain investment funds,products, including private equity partnerships and certain hedge funds, the Company may receive carried interest cash distributions from the partnerships in accordance with distribution provisions of the partnership agreements. The Company may, from time to time, be required to return all or a portion of such distributions to the limited partners in the event the limited partners do not achieve a return as specified in the various partnership agreements. Therefore, BlackRock records carried interest subject to such clawback provisions in Total Investments,investments, or cash/cash of consolidated VIEsand cash equivalents to the extent that it is distributed, and as a deferred carried interest liability/other liabilities of consolidated VIEsliability on its condensed consolidated statements of financial condition. Carried interest is recorded as performance fees on BlackRock’s condensed consolidated statements of income upon the earlierwhen fees are no longer probable of the termination of the investment fund or when the likelihood of clawback is considered mathematically improbable.significant reversal.
Indemnifications. On behalf of certain clients, the Company lends securities to highly rated banks and broker-dealers. In these securities lending transactions, the borrower is required to provide and maintain collateral at or above regulatory minimums. Securities on loan are marked to market daily to determine if the borrower is required to pledge additional collateral. BlackRock has issued certain indemnificationsagreed to indemnify certain securities lending clients against potential loss resulting from a borrower’s failure to fulfill its obligations under the securities lending agreement should the value of the collateral pledged by the borrower at the time of default be insufficient to cover the borrower’s obligation under the securities lending agreement. At September 30, 2017,The amount of securities on loan as of March 31, 2021 and subject to this type of indemnification was $292 billion. In the Company indemnified certain of its clients for their securitiesCompany’s capacity as lending loan balances of approximately $197.6 billion. The Company held, as agent, cash and securities totaling $210.6$312 billion were held as collateral for indemnified securities on loan at September 30, 2017.March 31, 2021. The fair value of these indemnifications was not material at September 30, 2017.March 31, 2021.
While the collateral pledged by a borrower is intended to be sufficient to offset the borrower’s obligations to return securities borrowed and any other amounts owing to the lender under the relevant securities lending agreement, in the event of a borrower default, the Company can give no assurance that the collateral pledged by the borrower will be sufficient to fulfill such obligations. If the amount of such pledged collateral is not sufficient to fulfill such obligations to a client for whom the Company has provided indemnification, BlackRock would be responsible for the amount of the shortfall. These indemnifications cover only the collateral shortfall described above, and do not in any way guarantee, assume or otherwise insure the investment performance or return of any cash collateral vehicle into which securities lending cash collateral is invested.
63
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ significantly from those estimates. Management considers the following critical accounting policies important to understanding the condensed consolidated financial statements. For a summary of these and additional accounting policies see Note 2, Significant Accounting Policies, in the notes to the condensed consolidated financial statements contained in Part I, Item 1 of this filing and statements. In addition, see Critical Accounting Policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2016 Form 10-K and Note 2, Significant Accounting Policies, in the 20162020 Form 10-K for further information.
Consolidation. In the normal course of business, the Company is the manager of various types of sponsored investment vehicles. The Company performs an analysis for investment products to determine if the product is a VIE or a VRE. Assessing whether an entity is a VIE or a VRE involves judgment and analysis. Factors considered in this assessment include the entity’s legal organization, the entity’s capital structure and equity ownership, and any related party or de facto agent implications of the Company’s involvement with the entity. Investments that are determined to be VREs are consolidated if the Company can exert control over the financial and operating policies of the investee, which generally exists if there is greater than 50% voting interest. See Note 4, Consolidated Voting Rights Entities, in the notes to the condensed consolidated financial statements for more information. Investments that are determined to be VIEs are consolidated if the Company is the primary beneficiary (“PB”) of the entity.
At September 30, 2017, BlackRock was determined to be the PB for certain investment funds that were determined to be VIEs, which required BlackRock to consolidate them. BlackRock wasis deemed to be the PB becauseof a VIE if it has the power to direct the activities that most significantly impact the entities’ economic performance and has the obligation to absorb losses or the right to receive benefits that potentially could be significant to the VIE. The Company generally consolidates VIEs in which it holds an equity ownershipeconomic interest of 10% or greater and deconsolidates such VIEs once equity ownership falls below 10%. See Note 5, Variable Interest Entities6, Consolidated Sponsored Investment Products, in the notes to the condensed consolidated financial statements for more information.
Fair Value Measurements. The Company’s assessment of the significance of a particular input to the fair value measurement according to the fair value hierarchy (i.e., Level 1, 2 and 3 inputs, as defined) in its entirety requires judgment and considers factors specific to the financial instrument. See Note 2, Significant Accounting Policies, in the notes to the condensed consolidated financial statements for more information on fair value measurements.
Investment Advisory Performance Fees / Carried Interest. The Company receives investment advisory performance fees, orincluding incentive allocations (carried interest) from certain actively managed investment funds and certain separately managed accounts. These performance fees are dependent upon exceeding specified relative or absolute investment return thresholds. Such fees are recorded upon completion of the measurement period,thresholds, which variesmay vary by product or account, and could beinclude monthly, quarterly, annuallyannual or longer.longer measurement periods.
Performance fees, including carried interest, are recognized when it is determined that they are no longer probable of significant reversal (such as upon the sale of a fund’s investment or when the amount of AUM becomes known as of the end of a specified measurement period). Given the unique nature of each fee arrangement, contracts with customers are evaluated on an individual basis to determine the timing of revenue recognition. Significant judgement is involved in making such determination. Performance fees typically arise from investment management services that began in prior reporting periods. Consequently, a portion of the fees the Company recognizes may be partially related to the services performed in prior periods that meet the recognition criteria in the current period. At each reporting date, the Company considers various factors in estimating performance fees to be recognized, including carried interest. These factors include but are not limited to whether: (1) the fees are dependent on the market and thus are highly susceptible to factors outside the Company’s influence; (2) the fees have a large number and a broad range of possible amounts; and (3) the funds or separately managed accounts have the ability to invest or reinvest their sales proceeds.
In addition, theThe Company is allocated carried interest from certain alternative investment products upon exceeding performance thresholds. BlackRockThe Company may be required to reverse/return all, or part, of such carried interest allocationsallocations/distributions depending upon future performance of these funds. Therefore, BlackRock records carriedproducts. Carried interest subject to such clawback provisions is recorded in Total Investments,investments or cash/cash of consolidated VIEsand cash equivalents to the extent that it is distributed, on its condensed consolidated statements of financial condition. Carried interest is recorded as performance fee revenue upon the earlier of the termination of the investment fund or when the likelihood of clawback is considered mathematically improbable.
The Company records a liability for deferred carried interest liability to the extent it receives cash or capital allocations related to carried interest prior to meeting the revenue recognition criteria. At September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company had $303$748 million and $152$584 million, respectively, of deferred carried interest recorded in other liabilities/other liabilities of consolidated VIEs on the condensed consolidated statements of financial condition. A portion of the deferred carried interest liability willmay also be paid to certain employees. The ultimate timing of the recognition of performance fee revenue and related compensation expense, if any, for these products is unknown.
64
The following table presents SeeNote 16, Revenue, in the notes to the condensed consolidated financial statements for detailed changes in the deferred carried interest liability (including the portion related to consolidated VIEs)balance for the three and nine months ended September 30, 2017March 31, 2021 and 2016:2020.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Beginning balance |
| $ | 280 |
|
| $ | 131 |
|
| $ | 152 |
|
| $ | 143 |
|
Net increase (decrease) in unrealized allocations |
|
| 23 |
|
|
| 8 |
|
|
| 52 |
|
|
| 7 |
|
Performance fee revenue recognized |
|
| — |
|
|
| (11 | ) |
|
| (12 | ) |
|
| (22 | ) |
Acquisition |
|
| — |
|
|
| — |
|
|
| 111 |
|
|
| — |
|
Ending balance |
| $ | 303 |
|
| $ | 128 |
|
| $ | 303 |
|
| $ | 128 |
|
Accounting Developments
Recent Accounting Pronouncements Not Yet Adopted.
Revenue from Contracts with Customers. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance also changes the accounting for certain contract costs and revises the criteria for determining if an entity is acting as a principal or agent in certain arrangements. The Company continues to evaluate the impact of ASU 2014-09 on the presentation and recognition of its revenue contracts and certain contract costs. The most significant change identified to date relates to the presentation of certain distribution costs, which are currently presented net against revenues (contra-revenue) and will likely be presented as an expense on a gross basis. The Company currently expects such net gross up to annual revenue to be approximately $1 billion with a corresponding gross up to annual expense. Consequently, the Company expects its GAAP operating margin to decline upon adoption of the new guidance due to the gross up of revenue. However, it currently does not expect any material impact to its as adjusted operating margin. The Company is currently evaluating which transition method it will apply when it adopts the new revenue recognition guidance in the first quarter of 2018.
For accounting pronouncements that the Company adopted during the nine months ended September 30, 2017 and for additional recent accounting pronouncements not yet adopted, see Note 2, Significant Accounting Policies, in the condensed consolidated financial statements contained in Part I, Items 1 of this filing.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
AUM Market Price Risk.BlackRock’s investment advisory and administration fees are primarily comprised of fees based on a percentage of the value of AUMassets under management (“AUM”) and, in some cases, performance fees expressed as a percentage of the returns realized on AUM. At September 30, 2017,March 31, 2021, the majority of the Company’s investment advisory and administration fees were based on average or period end AUM of the applicable investment funds or separate accounts. Movements in equity market prices, interest rates/credit spreads, foreign exchange rates or all three could cause the value of AUM to decline, which would result in lower investment advisory and administration fees.
Corporate Investments Portfolio Risks. As a leading investment management firm, BlackRock devotes significant resources across all of its operations to identifying, measuring, monitoring, managing and analyzing market and operating risks, including the management and oversight of its own investment portfolio. The Board of Directors of the Company has adopted guidelines for the review of investments to be made by the Company, requiring, among other things, that investments be reviewed by certain senior officers of the Company, and that certain investments may be referred to the Audit Committee or the Board of Directors, depending on the circumstances, for approval.
In the normal course of its business, BlackRock is exposed to equity market price risk, interest rate/credit spread risk and foreign exchange rate risk associated with its corporate investments.
65
BlackRock has investments primarily in sponsored investment products that invest in a variety of asset classes, including real assets, private equity and hedge funds. Investments generally are made for co-investment purposes, to establish a performance track record to hedge exposure to certain deferred compensation plans or for regulatory purposes. Currently, the Company has a seed capital hedging program in which it enters into swaps to hedge market and interest rate exposure to certain investments. At September 30, 2017,March 31, 2021, the Company had outstanding total return swaps with an aggregate notional value of approximately $538$778 million. At September 30, 2017, there were no outstanding interest rate swaps.
At September 30, 2017,March 31, 2021, approximately $1.8$5.1 billion of BlackRock’s Total Investmentsinvestments were maintained in consolidated sponsored investment fundsproducts accounted for as VREsvariable interest entities and VIEs.voting rights entities. Excluding the impact of the Federal Reserve Bank stock, carried interest investments made to hedge exposure to certain deferred compensation plans and certain investments that are hedged via the seed capital hedging program, the Company’s economic exposure to its investment portfolio is $1,982 million.$2.9 billion. See Balance Sheet Overview- Investments and InvestmentsStatement of Consolidated VIEs Financial Condition Overview-Investments in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information on the Company’s Total Investments.investments.
Equity Market Price Risk.At September 30, 2017,March 31, 2021, the Company’s net exposure to equity market price risk in its investment portfolio was approximately $816$1,173 million of the Company’s total economic investment exposure. Investments subject to market price risk include private equity and real assets investments, hedge funds and funds of funds as well as mutual funds. The Company estimates that a hypothetical 10% adverse change in market prices would result in a decrease of approximately $81.6$117 million in the carrying value of such investments.
Interest Rate/Credit Spread Risk. At September 30, 2017,March 31, 2021, the Company was exposed to interest-rate risk and credit spread risk as a result of approximately $1,166$1,746 million of Total Investmentsinvestments in debt securities and sponsored investment products that invest primarily in debt securities. Management considered a hypothetical 100 basis point fluctuation in interest rates or credit spreads and estimates that the impact of such a fluctuation on these investments, in the aggregate, would result in a decrease, or increase, of approximately $20.3$36 million in the carrying value of such investments.
Foreign Exchange Rate Risk.As discussed above, the Company invests in sponsored investment products that invest in a variety of asset classes. The carrying value of the total economic investment exposure denominated in foreign currencies, primarily the British pound and Euro, was $404$948 million at September 30, 2017.March 31, 2021. A 10% adverse change in the applicable foreign exchange rates would result in approximately a $40.4$95 million decline in the carrying value of such investments.
Other Market Risks. The Company executes forward foreign currency exchange contracts to mitigate the risk of certain foreign exchange risk movements. At September 30, 2017,March 31, 2021, the Company had outstanding forward foreign currency exchange contracts with an aggregate notional value of approximately $1.3$1.9 billion.
Item 4. Controls and Procedures
Disclosure Controls and Procedures. Under the direction of BlackRock’s Chief Executive Officer and Chief Financial Officer, BlackRock evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, BlackRock’s Chief Executive Officer and Chief Financial Officer have concluded that BlackRock’s disclosure controls and procedures were effective.
Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2017March 31, 2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. In addition, there was no material impact to our internal control over financial reporting while majority of our employees are working remotely due to the COVID-19 pandemic. The Company is continually monitoring and assessing the COVID-19 situation to determine any potential impact on the design and operating effectiveness of our internal control over financial reporting.
66
For a discussion of the Company’s legal proceedings, see Note 15, Commitments and Contingencies, in the notes to the condensed consolidated financial statements of this Form 10-Q.
Item 1A. Risk Factors
From timeIn addition to time, BlackRock receives subpoenasthe risk factors previously disclosed in BlackRock’s Annual Report on Form 10-K for the year ended December 31, 2020, BlackRock’s business, financial condition or other requests for information from various U.S. federal, state governmental and domestic and international regulatory authorities in connection with certain industry-wide or other investigations or proceedings. It is BlackRock’s policy to cooperate fully with such inquiries. The Company and certainresults of its subsidiaries have been named as defendants in various legal actions, including arbitrations and other litigation arising in connection with BlackRock’s activities. Additionally, BlackRock advised investment portfolios mayoperations could be subject to lawsuits,materially adversely affected by any of the following risks.
RISKS RELATED TO THE COVID-19 Pandemic
The COVID-19 pandemic may adversely affect BlackRock’s business, operations and financial condition which potentially couldmay cause its AUM, revenue and earnings to decline.
The COVID-19 pandemic has caused and is causing significant harm to the investment returns ofglobal economy and may adversely affect BlackRock’s business, including its operations and financial condition, and may cause the applicable portfolio orCompany’s AUM, revenue and earnings to decline. The COVID-19 pandemic continues to result in governmental authorities taking measures to contain the Company being liablespread and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activity in certain jurisdictions, including closures. These measures may continue to, the portfolios for any resulting damages.
On May 27, 2014, certain purported investors in the BlackRock Global Allocation Fund, Inc. and the BlackRock Equity Dividend Fund (collectively, the “Funds”) filed a consolidated complaint (the “Consolidated Complaint”) in the U.S. District Court for the District of New Jersey against BlackRock Advisors, LLC, BlackRock Investment Management, LLC and BlackRock International Limited under the caption In re BlackRock Mutual Funds Advisory Fee Litigation. The Consolidated Complaint, which purports to be brought derivatively on behalf of the Funds, alleges that the defendants violated Section 36(b) of the Investment Company Act by receiving allegedly excessive investment advisory fees from the Funds. On February 24, 2015, the same plaintiffs filed another complaint in the same court against BlackRock Investment Management, LLC and BlackRock Advisors, LLC. The allegations and legal claims in both complaints are substantially similar, with the new complaint purporting to challenge fees received by defendants after the plaintiffs filed their prior complaint. Both complaints seek, among other things, to recover on behalfseverely restrict global economic activity, which can disrupt supply chains, lower asset valuations, significantly increase unemployment and underemployment levels, decrease liquidity in markets for certain securities and cause significant volatility and disruption in the financial markets.
Towards the end of the Funds all allegedly excessive advisory fees received by defendants infirst quarter of 2020 the twelve month period precedingpandemic began to impact BlackRock’s business. While global markets have significantly recovered since then, the start of each lawsuit, along with purported lost investment returns on those amounts, plus interest. The defendants believe the claims in both lawsuits are without merit and intend to vigorously defend the actions. On September 25, 2017, the defendants filed a motion for summary judgment to dismiss the lawsuit.
Between November 12, 2015 and November 16, 2015, BlackRock, Inc., BlackRock Realty Advisors, Inc. (“BRA”), BlackRock US Core Property Fund, Inc. (formerly known as BlackRock Granite Property Fund, Inc.) (“Granite Fund”), and certain other Granite Fund related entities (collectively, the “BlackRock Parties”) were named as defendants in thirteen lawsuits filed in the Superior Courteffects of the State of California for the County of Alameda arising out of the June 16, 2015 collapse of a balcony at the Library Gardens apartment complexpandemic are ongoing, and such impact may continue in Berkeley, California (the “Property”). The Property is indirectly owned by the Granite Fund, which is managed by BRA. The plaintiffs also named as defendants in the lawsuits Greystar, which manages the Property,future quarters if conditions persist or worsen. Should current economic conditions persist or deteriorate, there may be an ongoing adverse effect on BlackRock’s business, including its operations and certain other non-BlackRock related entities, including the developer of the Property, building contractors and building materials suppliers. The plaintiffs allege, among other things, that the BlackRock Parties were negligent in their ownership, control and maintenance of the Property’s balcony, and seek monetary, including punitive, damages. Additionally, on March 16, 2016, three former tenants of the Library Gardens apartment unit that experienced the balcony collapse sued the BlackRock Parties. The former tenants, who witnessed (but were not physically injured in) the accident make allegations virtually identical to those in the other previously filed actions and claim that,financial condition, as a result of, the collapse, they suffered unspecified emotional damage. Several defendants also filed cross-complaints alleging a variety of claims, including claims against the BlackRock Parties for contribution, negligence, and declaratory relief. BlackRock, Inc. believes the claims against it are without merit and intendsamong other things:
• | reduced AUM, resulting in lower base fees, as well as a reduction in the value of BlackRock’s investment portfolio, including its coinvestments and seed investments in sponsored investment funds; |
• | lower alpha generation which may adversely affect future organic growth and BlackRock’s ability to generate performance fees; |
• | reduced client and prospective client demand for BlackRock products and services and/or changing client risk preferences which may adversely affect future organic growth; |
• | a decline in technology revenue growth as a result of extended sales cycles and longer implementation periods as clients work remotely; |
• | negative impact of the pandemic on BlackRock’s clients, and key vendors (such as pricing providers), market participants and other third-parties with whom it does business; |
• | the negative operational effects of an extended remote working environment, including strain on Aladdin and/or BlackRock’s other internal and external technology resources leveraged at the firm, as well as the potential for heightened operational risks, such as cybersecurity and fraud risks; |
• | the possibility that prolonged periods away from physical office locations and daily in-person interactions with colleagues may cause members of BlackRock’s workforce to become disconnected with corporate culture and policies, which may increase operational issues arising from human error and/or individual attempts to circumvent controls due to distractions, fatigue or a lack of oversight; and |
• | the disruption to BlackRock’s workforce due to illness and health concerns, potential limitations of its remote work environment (including any complications associated with hiring and onboarding new employees remotely), and government-imposed restrictions, laws and regulations. |
The aggregate extent to vigorously defend the actions. A trial on all claims is scheduled to begin on February 5, 2018.
On June 16, 2016, iShares Trust, BlackRock, Inc. and certain of its advisory affiliates,which COVID-19, and the directors and certain officers of the iShares ETFs were named as defendants in a purported class action lawsuit filed in California state court. The lawsuit was filed by investors in certain iShares ETFs (the "ETFs"), and alleges the defendants violated the federal securities laws, purportedly by failing to adequately disclose in prospectuses issued by the ETFs the risks to the ETFs’ shareholders in the event of a "flash crash." Plaintiffs seek unspecified monetary damages. The Plaintiffs’ complaint was dismissed in December 2016 and on January 6, 2017, plaintiffs filed an amended complaint. The defendants filed a motion for judgmentrelated impact on the pleadings dismissing that complaint. On September 18, 2017, the court dismissed the lawsuit.
On April 5, 2017, BlackRock, Inc., BlackRock Institutional Trust Company, N.A. (“BTC”), the BlackRock, Inc. Retirement Committee and various sub-committees, and a BlackRock employee were named as defendants in a purported class action lawsuit brought in the U.S. District Court for the Northern District of California by a former employee on behalf of all BlackRock employee 401(k) Plan (the “Plan”) participants and beneficiaries in the Plan from
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April 5, 2011, to the present. The lawsuit generally alleges that the defendants breached their duties towards Plan participants in violation of the Employee Retirement Income Security Act of 1974 by, among other things, offering investment options that were overly expensive, underperformed peer funds, focused disproportionately on active versus passive strategies, and were unduly concentrated with investment options managed by BlackRock. While the complaint does not contain any specific amount in alleged damages, it claims that the purported underperformance and hidden fees cost Plan participants more than $60 million. On October 10, 2017, the plaintiffs filed an Amended Complaint, which, among other things, adds as defendants certain current and former members of the BlackRock Retirement and Investment Committees. The Amended Complaint also includes a new purported class claim on behalf of investors in certain Collective Trust Funds (“CTFs”) managed by BTC. Specifically, the plaintiffs allege that BTC exercised fiduciary authority over its compensation for securities lending services to the CTFs. The defendants believe the claims in this lawsuit are without merit and intend to vigorously defend the action.
Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability arising out of regulatory matters or lawsuits will have a material effect onglobal economy, affect BlackRock’s business, results of operations and financial position, condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any recovery period, the shifting epicenter, and emergence of new variants, of the COVID-19 virus, the continuing prevalence of severe, unconstrained and/or cash flows. However, there is no assurance asescalating rates of infection in certain countries and regions, the availability, adoption and efficacy of treatments and vaccines, future actions taken by governmental authorities, central banks and other third parties (including new financial regulation and other regulatory reform) in response to whether any such pending or threatened matters will have a material effectthe pandemic, and the effects on BlackRock’s resultsproducts, clients, vendors and employees. Moreover, the effects of operations, financial position or cash flowsthe COVID-19 pandemic may heighten the other risks described in the section entitled “Risk Factors” in BlackRock’s most recent Annual Report on Form 10-K and any future reporting period. Due to uncertainties surroundingsubsequent reports filed with the outcome of these matters, management cannot reasonably estimate the possible loss or range of loss that may arise from these matters. Securities and Exchange Commission.
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Item 2. Unregistered Sales of EquityEquity Securities and Use of Proceeds
During the three months ended September 30, 2017,March 31, 2021, the Company made the following purchases of its common stock, which is registered pursuant to Section 12(b) of the Exchange Act.
|
| Total Number of Shares Purchased |
|
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1) |
| ||||
July 1, 2017 through July 31, 2017 |
|
| 198,234 |
| (2) |
| $ | 427.31 |
|
|
| 183,716 |
|
|
| 7,407,531 |
|
August 1, 2017 through August 31, 2017 |
|
| 439,530 |
| (2) |
| $ | 422.69 |
|
|
| 427,122 |
|
|
| 6,980,409 |
|
September 1, 2017 through September 30, 2017 |
|
| 39,343 |
| (2) |
| $ | 419.40 |
|
|
| 37,753 |
|
|
| 6,942,656 |
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Total |
|
| 677,107 |
|
|
| $ | 423.85 |
|
|
| 648,591 |
|
|
|
|
|
|
| Total Number of Shares Purchased(1) |
|
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||
January 1, 2021 through January 31, 2021 |
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| 791,217 |
|
|
| $ | 715.83 |
|
|
| 411,691 |
|
|
| 4,630,277 |
|
February 1, 2021 through February 28, 2021 |
|
| 675 |
|
|
| $ | 701.26 |
|
|
| — |
|
|
| 4,630,277 |
|
March 1, 2021 through March 31, 2021 |
|
| 1,552 |
|
|
| $ | 694.48 |
|
|
| — |
|
|
| 4,630,277 |
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Total |
|
| 793,444 |
|
|
| $ | 715.77 |
|
|
| 411,691 |
|
|
|
|
|
_______________________
(1) |
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Item 6. Exhibits
Exhibit No. |
| Description |
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31.1 |
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31.2 |
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32.1 |
| Section 906 Certification of Chief Executive Officer and Chief Financial Officer |
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101.INS |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation |
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| Cover Page Interactive Data File (formatted as Inline XBRL |
_______________________
(1) | ||
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| |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| BLACKROCK, INC. | |
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| (Registrant) | |
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| By: | /s/ Gary S. Shedlin |
Date: |
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| Gary S. Shedlin |
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|
| Senior Managing Director & Chief Financial Officer |
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