BlackRock chief warns of inflation as staff get 8% pay rise

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BlackRock chief executive Larry Fink warned the United States should prepare for a period of higher inflation as the world’s largest asset manager gave the majority of its employees a pay rise by 8%.

The forecast came a day after figures showed that the U.S. consumer price index rose in June at the fastest pace in more than a decade, stoking fears the economy was overheating.

“We are used to inflation below 2%,” said Fink, who did not rule out inflation remaining above 3% thanks to a mix of higher energy costs, supply chain disruptions. global economy and the Federal Reserve’s focus on job growth.

“In conversations with business leaders, they see rising commodity prices and some are increasing their prices and wages,” Fink told the Financial Times.

BlackRock announced base salary increases for all employees up to and including director level, as well as second quarter earnings that far exceeded analysts’ expectations.

Taking advantage of the rebound in equity markets, BlackRock’s assets under management hit a record $ 9.5 billion. Revenue increased 32% to $ 4.8 billion, beating expectations of $ 4.6 billion, thanks to strong organic growth and higher performance fees.

Net income climbed 14% to $ 1.38 billion, while adjusted earnings per share stood at $ 10.03, beating the $ 9.48 expected by Wall Street.

Fink said the decision to increase the base salary of nearly 95% of its 16,500 employees reflected a desire to share in the benefits of the group’s growth, rather than a reaction to the broader inflationary pressures that staff might face. to be confronted. The increase will take effect in September.

BlackRock’s boom was underscored by its operating margin, which climbed 40.1% in the quarter from 38.5% a year ago.

Although assets under management set a new record, net inflows of $ 81 billion for the three months to the end of June ended a four-quarter streak in which they had surpassed $ 100 billion.

Long-term investment flow, a measure that excludes cash management, was $ 60 billion, below the $ 94 billion expected by analysts. A client of a US pension fund withdrew $ 58 billion from a stock index warrant during the quarter.

“While the loss of retired clients weighed on the overall flow number, the underlying trends were strong,” said Kyle Sanders, analyst at Edward Jones.

Wall Street remains optimistic about BlackRock’s long-term growth prospects given the substantial lead it holds over rivals in ETFs and technology services through its Aladdin platform. Like its competitors, the group is also targeting the development of investments in the environment, social and governance.

BlackRock’s iShares franchise assets exceeded $ 3 billion for the first time in May. Net inflows for the quarter reached $ 75 billion, up from $ 51 billion a year ago. The asset manager told investors in June that he expects the current global $ 9 billion ETF market to climb to $ 15 billion by 2025.

China remains another important area of ​​long-term growth for the group, as Beijing opens the country to foreign fund managers.

BlackRock obtained approval to operate as an asset manager in a joint venture with China Construction Bank and Singapore state fund Temasek during the quarter. Last month, he became the first foreign asset manager to gain approval to start a wholly-owned mutual fund business in China.

“BlackRock has invested in the region and has spent time building relationships that will help it become a major asset manager in China,” said Craig Siegenthaler, analyst at Credit Suisse.

Shares of BlackRock, which closed at a record high this week, fell 4% in New York exchanges. The stock has climbed 21% this year, topping the S&P 500’s 16.7% gain.

S&P Asset Management and Custody Bank Index bar chart showing BlackRock's stock performance recently outperformed most of its rivals


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