By Sohini Podder and Lewis Krauskopf
(Reuters) -BlackRock Inc's fourth-quarter profit beat analyst estimates on Friday, as the world's largest money manager's fee income rose and assets under management topped $10 trillion, but shares dipped as revenue slightly missed Wall Street estimates.
A strong finish to the year by global financial markets helped boost the performance of asset managers in general, with BlackRock (NYSE:BLK) also benefiting from its large scale and wide reach.
Assets under management stood at $10.01 trillion at the end of the quarter, up from $8.68 trillion a year earlier.
“It’s an impressive milestone and it just illustrates their dominance in the fastest growing areas within the industry,” said Kyle Sanders, analyst at Edward Jones. “They continue to gather assets at a remarkable clip.”
Net inflows for the quarter were at $212 billion, of which long-term net flows accounted for $169 billion, up from $116 billion a year earlier.
"Our business is more diversified than ever before – active strategies, including alternatives, contributed over 60% of 2021 organic base fee growth," Chief Executive Officer Larry Fink said in a statement.
BlackRock's revenue from investment advisory, securities lending and administration fees, its biggest segment, rose to $3.9 billion in the fourth quarter, helped by global dealmaking volumes rising to a record high in 2021, crossing $5 trillion for the first time.
Adjusted profit rose 2.5% to $1.61 billion, or $10.42 per share, in the quarter ended Dec. 31, from $1.57 billion, or $10.18 per share, a year earlier.
Analysts on average were expecting the company to report a profit of $10.16 per share, according to IBES data from Refinitiv.
Revenue rose nearly 14% to $5.11 billion, slightly below the consensus analyst estimate of $5.17 billion.
BlackRock shares were down 1.7% to $852.66 in morning trading. Markets have had a rocky start to the year as investors digest the expected move by the Federal Reserve to start raising interest rates to rein in rising inflation.
"2022 is going to be a transitional year for the entire asset management space,” said Cathy Seifert, an analyst at CFRA. "Investors need to take a little pause and examine what is sustainable and what is not."
BlackRock said it was targeting "record" investment in its business in 2022, including an expected increase in headcount by as much as 10%.
"Looking forward, they are going into investment mode again," Sanders at Edward Jones said. "They are going to spend a lot, and that is probably going to make it tough for them to really have meaningful profit margin and EPS growth in 2022.”
BlackRock shares rose nearly 27% last year compared with a 32% gain for the S&P 1500 asset manager and custody banks index.