BlackRock, Inc.

Q4 2021 Earnings Conference Call

1/14/2022

spk_0: good morning my name is jerome and i will be or conference facilitator today at this time i would like to welcome everyone to the block block incorporated fourth quarter two thousand and twenty one earnings study conference oh host for today's call will be chairman and chief executive officer laura
spk_1: and be frank
spk_0: chief financial officer gary as said lynn president robert as capito and general counsel christopher j meet online for been placed on me to forbid any background noise after the speakers remarks verbal be question and answer period if you would like to ask a question during this time simply press for that the number one on the earth telephone key keypad if you would like that we draw your question press the pound key thank you mister meet you may begin your conference
spk_2: good morning everyone i'm chris meet the general counsel blackrock before we begin i'd like to remind you that during the course of this call me may make the number of forward looking statements we call your attention to the fact that blackrock actual results the of course differ from the statements
spk_3: i you know
spk_2: which was some of the factors that may cause result the blackrock to differ materially from what we see today by focusing no duty not undertake update to before looking statements so without i'll turn over to gary thanks chris good morning and happy new year to everyone i hope everyone and their families are remaining safe and healthy it's my pleasure to present results for the fourth quarter and full year twenty twenty one before i turn it over to lario reviewer financial performance a business results while our earnings release discloses both yeah job and as adjusted finance results
spk_4: as always i will be focusing primarily on or as adjusted results
spk_2: throughout block rocks history we have consistently and systematically invested in our business with a long term focus and commitment to serve clients employees shareholders and the communities in which we operate as result of these long term investments and twenty twenty one we are we grew organically at our fastest rate ever and continued to expand organic growth premium versus the industry even as our assets under management reach new heights we have continually adapted to develop industry leading franchises and each yes private markets technology or active investment platform and more recently in e s and in china
spk_4: these investments or reflect a singular focus on helping clients construct resilient he portfolios and they are driving the record levels of growth we're seeing today
spk_2: rock generated net inflows of five hundred forty billion and twenty twenty one representing six percent organic a growth and eleven percent organic base be grow each of our strategic priority areas drove significant growth during the year
spk_4: importantly despite fourth quarter volatility we finish the year with strong momentum generating two hundred twelve billion dollars of total net inflows reflecting annualized organic be the growth of nine percent continued strong flows more entire active franchise along with record i shows was which benefited from typical yeah
spk_2: your and rebalancing and tax management contributed to the fourth quarter is robust organic growth we continue to build out or platform and twenty twenty one as the strength and stability of are operating model allowed us to aggressively reinvest in our business deliver record financial results and return approximately three point seven billion dollars of capital to shareholders
spk_4: for your revenue of nineteen point four billion dollars was up twenty percent operating income of seven point five billion dollars rosa nineteen percent and earnings per share of thirty nine dollars eighteen cents was up sixteen percent versus twenty twenty for the fourth quarter black generate revenue five point one billion and operating income i'm a two point one billion dollars of fourteen percent and eleven percent respectively from a year ago quarterly earnings per share of ten dollars forty two cents was up two percent versus a year ago reflecting a higher effective tax rate and lower non operating income and the current quarter not operating results for the quarter include eighty six million dollars net investment income driven primarily by mark to market gains in our private equity toll investment portfolio or as to just tax rate for the fourth quarter was approximately twenty five percent driven in part by discreet items we currently estimated twenty four percent as a reasonable projected tax rate
spk_2: for twenty twenty two though the actual effective tax rate may differ because of nonrecurring a discrete items are potential changes in tax legislation fourth quarter base been securities lending revenue of four billion dollars was up seventeen percent euro we're primarily driven by eleven percent organic base v growth and the positive impact of market beta on average am partially offset by higher discretionary money market fee waivers versus a year ago and strategic pricing investments over the last year sequentially fourth quarter base v and securities lending revenue was approximately one percent or fourth quarter analyzed fact effective see rate decreased by to temps the basis points from the third quarter as the continued positive impact of strong organic base v growth was more than offset by the negative impact and of divergent equity beta which
spk_4: accelerated into quarter and and lower securities lending revenue in the current quarter we incurred cost me one hundred and thirty five million dollars of gross discretionary you'll sport waivers in the fourth quarter essentially the same as the third we're bringing total was to approximately five hundred million dollars for the four year given the current prospects for higher rates in the near term we now anticipate most of these
spk_2: yea was would cease shortly after the first twenty five bases point increase in the fed funds rate resulting in a one half basis point increase to analyze the fact a few a recall that approximately fifty percent of these gross be waivers are generally shared with distributors reducing the impact on operating income
spk_4: for the year we generated record performance views of one point one billion dollars which were increasingly diversified compared to a year ago and reflected strong alpha generation across our platform notably since a year ago performance fees from liquid alternatives have increased more than one hundred and fifty percent and are unrecognized to for cherry balance has more than double to over one point four billion dollars as our private markets platform continues to scale poorly technology services revenue was up eleven percent year over year and for your revenue of one point three billion dollars increase twelve percent annual contract or a cv increase thirteen percent year over year and we remain confident in our ability to continue delivering low to mid teens a the growth as the man for land and and club aceh solution is stronger than ever
spk_2: we are heavily investing heavily investing to skill and for next layer of growth and were to extend our capabilities in high demand areas such as the whole portfolio private markets wealth and sustainability full expanse increased twenty percent twenty twenty one driven primarily by higher compensation dna and direct and expense for the full year compensation expense increased twenty percent reflecting higher base salaries and higher and sent the compensation driven by growth and operating income and higher deferred compensation expense recall that you're over your comparisons of fourth quarter compensation expense or less relevant because we determine final four your compensation in the fourth quarter
spk_4: fourth quarter dna expense increase fifteen percent year over year reflecting higher marking a promotional expense which included higher team the expense higher occupancy expense parma harshly driven by higher carbon testing costs and higher portfolio services and technology expense for the full year excluding across me three hundred fifty million dollars of noncore gina expense which included two hundred seventy four million of aggregate fun launch costs corgi an expense was up to fifteen percent compared to twenty one recall the we exclude the impact of fun launch costs when recording or as adjusted operating margin the you are we are increasing gorgie in a was largely attributable to technology data and portfolio services expense all of which dry revenue growth and creek technology and deadspin was driven by our latin cloud migration marketed investments to support our index and he has two franchises and broader tax band to support productivity and
spk_2: crudeness approximately two thirds of the increase in our twenty twenty one portfolio services expense related to sub advisory costs associated with significant oh see i went and are offset by associated base peace twenty twenty one direct fund expense increased twenty four percent year over year primarily reflecting higher average index a when sequentially quarterly direct find expense declined despite higher average index am you to hire rebates that seasonally occur in the fourth quarter finally for your intangible amortization expense increase forty one million dollars euros a year due to our puerile opposition which close in february twenty twenty one or for your as adjusted operating margin of forty five point two percent was up thirty basis points vs twenty two one our business has never been position to take advantage of the opportunities before us and remain deeply committed to investing responsibly and aggressively to market cycles so we can continue to generate differentiate organic growth over the
spk_5: long term
spk_2: consistent with this growth ambition we are once again targeting record investment in people strategic priorities and platform infrastructure during twenty twenty two at present we would expect had shown to increase by as much as ten percent with a continued focus on optimizing our talent pyramid for more junior roles and growing our footprint and i i had innovation centers we would also expect corgi and a to increase by fifteen to twenty percent as we continue to invest in technology to scale or operations and support future growth including completing a lands cloud migration delivering you aladdin capabilities and continuing to open the platform to promote client innovation we are also investing to prudent use to were balance sheet the best position blackrock for continued success during twenty twenty one we allocated one point five billion dollars of new season for investment capital to support our growth and are your and portfolio now approximates three point seven billion dollars or strategic minority investments or reinforcing various elements of ah our strategy and simultaneously generating very attractive returns for our shoulders and we continue to invest in organically when we see opportunities to accelerate are organic growth and key strategic growth areas as we did to our acquisitions of the physical climate and transition risk models of rhodium and brenda which be critical to building best in class
spk_4: she capabilities within a lot we also remain committed to systematically returning access cast to shareholders or a combination of dividends and share repurchases and returned in aggregate of three point seven billion dollars to shareholders and twenty twenty one since inception of our current capital management strategy and two thousand and thirteen we've now we purchased over eleven billion dollars of black rock start with do singer outstanding outstanding total shares by eleven percent and generating and on lever compound annual return of twenty percent for our shareholders at present based on capital spending plans for the year and subject to market conditions including the relative valuation of our stock price we are targeting the repurchase of one point five billion dollars of shares
spk_2: during twenty twenty two and edition or board of directors has declared a quarterly cast of and of four dollars eighty eight cents per share representing an increase of eighteen percent over the current level
spk_4: finally an early december we completed a debt issuance to take advantage of current low interest rates and pre refinance or seven hundred fifty million three and three eighth notes to june twenty twenty two we successfully raise one billion dollars of new tenure notes with a two point one percent coupon the second lowest us dollar coupon and blackouts
spk_6: at stack
spk_4: as you will hear more from larry blackrock strategy has always been guided by our clients needs we relentlessly focus on helping the meet their financial objectives and are deeper and broader relationships with more clients are driving growth across our entire platform
spk_2: fourth quarter total net inflows a two hundred twelve billion dollars representing nine percent annualized organic am and peacekeeper were led by closing to eat us and our top performing active franchise record for your net inflows of five hundred forty billion dollars were positive across our client tights and desmond styles and region
spk_4: and reflected records for both each as an act of strategies each yes generated three hundred six billion dollars in net inflows and twenty twenty one representing eleven percent organic acid growth and nine percent organic base rose record fourth quarter each year flows of one hundred four billion dollars reflected some seasonality but also reflected the diversity of our product and line segments and accelerating secular she ships are crying in the market we saw continued strength and poor but our strategic products segments particularly sustainable and fixed income were the largest contributors to our fourth quarter flows sustainable each am of one hundred fifty million billion dollars nearly doubled during the year and are seven hundred fifty billion dollar fixed income each year class
spk_2: form grew organically by double digits even and one the most challenging macro environments for fixed income and several years clients also continue to use or broad based precision exposures to express western sentiment during the year
spk_4: blackrock generate for your retail known for the one hundred and two billion dollars representing twelve percent organic acid growth and fourteen percent organic based t grow significantly outperforming the broader mutual fund industry retail stores were part of them both to us and internationally reflecting broad strength to cross are active platform fourth quarter retail net inflows of twenty two billion dollars reflected similar trends but also included the seasonal impact of capital gains and given reinvestment
spk_2: we remain well positioned to meet investor needs for risk adjusted out the any old and are diversified fixed income platform with top performing strategies across total return unconstrained high yield and credit or first choice to investors and any rate environment
spk_4: institutional index net outflows of one hundred and eighteen billion dollars and twenty twenty one reflected equity net outflows including the previously disclosed fifty eight billion dollar loan the institutional redemption second quarter partially offset by fixed income net inflows as many large clients rebalance portfolios after significant equity market games
spk_2: or tactically shifted assets to fix them from in cash
spk_4: rapace institutional active franchise generated a record one hundred sixty nine billion dollars in net inflows and twenty twenty one reflecting broad based strength across all products allegories and the funding of several significant policy i owe mandates we're seeing strong momentum and r o c i a business evidenced by another significant corporate income funding in the fourth quarter we also saw continued growth in our life path targeted franchise and remain committed to helping investors around the world plan and then best for retirement in the aggregate strong growth across act of strategies to seven percent organic v bought for institutional channel and twenty twenty one
spk_2: across retail and institutional pie and types blackrock generated a record forty nine billion dollars of act of equity net inflows for the full year led by top performing franchises and technology health sciences and us growth equities as well as quantitative strategies
spk_4: we remain well positioned for future bros interactive platform with over seventy five percent of our fundamental lack of equity systematic act of equity and taxable fixed income assets performing above their respective benchmarks are pure medians for the trailing five year period overall demand for alternatives also continued with twenty seven billion dollars in net inflows to lick illiquid and liquid alternative strategies during the year driven by credit infrastructure and are multi strap and global event driven hedge funds total alternatives fundraising not to record and twenty twenty one and we have approximately thirty six billion dollars of committee capital to deploy for institutional clients and a variety of strategies representing over two hundred thirty million dollars of future annual base fees and significant potential performances finally blackrock cash management platform generate forty four billion of net inflows in the fourth quarter and ninety four billion of net inflows and twenty twenty one as we continue to grow market and a persistent low rate environment by leveraging are scale product breast technology and risk management on behalf of parts
spk_2: it has been another strong your for blackrock or global scale and diverse platform allow us to continue investing for the future weather and good markets are more challenging months and are differentiated business model remains incredibly well positioned to sustain industry leading organic growth and deliver long term growth long term shareholder value or commitment remains to optimize or yeah
spk_4: growth and the most efficient way possible and we will do so responsibly to meet the needs of all stakeholders with that potter and orbital there
spk_7: thank you very good morning everyone and thank you for joining the call i hope you all have have had a healthy and happy holiday season that all of you are staying say drop black box history the of relentlessly focus on helping our clients meet their investment goals and solve the most complex challenges with continually invested and reinvested in our business to be and anticipate our clients evolving and changing needs and to deliver the most comprehensive global investment in technology platform twenty twenty one results truly demonstrated a benefits of those investments blackrock deliver this strongest organic growth in our history even as her assets under management reached new highs regenerated five hundred and forty billion dollars in net inflows and twenty twenty one representing a record eleven for said organic a fee growth we also ended the year with strong momentum with two hundred and twelve billion dollars and a fourth quarter net inflows reflecting er seventh consecutive quarter of organic dc growth a bug or five percent target and we have steadily expand our organic growth premium relic to the industry relative to our competitors as their clients continue to interest as with more of their portfolios importantly our growth is more diversified that has ever been and twenty twenty one are active platform including alternatives contributed to hundred and sixty seven billion dollars in inflows record representing nearly half of our total net inflows he just were made a significant drop broke driver with record flows of three hundred and six billion edit our technology services revenue grew by twelve percent reaching one point three billion this wrong momentum across or entire business grow record financial results for the year blackrock deliver twenty percent revenue growth nineteen percent operating income growth sixteen percent dps grow edit the same time we expanded our margins two years into the pandemic we continue to confront new virus strains good friday divergent restriction approaches a country by country and even an uneven economy worldwide meanwhile inflation has reached the forty your high as we see several structural changes take hold consumer demand has shifted from services the household good as people are spending more time at home and benefiting from higher levels of savings labour shortages are causing supply chain bottlenecks as people have more choice in the gig economy the quit rate in the united states has never been higher reflecting the confidence of employees and we will need to recognize that the energy transition is inherently inflationary given the significant cost differential between clean and traditional technology today and that is why we're so optimistic about in that the and greed acknowledging the move the energy transition forward blackrock is always focused on a bobbing and staying ahead of arclight need as he navigate change and they are coming to blackrock more than ever before they value block rocked insights they value the breath of are solutions they certainly value our global footprint as a result block parties building deeper partnership with more clients across the across their whole portfolio throughout the world we strong conviction and our ability to continue generating differentiated organic growth over the long term because we've got a platform to help our clients and they could use sherry to meet their objectives in all market environments and we continue to invest the heads of their involving need and are swiftly and aggressively trying to embrace new market opportunities our long term strategy remains to be remade to keep alpha and performance at the heart of black rock to accelerate growth and i shares to build out or illiquid alternatives to continue to differentiate our technology to deliver a whole portfolio solution and become the global leader
spk_8: and sustainable investing
spk_7: blackrock of the two point six trillion dollar active manager and or multiyear investment in incorporating data science sustainability and new tools for portfolio construction is rotting resulting in stronger globe than at any time in our corporate history we generated a record two hundred sixty seven billion dollars the net inflows from active strategies and twenty twenty one including a second consecutive year of record active equity in close active strategies contributor over sixty percent of our annual or get a b c and our growth is significantly outpacing that of our peers and the broader industry as we take market share in this frank bedded landscape blackrock active mutual fund captured the number one sheer of industry flows and twenty twenty one and organic growth rate is tripled that of the industry as gary disgust or investment performance remain strong with eighty eight percent retractable sexism and seventy eight of were fundamental active equity funds above benchmark appear medium for a five year period and the us nearly eighty percent of were active mutual funds are rated either morning store for a morty sharp five position as well for future growth clients are increasingly there are increasing your allocation to alternative strategies that the search for diversification and higher returns blackrock has got a broad platform across infrastructure private credit real estate and private equity the meet that demand we raised a record forty two billion dollars inclined capital and twenty twenty one and our carpet in our ability to accelerate our growth as the leader in private markets if a structure for example has significant secular scale wins driving growth and will be an import engine of fiscal stimulus for economies looking to build for their future blackrock is incredibly well positioned the capture opportunity this area we are one of the largest infrastructure managers in in the industry with over thirty five billion dollars and client assets including one of the largest renewable power platform we have grown our platform war phone in the last five years and look forward to partnering with more clients as we raise new pages and our flagship funds and lodge new innovative strategies in this as that as it class i hear is also had a record year as the global eg of industry cross one trillion dollars in annual closed for the first time growth was driven by greater adoption globally from acid owners as little as managers wealth better jews and more recently from many of the approximately forty million first time investors who opened self directed investment accounts over the last two years blackrock and i sure the t s generated a record three hundred and six billion abedin flows and twenty twenty one he saw straight across each of our product categories including over a hundred billion dollars in net inflows into our core eg apps for the first time and nearly eighty billion dollars that are fixed they can be yet and more than fifty billion dollars into each of our sustainable and precision eg of categories we saw strong client demand for fixing a bts despite a challenging macro environment perfect snake a more broadly our growth benefited from the diversity of our product range across inflation lake pods municipal bonds sustainability and emerging market exposures and the diversity of our client base many of whom are increasingly using each years apart other actors portfolio construction worldwide egypt are increasingly becoming a vehicle of choice for accessing a broad range of investment exposures both at a passive way added an act the way and as barrier three eg f adoption come down it is enabling a new generation of investors access markets and more and more of them are lucky to eat yes as a default investment vehicle for those wanting to create more customize indexes are allotted technology has long provided this capability to institutions and through our recent appear you acquisition we cannot provide custom index capabilities to us wealth advisers following a breakout in twenty twenty momentum and sustainable investments continued and we generated a record one hundred and four billion of that enclosed in twenty twenty one as clyde the man for sustainable strategies accelerated we don't manage five hundred and nine billion dollars and sustainable a you m more than doubled from a year ago and remained committed to innovating and expanding choice for our clients what are the biggest opportunities of this generation will be happy are quite navigate the global transition to net zero economy we have already seen four trillion of capital move from traditional investment the sustainability was in the last two years alone at this is just the beginning the transition will not happen overnight and it will require significant invested in technology black is working with companies across a wide range of carbon intensive sectors that are prick proactively transforming their businesses and who the innovation will be critical to the world the carbonization agenda we believe these companies will present an important investment opportunity for investors black rock is intently focused on helping our clients participate in these opportunities and understand the impact of the transition on their portfolios to better data and analytics or vision is to move more capital into true vision than anyone else or multi decade investment into a lot of technology platform continues to differentiate blackrock lot of the as an asset manager at a leading syntax provider we generated one point three billion dollars in annual technology revenues of twelve percent year over year we remain focus on continually evolving allotted for the next decade and beyond we are innovating and extending our capabilities and areas of high client the man including whole portfolios well and sustainability the combination of aladdin an apron for example which allows it client to bring together their whole portfolio in one place and customize it still has already been embraced by over two dozen quiet and the pipeline is the strongest is ever been and growing the brother of black box investment strategies or technology capabilities or one black box culture are truly what differentiates as a providing whole portfolio whole portfolio solutions to our clients my conversations with clients around the world i'm hearing about the challenges they're facing their desire to consolidate the number partner is that the work with very critically choosing blackrock as a partner of choice for those large strategic complex relationships this is resonating especially in our work with insurance clients are strong fourth quarter inflows included a previously announced forty nine billion dollars of act active fix take a mandate from a large strategic insurance quiet our wall at black rock is the leverage are insured expertise and diversified global platform across as management technology sustainability advisory solution to deliver fully and completely to our clients we see significant opportunity to work more closely with are you sure and broader oh see i applied and twenty twenty two and beyond our ability to address client challenges enables us to fulfill our purpose and dr long term performance at benefits other stakeholders
spk_9: over the last five years
spk_7: clients have entrusted as with one point eight trillion dollars of net new assets that are organic growth for the last five years we caught ten trillion dollars and are you ever the fourth quarter as with every milestone we reached over the decade we are incredibly humbled why our clients support and they're incredible trust they are placed on us all of a headlock rock she'll and take this deep responsibility and managing every dollar clients awarded us whether it is that individual investor using whatever it yes in their first port holy or investment account or a very large pension fund interesting us with her whole portfolio it is truly an honor that we recognize every moment and every day black watched consistent results are possible because we're dedicated and boys i often talk about the importance of putting a company's purpose at the foundation of a relationship with all stakeholders our purposes resonating with employs more than ever blackrock employee base has remained stable over last two years missed a turbulent environment and i'm extremely proud of how passionate are eighteen thousand a boy are you helping more and more people experience financial well being i to take this moment the thank each and every one of our employees and every one of them individually for their continued partnership resilience and hard work and dedication through another difficult year everything black rock does is rooted in our culture of focusing on the long term
spk_9: and we will continue to innovate
spk_7: we will continue to be using or scale and contributing to a more equitable a more resilient future to benefit more clients to benefit or employees at the benefit our shareholders and the people and communities worldwide where we operate i firmly believe that the efforts of twenty twenty one will positioned blackrock to deliver value over the long run for all our stakeholders
spk_10: with that
spk_7: let me open it up for questions
spk_0: at this time i would like to remind everyone in order to ask questions please press are selling number one on your tower sounds pad if you do ask questions please take your phone off of it speakers setting and user hansard the avoid any potential he bought please limit yourself to one quo him if you have a follow up police we entered a key for password just a moment to compile the kimi roster their first question comes from the line of alex los de with goldman sachs in lines open
spk_7: i asked happy new year hey good morning everybody happy new year deal as well i'm so maybe we'll get started with the question around the odds of the active dynamics are or black or to twenty twenty one arm clearly great year record your doctor flows across the board bomb agreed subsequent cetera of how sustainable eating to straddle the against the twenty two two and that i was hoping you could expand on how faster a recent nature's rates could also you back asset allocation decisions over the next twelve to eighteen months church excuse me up getting over cold from my grandchild enemy ah our results in are active investment strategies it is is it is really one of the court transformation the blackrock over many years of work the history of black rock was an act of fix the the manager our acquisition of bg i
spk_11: whither fantastic quantitative approach to six they come and of equity
spk_7: popular active strategies our development in our in our illiquid space what are we built out that platform our recommitment and fortify are fundamental equity teams or the last five years which led to great performance in addition over the last five years alex the a and you're aware of this are build out of art distribution team or build out in the are i a channel having a hundred and two billion dollars of inflows flows from retail globally a large portion of that was hacked clubs so it's not just building at our our our best been teams and for to find them but it was building at also or distribution side of our businesses to this all built our lead to a well positioned as active strategies continue to go to be of choice with more and more investors wide web and and let's be clear many of our up close and each yes we're at from act of strategies to so across the board the two hundred sixty seven billion dollars and close rep the from great performance well positioned and i think that will continue to be built and twenty twenty two i would say the other major thing is and i talked about is quite a bit in my prepared remarks was our whole portfolio approach we believe more more organizations are going to be lucky to outsource large components of their of their balance sheets whether it's an insurance company a pension fund an endowment and looking for an organization that can position that quite well and because of our business model of having both active and index product across having the technology to interface with our clients up whereas what we are probably the best position organization the world to to meet those type of opportunities and so if anything i think that moment of in active is going to accelerate going forward especially in the oh see i already read area ah and whole portfolios visiting to be driving more and more work success others what we saw flows and in a in sustainability that continues to be a draw given our success in ill liquids as has really been a cornerstone of our twenty twenty one result so i'm i'm extremely optimistic ah on on are positioning for twenty two and be odd in terms of rising rates it really depends on how rising rates are are are are gonna be resulting in are we going to see a flattening yield curve with rising rates are we going to see it's deepening yield curve i tend to believe we're going to have more of a plattner on you know that it's central banks raised rates eight to ten times which
spk_2: ford curve suggest you know we could have a two and a quarter two and a half year old city short term right the real question is what does that mean for the tenure rate of those questions and how that plays out of the be very important that the biggest opportunity that we have is how black boxes his position in the opportunities way
spk_4: yeah i really do believe whether we app rising rate of flattening yield curve a steep an eel curb we will be part of the conversation look all or investors worldwide yet larry maybe i can just jump in on the rates just one thing for alex i think obviously the dynamic between rates going up and or level of am i think is is well known but i would just fall at a couple things one is we are two point eight trillion is primarily institutional for sure and obviously those are very sticky assets that are both strategic it matched up reliability so would you know we think we have very sticky assets to his were obviously very well positioned in terms of our broad fixed income platform so whether it's unconstrained high yield total the short duration i think we got that we're ready for a rotation and more importantly i think really is if rates go up a bunch of cash is likely to come off or the sidelines and so that all that will enable us to bed we move their cash into other asset classes and as i mentioned in my remarks very importantly we wait five hundred million dollars of fees last year
spk_12: in our cash business that first twenty five basis points move by the fed and it's as many people think that could come as early as the first quarter we think that will free up almost all of those waivers
spk_7: that will have about a half of basis point increase on our are analyzed effective v re and obviously we talked about while we share a roughly half of that with our distributors that will drop a significant amount of incremental profitability to the bottom line
spk_13: her next question comes from the line of crane and c and powder red bank of america online self and
spk_14: i greg happy new year
spk_7: hague more and larry rob gary of the doing well armed forces want to congratulate you on been the first asset manager to reach ten trillion was just a number
spk_13: click you know
spk_7: so my questions on each yep business we saw that the new york state insurance regulator just published an update on the capital treatment a fixed income each yeah
spk_15: i'm as bond with said evacuees i know there's been a focus for a while but she think this could open the door to larger each yep allocation from your insurance company points are good to rob as a great question the greg as to to catch everybody up towards the end of twenty twenty one if you saw the new york department of financial services published a rule which permits insurance firms to treat diversified liquid bond dps like bonds for the purpose of risk face capital and this puts bondi t apps on a level playing field with bombs and and and
spk_4: jurors portfolio so so far we are really excited by the initial claim feedback and interest to eat yes because of this rule we are very optimistic as how this could lead to future growth and this is just another sign of an unlocked come as atheists are gaining increased understanding and you know in the past we've said that
spk_15: we expect by twenty twenty five that eighty apps are going to reach fifteen trillion from ten trillion today
spk_12: we still believe that and even at that level atheists would still be a small part of the capital markets which is why we think there are decades of gross ahead and so we're we're very excited about the fact that ensures now will use more a t s to rappers
spk_13: sent their bond portfolio by the a good question good insight bail
spk_16: next question comes from the line as michael cypress from morgan stanley and line cells
spk_7: eight morning everyone happy new year thanks for taking the question are just wanted to ask on a ladder which is hobby you could update us on your arm number of are a lot initiatives since you guys have a lot going on there from migrating to microsoft is your to the snowflake partnership aladdin climate he could expand upon the progress on those different initiatives where they stand some of them earlier stage and others you know what's what's been built out what's left and that sort of really feedback from clients maybe could talk them had how you see are mocking of revenue growth ahead what are you a pin number her check on the scale of aladdin and alive in aladdin climate and i'll have gary comment on the progress with is your and and snowflake and they said my prepared remarks klein demand for aladdin has accelerated especially with more and more were both working having a comprehensive platform a whole portfolio solution platform is it is really highlights the them the opportunities in the strength of aladdin and more and more investment firms acid owners and insurance companies are looking for aladdin as an opportunity to expand in their ability to navigate of markets
spk_17: ah up as we built that aladdin as you suggested my coffee
spk_7: the hope of a space where aladdin is growing out whether it is a latin provider connecting every aladdin from user to which custodial a relationship intersecting that aladdin well and next thing aladdin to well well managers and having them more connected and we're on the beta sites right now of rolling out with of with some of our aladdin uses already on climate
spk_18: and that will continue to be in my mind one of the principal wider ladder utilization
spk_7: going forward and then up the greater utilization of or alternative accommodation of a lot any credibility extended aladdin across the entire investment ecosystem and the end and so with aladdin provider with aladdin wealth and now aladdin climate across all the portfolios i do believe it has been a drive accelerated growth for aladdin going forward i'm incredibly optimistic about the opportunity to eat out and i truly believe as more and more regulators are asking questions related to ah climate and how do you quantify climate as a risk of the need for aladdin it is essential in terms of understanding that risk as one measurement of be there are many other tools that people could use that is a will be one of the measurements of people can utilize up and i would also add one of the great strength for aladdin over the last two years and why greater utilization is open aladdin we are now allowing every user of aladdin like their own modeled in that are proprietary to that saw aladdin as a risk management system is not a monolithic system what aladdin has become is more an operating ecosystem and helping the owners of money the asset managers and money to really navigate across as categories communication to client communication to their to the custodial bag it's and having your own proprietary with system
spk_15: and that is been one of the great transitions of aladdin and then dovetailing that the infrastructure of aladdin related to as your
spk_2: and snowflake and allow gary to talk about what we do have the infrastructure to create a more resilient aladdin
spk_15: things are so
spk_2: mike i think you were specifically ask about gotta give you just a couple of comments you know we are obviously migrating
spk_4: aladdin from blackrock manage data centers to to the cloud and we think that that partnership
spk_15: with with microsoft and particular brings a number of and hands capabilities
spk_4: to both ourselves and eleven clients mean the big four for us or to localize date hosting is larry talked about really unlocking growth
spk_2: as a key part of our strategy to open a latin were clients are really looking to use both data and a p eyes in ways that differentiate them help express or their own competitive advantage or were looking to accelerate innovation and finally migrate into the cloud is going to help us support greater computing scale analysts to city at our lions as we see client demand to use data clearly increasing
spk_19: more importantly though it's it's it's beyond just the cloud i mean we're making investments really to address the needs of what we consider the investor up for the future
spk_4: obviously a focus on whole court for solutions you know better acquisition of a frog or we bring public and private capabilities together in one platform or sustainably of sustainability data and analytics which will be very critical of we talk about flexible tech solutions and connectivity that we just talked about but also integrated a data eat
spk_2: oh system that will allow
spk_4: our client to combine but aladdin and non aladdin data which i think is going to be important
spk_12: we're about two thirds complete with our client migrations that is ahead of our initial our initial plan
spk_20: but we anticipate completing the remainder of those client migrations likely a in the first half of twenty twenty two your next sentence from the line of brian adele lead to which back here line so thin great guy good morning good morning glory happy new year i'm married to answer back and sustainable investing on track their computer to be about yoga and near nearly twenty percent of your a group and you now at at that over five hundred billion year on yeah you're well on your way to making that when really marco well before the end of the decade it as if that is take a piece continued
spk_7: or maybe if he could talk about how you're seeing them recent trends in demand momentum on in the us vs you're a bobby to europe as them ah you know more of the growth engine love over the long term on on animal is that thing but maybe such as to talk about that differentiation and answer just on carbon transition as well this is such a developing market on at a know if you have a view on what a year a longer term market opportunity for investment product could be from a from l a u n size in that area and on what what shall product you are are targeting them quick question thanks blown up again what it in twenty twenty we made a large step in related to the tectonic shift that we've seen as can occur in the an investment world and and we continue to see rising interest in sustainability worldwide i think it just by evidence of twenty twenty one we saw thirty one billion dollars of flows in the us and sustainability sixty five billion dollars of flows from india would you suggest more in europe eight billion dollars a pack and you know we were we went from about one hundred billion dollars in two thousand and eighteen to five hundred billion today i think what it were a different spot as evidenced by those close as you suggested in europe if you do not have the sustainability leds you will not to be awarded in a mandate today is a component of all i wanna and is were all investing in europe today in the united states it's it's it's it's still quite mix depending on of the institution but it's growing it's growing up because a we we are able to create a customized portfolios this is the power of allotted blood customize portfolio for those clients are looking to to start looking at sustainability is it as an investment opportunity at a development risk and i believe this will continue to be driving flows in the coming years the big opportunity and the greatest opportunity in this area is investing and loop is a new technology as they said of my prepared remarks it works if we moved to up to a green economy tomorrow without new technology in the lead to up a an unfair and a just transition and as we witness and seventy places already with rising energy prices we've seen government capping energy costs to the consumer even the european countries that are so focused on sustainability like france and spain have caps or the heating and other things like that so this is going to be a very long as i discussed over the years you very log transition and very of and and it's not going to be a straight line the opportunity that is to be working with traditional hydrocarbon companies ah on a who are going to be part of the solution it can be working with agricultural companies who are part of solution it is the is investing in new startups whether it is to crate blue or green hydrogen or blue or green ammonia to find new solutions for green cement and steel for for investing in new opportunities and sequestering of hydrocarbons so we believe climate transition opportunities for renewable power
spk_21: for these new technology going to be
spk_4: are going to be great and i do believe there's gonna be huge investment opportunity to import so it's a combination of navigating your current portfolio of as as as a glance but also the opportunity to and investigated in a side by side with hydrocarbon companies or investing in a new techno oh and new startup gary why don't to carry on and talk about
spk_22: of sustainability to place
spk_23: i think you got it larry
spk_0: you should use it on all the key parts of the question in terms of just blows ah man unless a brian there was anything specific you you wanted additional color on the plaza think larry captured emea was basically sixty five percent of los sustainability for the year larry mentioned the u s thing about thirty billion i think importantly the us was up fifty pro
spk_7: sent year over year notwithstanding of it's still only about a third of those of those flows but otherwise that i think larry you calculate i'm and thank you okay hi ladies and gentlemen we have reached allotted time for questions mister see the have any closing remarks thank you operate i want to thank all of you for joining us today and your continued interest in black rock
spk_24: our fourth quarter and pull your performance which is a direct result of our commitment to serving our clients investing for the long term anticipating their needs
spk_7: and hopefully you could he you could hear from gary and iron and we see tremendous opportunities ahead and black focus remains on investing in our people investing in the communities where we operate
spk_0: and to stay in front of our clients needs if we do all goes well our shareholders are going to be the biggest beneficiary
Disclaimer

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