BlackRock Says Higher Waivers
BlackRock released its Q4 2020 Earnings late last week. During the Q4'20 earnings call CFO Gary Shedlin commented, "[W]hile fourth quarter base fees were up 5% sequentially, the impact of lower securities lending revenue during the quarter driven by a continued tightening of cash spreads was the primary reason we saw a sequential decline of 0.2 basis points in our annualized effective fee rate despite the positive impact of strong organic based fee growth." He continued, "As we look into 2021, based on current marketing conditions and the interest rates we are planning for the possibility of lower securities lending revenue and higher discretionary money market fee waivers as compared to 2020. In isolation, this could have an additional 0.3 basis point negative impact on our fee rate this year as compared to our fourth quarter annualized base fee rate." Shedlin said, "Bear in mind that our higher interest rate environment and continued strong organic based fee growth could mitigate this headwinds especially with continued momentum in our higher fee, active equity and alternative businesses and then nearly roughly and at nearly 40% of gross money market fee waivers are generally shared with distributors reducing the impact on operating income." He also commented, "Full year net inflows of $391 billion were positive across active and index, all asset classes, client types and regions, and reflected broad based strength across iShares and active and cash strategies.... Institutional index net outflows of $29 billion in 2020 reflected equity net outflows partially offset by fixed income net inflows, as several large clients rebalance portfolios after significant equity market gains or tactically shifted assets to fixed income and cash." The CFO explained, "BlackRock's cash management platform generated another $9 billion of net inflows in the fourth quarter, even as the broader industry saw outflows, and a record $113 billion of net inflows in 2020." CEO Laurence Fink added, "In strategic growth areas, we saw record client demand for active equities, sustainability, our cash products and our alternative investment strategies. We also generated 185 billion of net inflows into iShares ETFs and we also delivered a record $1.1 billion in technology services revenues."
