BlackRock's Q1 Equity Fee Rates Were Light Across All Product Types, Analyst Cautions On Fee Rate Dynamics

BlackRock, Inc. BLK shares are trading lower on Friday.

The company reported revenue growth of 11% year over year to $4.728 billion in the first quarter, beating the consensus of $4.676 billion. 

According to Goldman Sachs analyst Alexander Blostein, the company’s management fees of $3.778 billion missed consensus by 1% on worse-than-expected fee rate dynamics. 

Blostein writes equity fee rates were light across all product types, and the Alts fee rate declined three bps quarter on quarter as catch-up fees rolled off, and Tech/risk management fees were also a bit light (-1% versus Street).

The analyst adds that flows were driven by a good quarter for iShares, which accounted for $55 billion of flows between fixed income and equity and drove flows across Alternatives (bitcoin ETF).

Taking a step back, investor expectations into the quarter were light, Blostein fags.

Read More: BlackRock Starts Strong In 2024 With Q1 AUM & Fees Surge, Stock Gains

Overall, the analyst views the first quarter results as mixed – core revenue trends continue to lag management’s targets (organic base fee growth +1% LTM and softer trends in Tech), partially offset by better operating leverage (175 bps of margin expansion year over year, but helped by unusually high-performance fees this quarter).

Looking ahead, management called out a line of sight into the funding of significant wealth, institutional, and Aladdin mandates, suggesting growth is likely to pick up, the analyst notes.

Blostein sees investors remain focused on softer core revenue trends (management fees and Tech) and a path to getting organic base fee growth closer to management’s 5% target.

Price Action: BLK shares are trading lower by 2.01% to $770.14 on the last check Friday.

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