Skip to Content
Stock Analyst Update

Positive Flows Offset Market Losses in BlackRock's Q3

We are leaving our fair value estimate in place.


There was little in wide-moat BlackRock's (BLK) third-quarter results that would alter our long-term view of the firm. We are leaving our $880 fair value estimate in place. BlackRock closed the September quarter with $9.464 trillion in managed assets, down 0.3% sequentially but up 21.2% year over year, with positive flows and market gains driving most of the improvement over the past year. While annualized organic growth in assets under management of 4.5% during the third quarter was in line with our long-term annual target range of 3%-5%, total quarterly inflows of $98.0 billion were about $20 billion lower than our expectations; we had assumed that third-quarter flows would pick up even more following a weaker June quarter for organic growth. Still, flows for the September quarter were well above the $75.1 billion quarterly run rate of the previous eight quarters.

While average AUM increased 24.8% year over year during the third quarter, BlackRock recorded a 22.3% increase in base fee revenue growth as product mix shift and money market fee waivers led to a 2.0% decline in the overall realization rate compared with the prior-year period. Total revenue was up 15.6% year over year as lower performance fee income was not completely offset by higher distribution, technology, and risk management fees. Top-line growth of 21.7% through the first nine months of 2021 was in line with our forecast 18%-22% range for the full year. BlackRock posted an 80-basis-point increase in year-to-date adjusted operating margin to 45.1%, leaving it slightly above our projected range of 44%-45% for the full year. Unlike for most of the other traditional U.S.-based asset managers we cover, we project an improvement in BlackRock's operating profitability over the next five years, with adjusted operating margin expected to come in at 45%-47% on average, compared with 44.2% during 2016-20.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.