BlackRock chief executive Larry Fink is optimistic for active equity flows in 2018 despite seeing $18.5 billion leave these funds last year.
The outflows from active equity funds were a rare minus line in the company’s stellar 2017 results, which saw record overall inflows and assets under management hit an all-time high of $6.2 trillion, cementing the firm’s position as the world’s largest asset manager.
Record inflows, $367 billion for the year including over $100 billion in the last quarter, were driven by the firm’s iShares ETF business, which saw inflows of $245.3 billion for the year, up from $140 billion in 2016.
Investor preference for index-driven ETFs has been a huge boon for the firm but has hurt active equity funds across the whole industry and BlackRock is no exception.
The $18.5 billion of outflows it saw for that business in 2017 were an improvement on the $20.2 billion it suffered in 2016 and Fink believes the firm’s recent restructure of some active equity funds, combined with client allocation calls in 2018, will result in inflows this year.
‘We did have $1 billion of outflows [in active equity the fourth quarter] which were forecasted when we did the restructuring… but we will have positive flows in active fundamental and systematic equity in 2018,’ Fink said.
In March 2017, the firm announced an overhaul of some its active equity funds, moving away from traditional stock picking towards a quantitative approach.
As part of the revamp, the firm launched the BlackRock Advantage fund series, which is made up of converted equity products and new offerings that focus on data and factor analysis.
‘I think you will see a lot of focus from the institutions to potentially replace some of their alternatives with equities and to take some of their cash positions and put them into equities,’ BlackRock president Robert Kapito said. ‘We are very optimistic on that and we will be included.’
BlackRock’s active funds as a whole took in $24.4 billion for the year compared to $774 million in outflows throughout 2016.
The positive numbers were largely driven by inflows of $21.5 billion in active fixed income and $20.7 billion in active multi-asset funds.
Flows poured into the firms ETF business iShares which saw inflows of $245.3 billion for the year, up from $140 billion in 2016.
Equity ETFs took in $174.43 billion for the year, while fixed income ETFs took in $67.4 billion and alternative ETFs had $3.2 billion of inflows compared to 2016 when they took in $74.9 billion, $59.9 billion and $5.3 billion, respectively.
Fink said the firm’s focus on providing model solutions, filled with iShares ETFs, would further boost this business in 2018.
‘We’re bringing in more flows working with more of the distribution platforms on providing model-based products and customizing it and in those cases much of the product flow in those model-based products would be flowing into our iShares products,’ Fink said.
A combination of strong flows from iShares and the firm’s traditional active business helped propel total flows for the fourth quarter of 2017 to $103 billion and to $367.25 billion for the year, the strongest in the fund giant’s history, compared to $98 billion and $202.2 billion in 2016, respectively.
BlackRock’s assets under management now sit at $6.29 trillion compared to the end of 2016 when they were $5.15 trillion.
For the fourth quarter, active funds took in $12.96 billion, again largely driven by fixed income, which saw net inflows of $10.63 billion and multi-assets which pulled in $4.9 billion.
Its active equity business suffered $1.03 billion of net outflows in the fourth quarter compared to $4.5 billion of outflows in the fourth quarter of 2016.
ETF business iShares took in $54.8 billion of net inflows for the quarter, up from $49.3 billion during the fourth quarter of 2016.
Equity ETFs took in $44.9 billion, fixed income $8.7 billion and alternative $1 billion in net inflows for the quarter compared to the same period in 2016 when it they took in $50.7 billion, and had outflows of $326 million and $1.7 billion, respectively.