Oct 14 (Reuters) - BlackRock surpassed Wall Street profit expectations and attracted $205 billion in total inflows in the third quarter, sending the world's largest asset manager's shares up 5% in premarket trading on Wednesday.
The benchmark S&P 500 extended its steady climb in the quarter to hover near its all-time highs on a rally in AI-focused stocks, encouraging investors to pour money into asset management firms such as BlackRock.
"Market fundamentals are strong and well supported, with higher
margins and earnings momentum catalyzed by new technology," CEO Larry Fink said in a statement.
BlackRock's assets under management — which determine a large chunk of the earnings — rose to $15.49 trillion, from $13.46 trillion a year earlier and $15.34 trillion in the second quarter.
The growth was driven by a combination of $134.5 billion of new flows into BlackRock's flagship iShares ETFs, and the rising valuations of its investments in a robust equity market.
The company posted an adjusted profit of $15.93 per share, beating Wall Street expectations of $14.13, according to data compiled by LSEG.
The robust results will help alleviate pressure on BlackRock's shares, which have underperformed the broader market this year over fears of a slowdown in activity from cautious investor sentiment.
Even as markets have remained sturdy, the combination of surging bond yields and the expectation that the Federal Reserve's recent interest rate hike marks the beginning of a tightening cycle has called into question whether the rally can be sustained.
Higher yields over a sustained period can put pressure on markets as investors rotate capital into safe-haven assets, locking in better risk-adjusted returns.
Net flows into BlackRock's debt products were $78.2 billion in the quarter, signaling strong investor appetite despite the recent steep selloff in Treasuries.
REDEMPTIONS EASE IN PRIVATE CREDIT
BlackRock has accelerated its push into private credit markets in recent years. The asset class typically generates higher fees than the firm's main source of profits, its suite of ETFs, which depends on high volumes of inflows to boost earnings.
The company has spelled out plans to deliver more than $35 billion in revenue by the end of the decade, with over 30% of that coming from private markets and technology.
The private credit industry has come under scrutiny from investors concerned about lenders' exposure to software companies seen as particularly vulnerable to disruption from AI, as well as the opacity of valuations.
Those concerns prompted a surge in redemption requests from investors in recent quarters. That pressure, however, seems to be easing, with most large managers of private credit funds reporting slowing redemption requests in the third quarter.
BlackRock's HPS Corporate Lending Fund saw redemption requests fall to roughly 11.5% of shares in the latest quarter, from 13.3% in the second quarter.
While BlackRock does not break out its revenue from private markets, net flows in this category were $15.31 billion in the quarter.
(Reporting by Utkarsh Shetti in Bengaluru and Suzanne McGee in Providence; Editing by Sriraj Kalluvila)
