BlackRock Inc ($BLK) Q2 2025 Earnings Call

Thank you, Martin. Good morning, everyone, and thank you for joining the call. Over many years, BlackRock has worked to serve the ambitions of each and every client around the world. From the largest asset owners to individuals just getting their start with investing. We design and deliver strategies and products that fit their unique long-term needs and aspirations. We deliver in a way that best serves each client, whether through whole portfolio solutions, opportunistic investments, or customized models and SMAs. Throughout BlackRock's history, we've been relentless in anticipating the future needs of our clients and taking strategic actions to evolve for them. Our sustained multi-year growth has been powered by our whole portfolio approach. We were the first provider to blend active and index at scale through our acquisition of BGI and iShares. Our integration of active and index investing propelled the next 15 years of success for our clients and shareholders. iShares AUM was about 300 billion when we announced our acquisition, and today it's approaching $5 trillion. And now we're building on our foundational platform to redefine the whole portfolio again by bringing together public and private markets across both asset management and technology. That foundational platform has powered performance for clients and sustained organic base fee growth through cycles. We believe our expansions can drive even higher growth. Our trust and comprehensive relationships we have with clients across our core businesses like Aladdin, ETFs, fixed income and retirement are now driving an even broader opportunity set. We're seeing secular demand for capabilities we've developed in recent years like digital assets, active ETFs, systematic strategies, and customized SMAs through Aperio and SpiderRock. The strength of BlackRock's platform is also expanding the growth potential of GIP and HPS. They're both premier firms in their own right, but they recognize how our client relationships and the completeness of our platform could help us all achieve new heights together. BlackRock's ethos of change, the integration of firms, and the best parts of their culture, that's what allows us to be more adaptive with our clients. Our history of integrations is very different. And it sets us apart from any other public or private markets firm in the industry. BlackRock's breadth and scale has differentiated us with our clients of all sizes worldwide. We're delivering an integrated approach to help our clients across all aspects of public and private markets investing. We enable a seamless view into investment management, into technology and data on one single platform. We remain steadfast in our one BlackRock culture, making sure clients have access to all of BlackRock in a comprehensive, consistent way in every region with every client. Our long-standing relationships and history of reinvention are resulting in a higher, more diversified organic base fee growth. We're now generating 6% organic base fee growth for the second quarter and the first half of 2025 and 7% over the last 12 months. Revenues, operating income, and earnings per share each grew double digit. Total inflows were 116 billion excluding the index activity Martin mentioned. Growth has been powered by both our largest core businesses and newer initiatives. iShares ETFs have had a record first half inflows. Our technology ACV growth reached a fresh high of 16%. These strong fundamentals, alongside client demand for private markets, digital assets, Aperio, and systematic strategies propelled another consecutive quarter above target organic growth and a record AUM of 12 and a half trillion dollars. Our global reach delivers diversification upside to our platform with gains in international currencies lifting AUM by over 170 billion in the quarter. We manage 4 and a half trillion in AUM for clients outside the United States. Many of our largest growth opportunities are outside our home market including our work in India and the Middle East alongside our established presence in Europe and Asia. BlackRock is executing on a deepening set of opportunities across technology and data and public and private markets. Momentum is only accelerating and many of our recent milestones have not yet reflected in our results. Two weeks ago, we closed our acquisition of HPS Investment Partners. We're excited to welcome Scott, Scott, and Mike, and the entire HPS team to BlackRock. We see immense growth ahead for our combined franchise. Together, we'll be able to serve investors and borrowers across all of the private financing needs. Client feedback has been extremely positive as we integrate GIP, HPS, and Preqin. For many companies, periods of M&A contribute to a pause in client engagement. We're seeing the opposite. Clients are eager to put more capital to work with BlackRock. They appreciate our reputation as long-term investors and partners. We're not transactional. We're helping them invest in compelling long-term growth themes, like the global needs of new infrastructure investments and the fast-evolving debt financing landscape. These are creating differentiated private markets opportunities for our clients. At the end of June, we marked a major milestone with a final close of GIP 5, our flagship infrastructure strategy. It surpassed its target, raising $25.2 billion. That's a validation of how clients are embracing the logic of the BlackRock GIP combination. Many would expect a change in ownership to dampen fundraising. In our case, it ultimately ended up driving an even higher fundraising ability. GIP 5 represents the largest ever client capital raised in a private infrastructure fund. And our AI partnership continues to attract significant capital interest, including the recent additions of Kuwait Investment Authority and Temasek. The diversification benefits and potential for higher returns offered by private markets also make them an attractive investment for retirement accounts, a space where BlackRock has been a leader. We were recently selected by the Great-West Life Trust Company to provide a custom target date fund glide path that strategically allocates across public and private markets. We have a wealth of expertise in the defined contribution space and we're looking to expand to private markets across a variety of retirement solutions. Retirement is core to BlackRock in the United States and internationally. We are a trusted expert in advising clients, advising governments and policy makers on how they can help their constituents achieve more secure futures and retire with dignity. Demographic shifts and financial pressures are driving governments and corporations to rethink their retirement plans and the retirement systems, putting significant money in motion. In the Netherlands, for example, a transition from defined benefits to a hybrid form of defined contribution is well underway. BlackRock is working with clients to manage this transition and improve investment outcomes for plan members. We had a related $30 billion outsourcing mandate with a Dutch client fund in early July. We take a blended approach of being deeply local and powered by our global platform. We deploy capital in public and private markets in every country in which we operate and beyond. And we are consistently studying what's driving capital flows both within each country and within each region. Our ability to execute at scale at the local level differentiates our international business. We're bringing a global framework to India through our Geo BlackRock offering in partnership with JFS and Reliance, who already serves hundreds of millions of individuals across India. There are huge advancements taking place through the digitization of currency and identification, but India remains a country of savers, not investors. Our joint venture Geo BlackRock recently launched its first funds raising over $2 billion with over 67,000 customers. We look forward to helping more and more people participate in the growth of local and global capital markets and global connections. Our acquisition of Preqin will be a key to enabling more transparency and clarity in private markets. In just the first few months since our closing of the Preqin acquisition, we've seen strong early demand from both GPs and LPs as they are looking to better analyze and benchmark their private market allocations. It's through better analytics, standardized benchmarks, and more widely available performance data we can close the information gap and enable even more future growth in private markets investing. In the public markets, our iShares business continues to be a powerful growth engine and a key driver of industry innovation. After nearly 30 years and approaching 5 trillion in assets, innovation remains at the heart of our franchise. Our newest investments and product launches from just the last few years are driving outsized growth contributing to record flows in the first half of 2025 and 12% organic base fee growth in ETFs this quarter. Our active ETFs delivered 11 billion of net inflows and our digital asset products continue to set new records. IBIT at quarter end crossed over 75 billion in AUM with another 12 billion dollars in net inflows. As of this morning, it crossed over 80 billion dollars. iShares ETPs are bridging the traditional capital markets with fast-growing cryptocurrency markets. They're also bringing new investors to the iShares brand. Nearly a third of the investors who first came to BlackRock for IBIT have gone on to purchase other iShares products. It's this type of capability expansion that drives durable growth and new client opportunities for our business. From category innovation in iShares to new ventures across the world, the investments we made across our platform are paying off. Many of the categories that are leading our growth barely existed two years ago. Categories like active ETFs, digital assets, and our scaled private markets franchise. Just as importantly, BlackRock's core businesses like ETFs, Aladdin, and cash management continue to be a growth engine for the firm and are cornerstones of many client relationships. A lot of firms got out of the cash business after the financial crisis when fee waivers were in place during a sustained period of low rates, but we recognized a simple thing. Every client needs to hold cash. Cash management has been the first entry point for many of our clients who've gone on to build large mandates with BlackRock. Our cash AUM is nearly $1 trillion and I think it's remarkable considering we're not a direct retail business or a DTC bank. At BlackRock, we think of cash as another avenue for innovation. We see a great untapped opportunity for cash and liquidity where people want to use the technologies of digital assets to access traditional instruments like treasuries. Our tokenized liquidity fund now has 3 billion in AUM and what started as a small corporate investment and asset management relationship with Circle in 2022 has grown meaningfully. We delivered a significant gain to shareholders this quarter in connection with the IPO and subsequent trading activity and we now manage more than $50 billion for Circle stablecoin cash reserves. We're entering our seasonally strongest back half of the year with considerable momentum and a robust pipeline. Our recent closing of HPS will help us offer even more to clients. We believe our clients and shareholders will be beneficiaries as GIP, HPS, and Preqin are now all coming together in a shared BlackRock story. We are intentionally organizing to bring clients under one unified firm, not a collection of enterprises, and we have aligned our cultures and aligned each and every one of these interests. The opportunity to deliver the full reach of BlackRock's capabilities to more individuals, to more companies, and governments, and regions is greater today than ever before. Our comprehensive platform is deeply connected to our clients, to the capital markets, and to the future trends that are driving portfolios. These are just the early days in our next phase of growth at BlackRock. Operator, let's open it up for questions.

Great question. Thank you, Michael. I think as we showed in the closing of the second quarter, the client feedback has been extremely strong. I actually was in Asia this past week. And the opportunities we have with insurance companies, with wealth management, across Asia and every other region is stronger than we ever imagined. As we said, GIP 5 closed above our target at 25.2. Our AIP fund will have a lot of positive announcements in the coming quarters. We announced in the past quarter that we added Temasek and Kuwait Investment Authority as a part of our investment team. And we are confident that we'll be able to raise the full $30 billion that we announced in equity. And once we then begin those projects, we'll have to raise another $100 billion in associated debt to finance those type of projects. And we're working with the hyperscalers as we speak right now on this. And we have some really great opportunities ahead of us in that. Those are just two examples of the opportunities we see with GIP. There's no question in my mind that with rising deficits with more and more governments, the conversations we're having whether it's in Europe or the United States or Japan, that the role of public-private financing and the role of infrastructure financing is going to grow dramatically. And so we see some huge, huge opportunities. Another big opportunity that GIP just closed was purchasing all the Malaysian airports, it's just another example of the opportunity. And we are still progressing with the proposed announcement of our ports transaction with Hutchinson. So all of that is just a good example of some of the growth opportunities we see, but the resiliency and the conversations have never been greater. Related to private credit and HPS, we're just at the beginning. But we can say we'll have a lot to discuss in the third quarter, but the flow opportunities of HPS during the period of time of announcement and closing did not abate at all. So we are seeing across-the-board a very large acceptance of the industrial logic of the combination of HPS, GIP, and BlackRock. And I would say that was quite a big difference than when we did the BGI transaction in 2009.

Today clients are looking at the merits of what BlackRock can do, our history of integration, our history of bringing one culture together, bringing the best of all the acquired organizations to be part of us to build a new foundational structure around BlackRock. On insurance, with having $700 billion of AUM with insurance companies, and that is continuing to grow. We are continuing to see more and more opportunities where we can be driving private markets with the insurance companies that we already manage. In wealth, very very exciting. If there is a change in the opportunity related to defined contributions, it is only going to accelerate the opportunities we have in the private market space with retirement. 50% of our assets that we manage is in retirement. And so, the relationships we have with plans is enormous. If you look at our success in LifePath, if you look at our success in our target date products, if you look at our success in what we're trying to do now in LifePath Paycheck, where now we have over $500 million in that alone. Our relationships with these defined contribution plans is as strong as ever. We're innovating, we're creating opportunity. Now, if you overlay the opportunity for wealth worldwide, whether it's wealth in Japan, wealth in the United States, wealth in any region, the need, especially here in the United States, because you have much higher threshold related to fiduciary responsibility, is going to be analytics and data. And if that moves forward, if there's that opportunity, the need for analytics and data will more than ever create huge opportunities for Preqin and the future opportunity of growth of Preqin eFront. And so, we believe all these changes, the integration and blending of both public markets and private markets, is going to all be centered around having a base of great analytics and data. And I am more certain than ever the acquisition of Preqin alongside eFront is going to be generating much more opportunity for BlackRock. And I believe we are well positioned, whether it's well positioned because of the product profile we have with HPS and GIP, and what we but the with a foundational position we're in in the retirement space in the defined contribution space overlaying all the analytics data that we have under Aladdin now puts us in a position that we could have broader deeper conversations with our clients and I'm very much looking forward to having those deep conversations with each and every client.

Let me just add one thing. Just the industrial logic and why this is so imperative. If through broadening the investment profile of what can be included in a defined contribution plan, if you believe over a 30-year horizon, you could add 50 basis points, which is not an unrealistic target. It adds 18% to the corpus 30 years later. That should be compelling enough. Now, the reality is though, there is a lot of litigation risk. There's a lot of issues a lot related to the defined contribution business. And this is why that analytics and data are going to be so imperative way beyond just the inclusion. And so, this is one thing that we are very certain on. As this moves forward, the need for analytics and data and the role of Preqin, eFront, Aladdin is only going to be a larger set of opportunities for BlackRock in this space.

Hello.

Good. I'm going to turn that to Martin.

I would just add a few other things that we've been building up organically and the opportunities we see. We believe fundamentally that every country in the world is going to be attempting to build out their own capital markets. They see the success of the United States. One of the great reasons of the US position in the world today is having a strong back office system and a strong capital market system. We talked about this at Investor Day. But what we saw in India and what we're trying to do and expand its retirement system platform there is a good example of the expansion of the global capital markets. Yesterday, we had a conversation with another very big organization that was in a strong position in a growing developing country with huge opportunities to do the same thing we're doing with Reliance and Jio BlackRock. We've already announced what we are trying to do in the Middle East in Saudi Arabia related to expansion of a mortgage-backed securities market. So we are not just looking at tucking in acquisitions, but the opportunity we have to expand our position as more and more countries are expanding their capital markets and playing a bigger role in that. And I think India is just the beginning where we believe we're going to build out a very large-scale asset management platform in India itself. These are the seeds that we are doing that are probably being obscured by all the inorganic things we are doing. But I want to just give you that color that we see the expansion of global capital markets as a primary driver for future success for BlackRock over the next 5 years. And having our global footprint, being in 100 different countries just gives us a unique opportunity to be working with more and more governments worldwide helping them think about how they expand their capital market and how they expand their own Pillar 3 retirement system. As a leader in retirement, this is a conversation we're having with everybody. And I mentioned in one of the prior questions related to what's going on in Netherlands, moving from DB to a hybrid DC. These are all big changes, but they present huge and unique opportunities for BlackRock. And so inorganic opportunities are still going to be, if they're compelling, we will still be doing those types of transactions, especially tucking in areas in private markets or tucking in in technology. But the opportunity to grow organically as the capital markets grows worldwide is something that we are very excited about over the next 5 years.

I'll let someone like Martin should be taking it.

Let me just add a few more things. As the European markets evolve and change, and as regulation really focused on remunerations, the beginnings of the access to ETFs in Europe is only just beginning. Europe is 5-6 years behind the United States in terms of access. It's just all evolving now. iShares is about a trillion dollars in Europe. 40% market share. And we are in a position now, especially in countries as we said, changing away from defined benefits to defined contributions in Europe. You're going to see more and more of the financial advisory organizations of Europe. You're going to see more and more of the digital organizations in Europe adapting more and more ETF-based strategies, similarly to what as we've seen in the United States. So, we believe that Europe is just starting to launch the same type of growth rates that we saw in the United States in terms of the adaptation of ETFs. And if you now intersect the role of digital ETFs, to me that is creating more and more enthusiasm, more access to ETFs, more interest in ETFs, and as I said in my prepared remarks, we're seeing more and more clients who first started using ETFs for IBIT are now looking at ETFs and iShares as a vehicle to expand way beyond their first entry into a digital platform. So we're very well positioned and I look at the opportunities in Europe similarly to the type of growth rates we saw in the US over the last 5 years.

Hey Patrick.

Yeah, in my world tour working with central banks and regulators, the conversation about stablecoin is vibrant right now. And so what we are going to see is more competitive type of stablecoins. They may have some role in diversifying away from dollar as we digitize more and more currency. But the opportunity for BlackRock in our world in both stablecoin or the entire role of tokenization of financial assets, tokenization of real assets like real estate is going to be the future. And we believe more than ever before that we are as well positioned as any organization in the world to be part of the conversations as stablecoins are going to be growing and developing. Related to buying money market funds or having a role as the manager, those conversations are broad. But if you're going to show that a stablecoin truly is a substitute for a currency, it must be invested in those currencies' bonds. And so I would hope that that will remain as a consistent feature of each and every stablecoin. And I believe that is going to be one of the big issues. There are questions remaining with some other stablecoins as to what is the collateral backing some of that. And if we're going to put our name associated with it, we believe each and every stablecoin should be invested in short-term government bonds that back that stablecoin. We want to make sure it's legitimized, but it's also safe and it's a great digital substitution for each and every country's cash as a cash substitute. And I think that is going to be moving very rapidly, but it is surprising even to me the dialogues that we're having with central banks and how they are looking to now use their own digitized currency or using stablecoins to digitize their currency. And so we believe this is just the beginning and we will be playing a significant role as stablecoins are developed in each and every country where they believe it will fit the needs of their own monetary policy and their policies related to their capital markets.

Yes, thank you, operator. I want to thank all of you for joining us this morning for your continued interest in BlackRock. Our second quarter results demonstrated the strength of our global relationships and how our platform is powering the portfolios of the future. We're so excited to welcome our new colleagues from HPS to our global offices in the coming months and we're working closely together to better serve our clients across all their investment needs, which in turn should drive stronger, more durable results as we did in this quarter for you, our shareholders. Everyone, thank you. Have a good summer. Enjoy the quarter. Bye-bye.