BlackRock records one of its best quarters for alternatives

Q1 2020 reflected strong fundraising activity in illiquid alternatives, with the firm gathering about $7bn across its secondaries and infrastructure funds.

BlackRock gathered $7 billion of net inflows and capital commitments for alternatives in the first quarter of 2020, one of its best quarters in illiquid alternative fundraisings, according to chairman and chief executive Larry Fink.

“In our illiquid alternatives space, we are actually having deeper, longer, broader dialogues [with investors] than ever before,” Fink said, speaking on the firm’s first quarter 2020 earnings call on Thursday.

Earlier this month, the firm raised two-thirds – roughly $1 billion – of its target for its debut secondaries fund, as reported by sister title Secondaries Investor. It raked in $5.1 billion for a global energy and power infrastructure fund that will invest in areas including solar, wind and hydro power as well as natural gas and energy transportation and storage.

In January, it also resumed investment activities for its debut private equity vehicle, the roughly $4 billion Long Term Private Capital, following a suspension in December due to a key-person issue.

BlackRock recorded $75 billion in net inflows in the first seven weeks of the year, driven by strength in iShares and Americas and Europe retail, Fink said. Its cash management business recorded $52 billion of net inflows, $3 billion in alternative net inflows and the firm raised an additional $4 billion in infrastructure, private credit and secondaries.

However, due to significant market declines in the quarter including the impact of divergent equity beta and FX related dollar appreciation, the firm will enter the second quarter with an estimated base fee run rate that is approximately 12 percent lower than the previous quarter, chief financial officer Gary Shedlin said on the call. The firm also incurred higher technology costs in the quarter, including certain one-time costs related to facilitating remote operations associated with covid-19, as part of its business continuity planning.

BlackRock’s AUM as of end-March was $6.47 trillion, a 12 percent decrease from the previous quarter’s $7.4 trillion. Net income also dropped 38 percent, from $1.3 billion as of Q4 2019 to $806 million as of Q1 2020. Compared with the equivalent period the year before, the firm’s first quarter earnings fell 23 percent.

BlackRock is not reducing its 16,000-strong workforce but will freeze hiring in the current environment. It will also re-evaluate expenses once it has a better assessment of the long-term revenue implications of the crisis, Shedlin added.

Maintaining the health and safety of its employees is the main priority for the firm, Fink noted.

In response to the covid-19 crisis, BlackRock committed $50 million to those immediately impacted by the virus, of which the first $18 million has been deployed to food banks and community organisations across the US and Europe that are working directly with vulnerable populations.

BlackRock’s Financial Markets Advisory group is also partnering with various central banks including the Federal Reserve Bank of New York and Bank of Canada on programmes to facilitate market efficiency and to support the global economy.