Blackrock, Inc. · NYSE:BLK
Blackrock — Investor Day (June 2016)
152 slides from Blackrock's investor day presentation, Jun 15, 2016
Slide 1: BlackRock
BLACKROCK’
Slide 2: Forward-looking statements
Forward-looking statements This presentation, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. For
Slide 3: BlackRock: Built for Change
BlackRock: Built for Change Geraldine Buckingham Global Head of Corporate Strategy
Slide 4: Challenging market dynamics are impacting our clients' ability to meet their investment needs
Challenging market dynamics are impacting our clients’ ability to meet their investment needs Cash Deposits ($tn) Funding Deficits in US Public Pension Plans ($bn) $22 17% $21 $597 $14 $510 $12 $4 $1 1995 2005 2015 2014 2015 US China Japan Source: Cash deposit data from Federal Deposit Insurance Cor
Slide 5: Several trends are reshaping the investment environment
Several trends are reshaping the investment environment An evolving market paradigm that is characterized by muted market growth, low-rates and central bank policy divergence Rapid advancements in technology that are changing how money is managed, how risk is measured and how clients interact with t
Slide 6: Client needs are changing – and asset managers must evolve
Client needs are changing – and asset managers must evolve Solutions New drivers of alpha Active Equity and Fixed Income Technology to increase convenience, Multi-asset transparency and access to information Alternatives ETFs Outcomes and solutions delivered through Factors / Smart Beta as
Slide 7: Changing client needs align with higher industry growth areas
Changing client needs align with higher industry growth areas Expected Annualized Global Industry Organic Growth 2016-2020 Targeted Growth Moderate Growth High Growth 62% 12% 11% 4% 2% 3% 2% 1% (0%) Active Equity Active Fixed Asset Non-ETF IndexIndex Alternatives Bundled Multi- Factors Factors& ETFs
Slide 8: Technology and Aladdin: Unparalleled platform breadth and strength
Unparalleled platform breadth and strength BLK Organic BLK Top 10 Category Growth vs. Industry Player (AUM) Targeted Growth: BLK Active Equity h positioned to Technology and Aladdin capture share Active Fixed Income h Moderate Non-ETF Index 1 Growth: BLK positioned to Alternatives h capitalize
Slide 9: Differentiated growth in active management
Differentiated growth in active management Asset Management Industry Revenue (2014) BlackRock Unconstrained Active Fixed Income 2015 Organic 37% 71% 45% Cumulative 3 Year Net New Flows ($bn) Total Industry AUM Growth $283bn $29.1 Total Active $264bn 2013-2015 Active Equity & Fixed Income $123bn $8.6
Slide 10: Share gains and secular tailwinds in alternatives
Share gains and secular tailwinds in alternatives Alternatives Industry AUM ($tn) BlackRock Alternatives Hedge Funds Hedge Fund Solutions Retail Alternatives $13 Private Equity Solutions Private Credit $8 Real Estate Infrastructure BLK Share: 1% 2014 2020E Alternative Solutions BlackRock AUM Rest of
Slide 11: Market leadership in ETFs
Market leadership in ETFs ETF Industry AUM ($tn) iShares Industry Positioning AUM Market Share (March 2016) Fixed Provider Global U.S. Europe Equity Income iShares 38% 39% 46% 35% 52% Vanguard 18% 23% 4% 19% 17% $6.0 State 15% 20% 3% 16% 9% $1.7 $1.9 Street $1.4 $1.2 All others 29% 18% 47% 30% 22% $
Slide 12: BlackRock's investment platform enables creation of holistic solutions for clients
BlackRock’s investment platform enables creation of holistic solutions for clients Liquid Equities Multi-Asset Fixed Income Active Products & Solutions Active Alternatives Products Asset Allocation Products Cash Models Factors Passive Passive Products ESG Products Illiquid Alternatives Technology an
Slide 13: BlackRock: Built for Change
BlackRock: Built for Change Clients’ ability to meet their goals is being affected by both short term market challenges 1 and longer term secular trends – and asset managers must adapt to deliver growth BlackRock is built to meet client needs – and we are well-positioned in areas of 2 current and fu
Slide 14: Active Management
Active Management Rob Kapito President
Slide 15: BlackRock Snapshot
$4.7 trillion in total assets across diverse investment platform BlackRock Snapshot Equity $4.4TN $0.3TN $9.5BN Fixed Income 2015 Long-Term Multi-Asset Long-Term AUM Cash & Advisory AUM Base Fees Alternatives Long-Term AUM By Style Long-Term Base Fees by Style 25% 34% 35% 54% 41% 11% Active Index iS
Slide 16: Value of alpha enhanced in a challenging market environment
Value of alpha enhanced in a challenging market environment The era of supernormal returns has ended Example: Value of alpha Average annualized industry returns by asset class: Total Portfolio Return 21% 18% 16% U.S. Equity Market U.S. Equity Market Mar. 2009 - Oct. 2014 Oct. 2014 - Mar. 2016 2.5% A
Slide 17: BlackRock has generated flows into both active and index
BlackRock has generated flows into both active and index Global Industry Flows BlackRock Long-term Net Flows Long-term Net Flows ($bn) Long-term Net Flows ($bn) $616 $630 $432 $147 $397 $92 $76 $61 $41 $91 $34 2013 2014 2015 Contribution to Long-term Net New Base Fees ($340) 2013 2014 2015 48% 52% 5
Slide 18: BlackRock has delivered alpha to clients consistently over time
BlackRock has delivered alpha to clients consistently over time Active long-term performance in dollars Long-term relative performance(1) Over the last 10 years, BlackRock has generated a total of $55 billion of alpha above relevant benchmarks for % of Assets above Benchmark or Peer Median our activ
Slide 19: Strong global Fundamental Active Equity performance
Strong global Fundamental Active Equity performance Long-term relative performance % of Assets above Benchmark or Peer Median as of 3/31/16 83% 80% 74% 76% 76% 71% 64% 58% 52% 54% 38% 23% FAE EMEA FAE APAC FAE U.S. FAE 1-year 3-year 5-year ($ in billions) AUM $206(1) $71 $20 $107 2015 NNB $1.9 $1.3
Slide 20: Scale active franchises delivering alpha – and driving growth
Scale active franchises delivering alpha – and driving growth 3-year average active return vs. Morningstar category average or benchmark Pan European Equity Morningstar category average or Income Composite: 3-year average active return vs. +4.58% Asian Equities Composite: Strategic Income Opportunit
Slide 21: BlackRock is positioned to deliver alpha for our clients
BlackRock is positioned to deliver alpha for our clients Aladdin® Technology & Aladdin Trading & Risk & Liquidity Quantitative Solutions Platform Analysis BlackRock Alpha Drivers Data Talent Expertise BlackRock Investment Institute Innovation 21
Slide 22: Active Fixed Income Snapshot
Active Fixed Income Active Fixed Income Snapshot $754bn 400+ Tim Webb of LT AUM investment 23 years in industry professionals(1) 16 years at BlackRock Global Fixed Income Snapshot Fundamental $1.5tn 1 Global Credit Municipals Active & Passive Global Fixed Model Based AUM Income platform Fixed Income
Slide 23: Market dynamics creating unprecedented fixed income landscape
Market dynamics creating unprecedented fixed income landscape Diminished FI Supply vs. Increased Demand Persistent Low and Negative Interest Rates Implications Clients (e.g. insurance firms, pensions) will require differentiated active fixed income solutions 23
Slide 24: Evolving client needs have implications for active managers
Evolving client needs have implications for active managers Non-traditional active FI solutions that Client Needs Efficient Low Cost Beta Exposures provide attractive yield BlackRock approach Flexibility Diversification Risk/Loss Management Fully leverage the breadth of Deliberately manage “tail-ris
Slide 25: BlackRock's Fixed Income differentiators
BlackRock’s Fixed Income differentiators Investment expertise, scale and global reach Talent 400+ fixed income professionals covering every sector of the market $754bn in Active & $771bn in Passive Solutions Diversification across investment styles, strategies, risk/return profiles $754bn in Act
Slide 26: Active Equity: Focus on Fundamental
Active Equity: Focus on Fundamental Active Equity Snapshot $276bn 250+ 1 26 teams investment unified fundamental of LT AUM professionals(1) and scientific active 10 countries equity platform Fundamental Active Equity Snapshot $206bn 190 Nigel Bolton of LT AUM investment 31 years in industry professi
Slide 27: Scale and global reach drive differentiated alpha generation
Scale and global reach drive differentiated alpha generation Global network includes 250+ equity investors worldwide Specialist model with 27 equity investment teams on 5 continents across 10 countries All leverage BlackRock’s full platform across equity, fixed income, multi-asset and alternatives T
Slide 28: BlackRock's approach to active equity management
BlackRock’s approach to active equity management 1 2 3 Innovation through Connectivity Investment skill changing market across the platform & proven market expertise environment Technology and Aladdin BlackRock Data Investment Talent Expertise Institute 1,800+ investment professionals with Data scie
Slide 29: Creating Europe's #1 Active Equity franchise
Creating Europe’s #1 Active Equity franchise European Equity Franchise Substantial growth Delivering for clients Diverse product range to through volatile markets meet client needs AUM ($bn)(1) $41 Example: Core long-only Pan European Equity Income Composite(2) Outcomes 460 bps income, unconstrained
Slide 30: Active Equity: Focus on Scientific
Active Equity: Focus on Scientific Active Equity Snapshot $276bn 250+ 1 26 teams investment unified fundamental of LT AUM professionals(1) and scientific active 10 countries equity platform Scientific Active Equity Snapshot $71bn 82 Raffaele Savi of LT AUM investment 18 years in industry professiona
Slide 31: Where insights come from
Where insights come from Relevant Possible Big Data Machine Learning a Fundamentals Natural Language Processing Macro Trends Cloud Computing Business Strategy Computer Vision Competitive Dynamics Text Quality of Management Internet Search Social Media Satellite Images Sensors 31
Slide 32: Conference calls: Measuring sentiment through text analysis
Conference calls: Measuring sentiment through text analysis Analyze Measure Test 120% 100% 80% 60% 40% 20% 0% -20% confcall mlconf BlackRock algorithms “read” over 5,000 earnings Turn unstructured textual information into First generation signal (confcall) using simple call transcripts every q
Slide 33: Tracking the consumption purchasing process with Big Data
Tracking the consumption purchasing process with Big Data E-transactions Online Search GPS traffic data Booked sales receipts Website traffic Satellite images Credit card data More leading More accurate 33
Slide 34: Risk & Quantitative Analysis
Risk & Quantitative Analysis Risk Management Equities 6,000 accounts Top-down and Fixed Income 124 portfolio 550 bottom-up Multi Asset teams approach Beta Strategies representative No house view Alternatives accounts Investment, Counterparty and Enterprise Risk 21 230 Ed Fishwick countries risk 30+
Slide 35: Risk & Quantitative Analysis
Risk & Quantitative Analysis Portfolio Risk Tool: 1 Aladdin is the bedrock of our risk platform Risk decompositions, scenario analysis, optimizations in one single tool 2 Identification and calibration of risk Example: SCENARIO ANALYSIS Implied Shock Implied Shock Asset Class Risk Factor (bps) in σ
Slide 36: Understanding Risk and Return
Understanding Risk and Return Innovative investment approach to harness complementary, diversified sources of alpha Time Horizon Illustrative Short-Term Medium-Term Long-Term Transient Factors Micro-structure Sentiment & Themes Effects Company-specific Macro Shocks Fundamentals (Growth) Reversals Ec
Slide 37: Ability to construct multi-asset investment solutions
Ability to construct multi-asset investment solutions Liquid Equities Multi-Asset Fixed Income Active Products & Solutions Active Alternatives Products Asset Allocation Products Cash Models Factors Passive Passive Products ESG Products Illiquid Alternatives Technology and Aladdin Risk & Quantitative
Slide 38: Institutional
Institutional Mark McCombe Global Head of Institutional Client Business and Co-Head of BlackRock Alternative Investors
Slide 39: BlackRock Institutional
BlackRock Institutional Contribution to BlackRock $2.8TN 63% $2.8BN 30% Long-Term AUM Long-Term AUM Long-Term Base Fees Long-Term Base Fees Long-Term AUM By Asset Class Long-Term Base Fees By Asset Class 3% 10% 16% 24% 34% 18% 63% 32% Active Equity & Fixed Income Index Equity & Fixed Income Active E
Slide 40: Our clients face a challenging investing environment
Our clients face a challenging investing environment Key Trends Impacting Clients Client Types Defined Defined Contribution Benefit Evolving Market Paradigm Plans Plans Insurance Official Companies Institutions Critical Retirement Funding Gaps Foundations and Corporations Regulatory Change Endowment
Slide 41: Understanding client challenges drives institutional framework
Understanding client challenges drives institutional framework Partner with our clients to deliver investment solutions 1 Technology and Aladdin that work Solutions 2 Increase product diversification 3 Pivot to higher value-add capabilities 41
Slide 42: Creating partnerships to reflect the needs of each client
Creating partnerships to reflect the needs of each client BlackRock seeks to understand each client‘s strategic and tactical considerations… Investment/Policy Balance Sheet Constituencies Risk Tolerance Regulatory/Reporting Objectives Assessment Capital preservation Assessment Regulators Cre
Slide 43: Partnering with our clients to deliver investment solutions: Case Study
Partnering with our clients to deliver investment solutions 1 that work: Case Study Client Needs: BlackRock’s unique approach: Solution outcome Maintain portfolio returns / yield Model range of asset classes to Step 1: build custom efficient frontier Unconstrained using Aladdin technology SAA Redu
Slide 44: Increasing product diversification
2 Increasing product diversification In 1Q13: In 1Q16: 38% of top 500 clients owned 3 or more products 49% of top 500 clients owned 3 or more products 49% % of Top 500 % of Top 500 Clients Clients 36% 38% 26% 28% 23% 1 2 3+ 1 2 3+ Multi-asset capabilities driving growth of long-term client relations
Slide 45: Pivoting to higher value-add capabilities
3 Pivoting to higher value-add capabilities $100bn+ Core Alternatives Platform Core Alternatives Flows ex-Return of Capital(2) ($bn) Core Alternatives AUM Organic Asset 2% 0% 8% 8% 8% $50bn $15bn $25bn $12bn Growth(2) $7.3 $2bn $6.5 $5.7 Hedge Funds Private Equity Solutions Hedge Fund Solutions Priv
Slide 46: Positioned to meet growing client demand for alternatives
Positioned to meet growing client demand for alternatives… Global Alternatives Industry AUM Growth(1) ($tn) Why BlackRock? 2014 AUM $8 Reputation 1 • • Deal sourcing advantages Fiduciary relationships Growth from $2 Retail and Wealth 2014-2020E Alternatives Investment Expertise Growth from Instituti
Slide 47: …and deliver higher value-add capabilities
…and deliver higher value-add capabilities 2015 Global Institutional Industry AUM ($tn) BlackRock Market Share AUM(1) Revenue(2) Total $36 7% 2% Index (ex. ETFs) $8 21% 16% Active (ex. Alts) $22 4% 2% Alternatives $6 1% 1% BlackRock Other Source: McKinsey and BlackRock Corporate Strategy estimates 2
Slide 48: Changing client needs are driving positive mix shift
Changing client needs are driving positive mix shift 2015 Global Institutional Long-Term Flows Organic Asset Growth (1%) $24bn $3bn ($16bn) ($43bn) Annualized Global Institutional Long-Term Base Fee Impact Organic Base Fee Growth 4% $101mm $80mm $30mm ($9mm) Index Active ex-Alts Alternatives Total I
Slide 49: BlackRock Institutional
BlackRock Institutional Partner with our clients to deliver investment solutions 1 Technology and Aladdin that work Solutions 2 Increase product diversification 3 Pivot to higher value-add capabilities 49
Slide 50: Real Assets
Real Assets Jim Barry Global Head of Real Assets
Slide 51: BlackRock Real Assets
BlackRock Real Assets Contribution to BlackRock $29BN 700+ 300+ 22 AUM(1) Clients Professionals Global Offices Real Estate AUM by Region $21BN Infrastructure AUM(1) by Product $8BN 9% 18% 31% 45% 10% 52% 13% 7% 8% 7% US UK Renewable Power Infra Equity Americas (Ex-US) EMEA (Ex-UK) Infra Debt Infra S
Slide 52: Broad asset class seeking to deliver a variety of investment outcomes
Broad asset class seeking to deliver a variety of investment outcomes Tangible Real Assets Investment Objectives Infrastructure Real estate Natural real assets Long-term stable cash flows Energy & power Office Agriculture Return enhancement Transport Retail Timber Social Apartments Diversifica
Slide 53: Trends driving growth and change in Real Assets
Trends driving growth and change in Real Assets Rapid advancements in technology Fast growing cities S Sustainable and socially responsible investing Government focus Expansion and blending of the investment universe 53
Slide 54: Real Assets projected to be a fast growing alternatives sector
Real Assets projected to be a fast growing alternatives sector 14 $13.6 $2.5 Worldwide AUM ($tn) 12 10 9% $7.9 8 $1.4 6 $5.3 10% $11.1 $0.8 4 8% $2.5 $6.5 17% 6% 2 $0.5 $4.5 $2.0 31% 0 2004 2007 2013 2020E ■ Real Assets ■ Other Alternatives (1) Compound Annual Growth Rate (includes organic growth an
Slide 55: Our clients intend to increase investment allocations to Real Assets
Our clients intend to increase investment allocations to Real Assets(1) In our 2016 rebalancing survey, 53% of respondents stated an intent to increase Real Assets allocation this year 100% + 7% + 20% + 24% + 18% + 37% 75% + 53% 50% 25% 0% Real Assets Real Assets Private Equity Hedge Funds Fixed Inc
Slide 56: Real Assets are a solution to clients' investment challenges
Real Assets are a solution to clients’ investment challenges % of client respondents citing the following as top factors for increasing allocations to real assets Macro environment considerations Increase return Replace or enhance current income Address long-duration liabilities Diversify overall po
Slide 57: BlackRock's reputation, investment expertise and outcome orientation position us well
BlackRock’s reputation, investment expertise and outcome orientation position us well to deliver strong performance % of client respondents citing the following as challenges when investing in private market assets Access to opportunities 41% BlackRock is well positioned to address investors’ challe
Slide 58: Outcome Orientation: Real Assets strategies span the entire risk / return spectrum
Outcome Orientation: BlackRock Real Assets strategies span the entire risk / return spectrum BlackRock strategies designed to address client needs and preferences, including: Income/yield Liquidity needs Inflation protection Return/appreciation Risk tolerance Levered/unlevered Opportunis
Slide 59: BlackRock's platform and reputation resonating in our Infrastructure offering
BlackRock’s platform and reputation as a trusted fiduciary is resonating in our Infrastructure offering Long duration assets and Investment needs of stable returns $71TN through 2030(1) Income in low interest rate environment Diversification Funding gaps given bank Global and public utility Infrastr
Slide 60: BlackRock's global network and reputation as a local partner
BlackRock’s global network and reputation as a local partner Real Estate Infrastructure Local Partnerships Office Buildings in Asia Apartments in New York Pipeline in Mexico Windfarm in Texas Own or developing over 13,000 individual apartment units in the US Owner of 70 wind and solar projects globa
Slide 61: BlackRock Real Assets
BlackRock Real Assets 1 Focus on scalable opportunities that are difficult to replicate in a purely financial way Use the power of BlackRock’s reputation to have real impact on the world that 2 benefits our investors and society Develop a common investment language of Real Asset outcomes, risk and f
Slide 62: iShares: The Path to $2 Trillion
iShares: The Path to $2 Trillion Mark Wiedman Global Head of iShares
Slide 63: BlackRock iShares
BlackRock iShares Contribution to BlackRock $1.1TN 25% $3.4BN 35% Long-Term AUM Long-Term AUM Long-Term Base Fees Long-Term Base Fees ETF AUM by Asset Class ETF Base Fees by Asset Class 2% 2% 26% 16% 82% 72% Equity Fixed Income Other Equity Fixed Income Other Note: Long-term excludes Cash and Adviso
Slide 64: The path to $2 trillion
The path to $2 trillion Think of ETFs as a technology Three structural forces are driving ETF growth Unbundling of alpha & exposures Growth of fee-based advisory Shrinking of bank balance sheets How we plan to lead that growth Exploit our global strengths Serve diverse client segments across the
Slide 65: ETFs as a technology
ETFs as a technology A security An investment tool Price transparency Low cost • Real-time Market exposure • Public Secondary market liquidity • No impact on bank balance sheet Simplicity – trades like a stock 65
Slide 66: Three structural forces driving ETF usage
Three structural forces driving ETF usage Investors are unbundling Wealth industry is shifting to Bank balance sheets alpha and exposures fee-based advisory are shrinking 66
Slide 67: Going beyond active vs. passive
Going beyond active vs. passive Not “active vs. passive” Our clients are active investors They use iShares as tools within portfolios Endangered – sheep in wolves’ clothing Closet indexers Unbundling of Factor huggers alpha & exposures 67
Slide 68: Fueling the shift to fee-based investing
Fueling the shift to fee-based investing Disclosure Moving to fee-based advisory Disclosure or ban Ring-fencing fails Advisory pricing goes fee-based Price sensitivity rises ETFs/lower cost active win share Trillions in motion over time Fiduciary Rule – ban / disclosure Bans Market Force
Slide 69: Shrinking bank balance sheets
Shrinking bank balance sheets ETFs Fixed income Futures and trading swaps 69
Slide 70: Regulators squeezing bank balance sheets
Regulators squeezing bank balance sheets More bonds, less inventory Derivatives market shrinking (‘08-’15) ($bn) ($tn) 0% 250 7 (10%) Basel: Bank holdings of corporate bonds 6 (20%) 40% projected 200 5 (30%) increase in 150 Corporate 4 (40%) trading book 100 bond stock 3 (50%) (49%) capital by 2 (60
Slide 71: Case study: U.S. high yield
Case study: U.S. high yield HYG trading as a percentage of all HY cash bond trading Bid-ask spreads: ETF vs. underlying securities Underlying securities 50 30% 50 Dec-15 HY sell off HYG Volumes as / Cash 25% 40 Bond Volume (%) Bernanke taper speech 20% Lehman collapse 30 15% 20 10% BlackRock HYG 5%
Slide 72: How the bond market works
How the bond market works Bonds Bonds Seller Dealer Buyer $ $ 72
Slide 73: ETFs connect buyers and sellers
ETFs connect buyers and sellers Bonds Bonds Seller Dealer Buyer $ $ Trading directly 73
Slide 74: Resilience under stress: BlackRock HYG during December 2015
Resilience under stress: BlackRock HYG during December 2015 ($bn) 6 30% HYG as % of total cash bond trading 5 25% 4 20% 3 15% Secondary market: exchange volume 2 10% 1 5% 0 0% 12/1/2015 Primary market: 1/20/2016 create / redeem volume Source: BLK, Bloomberg as of 01/20/16. % Cash bonds = rolling 20-
Slide 75: The competitive set is large – runway for growth
The competitive set is large – runway for growth ETF Competitive Set Investment Assets by Vehicle ($tn) $160 Swaps & futures Fixed Income $95 Closet indexers & Single ETFs security factor huggers holdings $49 Equity $21 $65 $3tn Index Index funds / $3 Active $18 separate accounts ETFs Global mutual
Slide 76: Our task
Our task Global AUM Market Share $3.1tn All others 10% 17% Next 10 competitors $1.9tn Competitor 2 We need to 16% 9% lead the next 17% 18% Competitor 1 leg of growth 19% 13% 39% iShares 41% 2012 5/2016 Source: Bloomberg. Note: Excludes Japan and China. 76
Slide 77: How we are going to do it
How we are going to do it Serve diverse client Drive 5 product use 1 Exploit global strengths 2 3 segments segments globally Global Insurance Bank Wealth brand Core Financial Smart Beta Asset mgr Pensions Self-directed investments instruments Global RIA SWFs Consultant Two global Precision Fixed ope
Slide 78: Exploiting our global strengths
Exploiting our global strengths iShares Global Strengths Assets of Largest Global ETF Players ($bn) $1,160 Global brand $555 Global Two global $466 operating product lines scale $101 $82 Global footprint iShares Vanguard State Street Invesco / Deutsche PowerShares Bank Source: Bloomberg. Notes: Data
Slide 79: Exploiting our global strengths
Exploiting our global strengths iShares Global Strengths Assets of Largest Global ETF Players ($bn) $1,160 Global brand $555 Global Two global $466 operating product lines scale $298 $245 $101 $82 Global footprint iShares Vanguard State Street iShares iShares Invesco / Deutsche Fixed Income EMEA Pow
Slide 80: Five product-use segments
Five product-use segments Financial Smart Beta & Core Instruments Factors Precision Fixed Income Exposures 80
Slide 81: iShares Core now represents $247bn in assets
iShares Core now represents $247bn in assets iShares Core funds have delivered $116bn in NNB since 2012 $46 $31 $20 $14 Canada EMEA $5 US 2012 2013 2014 2015 YTD 5/16 Notes: iShares Core suite of ETFs are designed to provide comprehensive, broad market domestic and international core portfolio expos
Slide 82: Segmentation case study
Segmentation case study Avg. daily secondary May 2016 AUM iShare BPS volume ($bn) ($mm) Precision Financial $23 Exposures Instruments EEM 69 $2,226 Core IEMG 16 $212 $13 EEMV 25 $39 $4 Smart Beta & Factors Source: Bloomberg, BlackRock. Notes: Net expense ratio is shown. The gross expense ratio for E
Slide 83: The path to $2 trillion
The path to $2 trillion Think of ETFs as a technology Three structural forces are driving ETF growth Unbundling of alpha & exposures Growth of fee-based advisory Shrinking of bank balance sheets How we plan to lead that growth Exploit our global strengths Serve diverse client segments across the
Slide 84: Factor-Based Investing
Factor-Based Investing Andrew Ang Head of Factor-Based Investment Strategies
Slide 85: BlackRock Factor-Based Investing
BlackRock Factor-Based Investing Contribution to BlackRock $142BN $67BN $9BN $254MM Long-Term AUM in 96 Long-Term AUM in Long-Term AUM Long-Term Base Fees Smart Beta ETFs Enhanced Long-Term AUM by Strategy Long-Term Base Fees by Strategy 7% 11% 47% 26% 63% 46% Smart Beta ETFs Other Smart Beta Enhanc
Slide 86: Factors are to investments what nutrients are to food
Factors are to investments what nutrients are to food Broad Universe Traditional Categories Most Basic Elements Nutrients Fiber 65% Protein 25% Carbohydrates <1% Fat 10% Sodium >1% Risk Factors Interest Rates 120 bps Credit Spreads 75 bps Inflation 53 bps Economic Growth 620 bps Currency / FX 12 bps
Slide 87: Factors help explain returns across and within asset classes
Factors help explain returns across and within asset classes Macro Factors determine levels Style Factors determine dispersion Style Factors Avg. Value Stock Value Momentum Equity Average Stock Average Stock Quality Market Level Size Avg. Growth Stock Low Volatility Economic Macro Factors
Slide 88: Factors have disruptive potential for asset management
Factors have disruptive potential for asset management Structural and market forces are elevating Factors Factors have the power to revolutionize investing Transformations in Asset Management Evolving market paradigm 1980s Growth of equities and alternatives, led by mean- variance optimization 1990s
Slide 89: BlackRock's Factor-Based platform complements existing capabilities
BlackRock’s Factor-Based platform complements existing capabilities across active and index Traditional Beta Factor-Based Strategies: $142bn(1) Model-based / Fundamental / Beta Active (includes ETFs) “Smart Beta” “Enhanced” Alternatives Smart Beta: $132bn Enhanced: $9bn Equity Smart Beta Alternative
Slide 90: Factors among fastest growing areas in asset management
Factors among fastest growing areas in asset management Factor industry AUM ($bn) Factor adoption is growing and evolving Our recent survey of institutional investors Enhanced demonstrates the growth and appeal of Factor- Smart Beta $2,478 Based Investing(1) $657 Growing Adoption $1,214 $332 $1,821
Slide 91: BlackRock Factor-Based Investing advantage
BlackRock Factor-Based Investing advantage BlackRock’s legacy and continued innovation in Factor-Based Investing 1996: Equity Quality; first 2005: Commodities Factors; first 1979: First smart beta fund long/short equity; first fixed global multi-strategy hedge fund (equity yield) income enhanced ind
Slide 92: BlackRock Factor-Based Investing
BlackRock Factor-Based Investing 1 Accelerate broader adoption of Factor strategies and deepen client relationships 2 Build new products and Factor-Based analytics platform Establish leading industry position by advancing our thought-leadership and 3 investment research, leveraging a cohesive global
Slide 93: Global Retail
Global Retail Rob Fairbairn Global Head of Retail and iShares
Slide 94: BlackRock Global Retail
BlackRock Global Retail Contribution to BlackRock $543BN 12% $3.3BN 35% Long-Term AUM Long-Term AUM Long-Term Base Fees Long-Term Base Fees Long-Term AUM By Asset Class Long-Term Base Fees By Asset Class 3% 6% 21% 29% 23% 41% 7% 40% 29% 1% Active Equity Index Equity Fixed Income Active Equity Index
Slide 95: Intermediated distribution model delivering BlackRock to clients
Intermediated distribution model delivering BlackRock to clients Global Retail $543bn in AUM(1) 600+ Mutual Funds 70+ Countries 900+ Employees US Wealth Advisory Integrated Retail/iShares Salesforce ~30 Languages supported $363bn in AUM(1) 20+ Cross-Border & Local fund ranges Latin America & Iberia
Slide 96: Key trends impacting our distribution partners
Key trends impacting our distribution partners Distribution Partners Key Trends Impacting Distribution Partners Evolving Market Paradigm Private Banks Clearing Banks Rapid Advancements in Technology Wirehouses Independents Insurance RIA / IFA Demographic Shifts Companies Defined Online Contribution
Slide 97: Increased regulation of wealth management globally
Increased regulation of wealth management globally aims to improve transparency and ensure alignment of interests Higher fiduciary standards Greater transparency Challenge to fee sharing Distributors changing Lower end of market Assets Shifting to business models getting squeezed Shifts in ▸ Fee-bas
Slide 98: DoL rule will impact clients and tools needed to serve them
DoL rule will impact clients and tools needed to serve them Increased assets flowing into retail market 1 due to greater investor confidence Breadth and depth of Flows into index funds and ETFs due to 2 heightened focus on fees & performance platform (active and index) Increased need for portfolio c
Slide 99: BlackRock a "go to" provider for wealth managers
BlackRock a “go to” provider for wealth managers Liquid Equities Multi-Asset Fixed Income Active Products & Solutions Active Alternatives Products Asset Allocation Products Cash Models Factors Passive Passive Products ESG Products Illiquid Alternatives Technology and Aladdin Risk & Quantitative Blac
Slide 100: Technology enhances our value proposition for clients
Technology enhances our value proposition for clients Spectrum of retail technology solutions for wealth managers for Wealth CIO Model FA Portfolio Home Office Risk Construction & Construction & Oversight Analytics Analytics risk monitor portfolio builder 100
Slide 101: BlackRock Global Retail
BlackRock Global Retail 1 Strengthen position in markets and channels 2 Evolve our product set, by focusing on investor needs 3 Deepen strategic client relationships 4 Retail technology solutions 101
Slide 102: Asia Pacific Retail
Asia Pacific Retail Asia Pacific Retail Growth strategy Strengthen position in markets and $32BN 13% 1 channels of Long-Term AUM 2015 organic growth Evolve our product set, by 2 focusing on investor needs 100+ 14+ 3 Deepen strategic client relationships # of full time # of countries employees 4 Reta
Slide 103: Asia Pacific Retail Distribution Landscape
Asia Pacific Retail Distribution Landscape Different, developing and diverse Singapore Taiwan India China Australia Japan Hong Kong South Korea Addressable AUM(1) $3bn(2) $590bn $556bn $287bn $501bn Projected 5yr AUM CAGR 14% 7% 5% 10% 9% Mutual funds % (3) 5% 20% 4% 18% 8% Cash % (3) 53% 23% 53% 31
Slide 104: BlackRock Asia Pacific Retail
BlackRock Asia Pacific Retail Positioned for growth Deepen Local Position: Leveraging Global Brand 1 Strengthening our onshore position 2 Deepening client relationships Building out local fund ranges in Hong Kong and Leveraging the firm’s brand, breadth and insights to China to access new client
Slide 105: EMEA Retail
EMEA Retail EMEA Retail Growth strategy Strengthen position in markets and $129BN 10% 1 channels of Long-Term AUM 2015 organic growth Evolve our product set, by 2 focusing on investor needs 200+ #1 3 Deepen strategic client relationships # of full time in gross sales employees 4 Retail technology so
Slide 106: EMEA Retail business well positioned for continued growth
EMEA Retail business well positioned for continued growth Increase penetration in our core markets: $200mm+ revenue opportunity AUM ($bn) $61 Continued delivery of our $19 $18 diversification strategy $10 Strategic initiatives to expand UK Italy Switzerland Germany in core markets Current share
Slide 107: Delivering the firm's full capabilities to respond to client needs
Delivering the firm’s full capabilities to respond to client needs Liquid Equities Multi-Asset Fixed Income Active Products & Solutions Active Evolving our product set, Alternatives Products Asset Allocation Products Cash Models Factors Passive Products ESG Passive Products to meet client needs in
Slide 108: Delivering bespoke solutions with a more local feel
Delivering bespoke solutions with a more local feel Becoming “More Local” Partnerships with “national Case study: Partnership with local bank champions” to become their Designed a bespoke, Multi-Asset suite of products “Captive Partner”, e.g. on Multi-Asset Bank committed ~50% of its managed a
Slide 109: US Wealth Advisory
US Wealth Advisory US Wealth Advisory Growth strategy (1) Strengthen position in markets and $363BN 5% 1 channels of Long-Term AUM 2015 organic growth Evolve our product set, by 2 focusing on investor needs 500+ #4 3 Deepen strategic client relationships # of full time rank by AUM employees inclusiv
Slide 110: US Wealth Advisory is positioned to grow market share
US Wealth Advisory is positioned to grow market share Capture market share across product categories Expand reach across channels Targeted growth Future growth Active Active Index Smart beta RIA & funds SMAs funds & factors ETFs Wirehouse Direct Independent Bank 39% BLK AUM market 10% 8% 5% 3% share
Slide 111: US Wealth Advisory's differentiated business model is well positioned
US Wealth Advisory's differentiated business model is well positioned 1 Bringing a combination of active and index capabilities that advisors want 2 Delivering new product and technology innovations at scale 3 Doubling our reach of financial advisors and investors 4 Serving as the trusted partner fo
Slide 112: Aladdin Portfolio Builder Demonstration
Aladdin Portfolio Builder Demonstration 112
Slide 113: BlackRock's Technology
BlackRock’s Technology Rob Goldstein COO and Head of BlackRock Solutions
Slide 114: Technology & innovation have always been a part of our culture
Technology & innovation have always been a part of our culture Our historic focus on the end-to-end investment process – powered by Aladdin – has always been a key differentiator and significant competitive advantage for BlackRock Bringing sell- All the Built by One system, Tailored and Single platf
Slide 115: Technology enables connectivity and solutions for our clients
Technology enables connectivity and solutions for our clients We leverage the full power of BlackRock’s global technology infrastructure across every dimension of our business to deliver solutions for our clients Technology and Aladdin Investing Risk Management Distribution Operations & Analytics
Slide 116: BlackRock Solutions a key differentiator
BlackRock Solutions a key differentiator Highly scalable investment management, operating and risk analytics platform 6% of BlackRock total revenue in 2015 Retail Technology Stable and recurring revenue, primarily Digital advice, portfolio construction capabilities and risk analytics driven by A
Slide 117: Aladdin is BlackRock's central nervous system
Aladdin is BlackRock’s central nervous system • Centralized investment and risk management platform integrating people, process and technology • Powers informed decision-making, efficient trading and operational scale • Aladdin Community a key component of value proposition END-TO-END INVESTMENT PLA
Slide 118: Aladdin revenue growth driven by global, multi-asset capabilities
Aladdin revenue growth driven by global, multi-asset capabilities Aladdin revenue has grown at a 13% CAGR since …driven by expansion of multi-asset capabilities and 2011… a more global client base % of Total Revenue 13% $528 2010 2015 $474 $433 Multi-Asset 3% 26% $390 Capabilities $323 Global Client
Slide 119: Significant opportunity for future growth exists
Significant opportunity for future growth exists Aladdin is currently used by 180+ institutions globally. Future revenue growth will be driven by: However, we’ve only penetrated 9% and 15% of the top 250 asset managers and top 250 insurers, respectively 1 Top 250 Asset Top 250 Insurers Expanding cap
Slide 120: Delivering Aladdin to asset servicers: Provider Aladdin
Delivering Aladdin to asset servicers: Provider Aladdin Bringing together asset managers and asset servicers (i.e. custodians, accounting agents, etc.) on a single platform to achieve true straight-through-processing 100110011001100 ALADDIN 110011001100110 Reporting FOR ASSET 0 1 1 0 0 1 1 0 0 11
Slide 121: Delivering Aladdin to wealth managers: Aladdin for Wealth
Delivering Aladdin to wealth managers: Aladdin for Wealth As the landscape for financial advice evolves, BlackRock sees growing opportunities to provide intermediary partners with institutional-quality portfolio construction, modeling and risk analytics capabilities for Wealth Security & Delivered o
Slide 122: Delivering digitally-enabled advice: FutureAdvisor
Delivering digitally-enabled advice: FutureAdvisor Digitally-enabled advice a significant growth area Need for advice among underserved mass market / mass affluent – 30% of total US investable assets(1) Demand for more cost-effective solutions than traditional advisor model Greater investor ex
Slide 123: FutureAdvisor Client Experience
FutureAdvisor Client Experience 123
Slide 124: BlackRock's Technology
BlackRock’s Technology 1 Using data and technology to deliver better solutions for our clients 2 Continuing to invest in Aladdin as our core platform 3 Expanding Aladdin’s value proposition to broader financial ecosystem 124
Slide 125: Shareholder Value Framework
Shareholder Value Framework Gary Shedlin Chief Financial Officer
Slide 126: Framework for shareholder value creation
Framework for shareholder value creation Key drivers of shareholder value Results since 1/1/14 Organic Growth +4% Annualized 3% share Operating Capital +150 bps count Leverage Management reduction Note: Results from 1/1/14 – 12/31/15. 126
Slide 127: Beta no longer the primary driver of growth
Beta no longer the primary driver of growth Organic growth as % of AUM growth 22% 56% >100% Change in Long-Term AUM ($bn) $27 $117 $386 $181 $2 $140 $152 ($153) 2013 2014 2015 Beta / FX Organic Growth Acquisitions Note: Beta represents market impact on total AUM. FX represents FX impact on total AUM
Slide 128: Strong and consistent organic growth versus peers
Strong and consistent organic growth versus peers Mean Standard Deviation 6% 6% 5% 5% 4% 4% 4% 2% 3% 3% Long-Term 2% 2% 1% 1% Organic AUM (0%) (0%) (0%) Growth BLK A B C D E F G Average of BLK’s 7 largest US publicly traded traditional peers. Note: Represents average organic growth and standard devi
Slide 129: iShares driving growth across the platform
iShares driving growth across the platform 2013 – 2015 Average Growth Organic AUM Target Growth High Retail single-digit 9% Retail + iShares iShares Low 11% double-digit Institutional + iShares Low Institutional 0% single-digit 129
Slide 130: Reaffirm 5% organic growth target
Reaffirm 5% organic growth target Client-Centric Global Broad Solutions Platform Approach Footprint Liquid Retail + Equities Multi- Fixed Alternatives Asset Income iShares Americas Cash 5% organic Illiquid EMEA AUM Risk & BlackRock Trading & growth Aladdin Quantitative Investment Liquidity Instituti
Slide 131: Organic growth has driven positive mix shift...
Organic growth has driven positive mix shift... +1.0 bps 24.2 bps 23.2 bps 2012 Effective Organic 2015 Fee Rate Divergent 2015 Effective Fee Rate Growth (ex. Beta / FX) Beta Fee Rate Revenue impact ($mm): ~$400 Note: Effective fee rate represents investment advisory, administration fees and securiti
Slide 132: ...but market dynamics cloud impact
...but market dynamics cloud impact +1.0 bps 24.2 bps 23.2 bps 21.9 bps (2.3 bps) 2012 Effective Organic 2015 Fee Rate Beta / FX Impact 2015 Effective Fee Rate Growth (ex. Beta / FX) Fee Rate Revenue impact ($mm): ~$400 ~$930 Note: Effective fee rate represents investment advisory, administration fe
Slide 133: Capital management philosophy
Capital management philosophy Business Investment for growth Investment Investment in operational infrastructure Complementary client capabilities Tactical Acquisitions Drive incremental organic growth and / or leverage scale Dividend payout ratio in range of 40-50% Dividends 21% CAGR in
Slide 134: Commitment to efficiently optimizing growth
Commitment to efficiently optimizing growth Organic Growth Rate and Operating Margin Methods of Investment 150 bps 1 42.9% 42.9% Headcount 41.4% Organic 5% 2 4% 3% Seed Investments 3 2013 2014 2015 Acquisitions Long-Term Organic Growth Operating Margin, as adjusted Note: For further information and
Slide 135: Investment in human capital
1 Investment in human capital Headcount Headcount growth (CAGR) 14% 2013 – 2015 Area Headcount CAGR 12,972 11,428 9% “Growth” 6,122 5,165 Operational 5% 6,263 6,850 Infrastructure 2013 2015 Total 7% Offshore 858 1,101 Offshore 13% “Growth” Operational Infrastructure 1. Note: Growth areas Represents
Slide 136: Investment in seed portfolio
2 Investment in seed portfolio Seed and Co-Investment Portfolio Revenues from Seeded Funds ($mm)(1) % Seed: 64% 70% 73% $672 435 571 438 $361 1,202 1,010 1,018 $148 2013 2014 2015 2013 2014 2015 Seed Investment Co-investment (1) Represents revenues from products that have received seed or co-investm
Slide 137: Inorganic investments aligned with strategic priorities
3 Inorganic investments aligned with strategic priorities Strategic Rationale Cash Earn-Out / Acquisition Alternatives Technology Scale Funding Retention Claymore ETF Swiss Re Private Equity Fund-of- Funds Credit Suisse ETF MGPA BlackRock Kelso Infraestructura Instituci
Slide 138: Committed to returning capital to shareholders
Committed to returning capital to shareholders $3.2bn M&A Cash returned to shareholders and reinvested as a % of Seed & Co-Investments GAAP Net Income: Stated payout ratio: 96% 77% Cash Dividends Share Repurchases 2015 1. Excludes $2.5bn and $1.0bn of secondary repurchases in 2011 and 2012, respecti
Slide 139: Drivers of shareholder value
Drivers of shareholder value Organic Growth • 5% annualized long-term organic AUM growth target Operating Leverage Capital Management • Investing back into the business • $2.6bn returned to • Scale driving margin expansion shareholders in 2015 139
Slide 140: Appendix
Appendix
Slide 141: Reconciliation between GAAP and as adjusted
Reconciliation between GAAP and as adjusted (in millions, except shares and per share data) 2010 2011 2012 2013 2014 2015 1Q16 Operating income GAAP $2,998 $3,249 $3,524 $3,857 $4,474 $4,664 $963 Non-GAAP expense adjustments (1) 169 143 50 167 89 31 84 As Adjusted 3,167 3,392 3,574 4,024 4,563 4,695
Slide 142: Standardized performance of U.S. flagship funds
Standardized performance of U.S. flagship funds Average active return versus Morningstar category (%) Health Sciences SIO Total Return Opps 1-Year (0.13) (0.02) 6.62 3-Year 1.79 1.42 1.85 5-Year 1.35 1.41 1.02 10-Year 4.22 (since Inception) 0.25 2.55 Note: SIO performance since inception represents
Slide 143: Standardized performance of U.S. flagship funds
Standardized performance of U.S. flagship funds Note: Performance data quoted represents past performance and is no guarantee of future results. Investment returns and principal values may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Curr
Slide 144: BlackRock Pan European Equity Income Composite
BlackRock Pan European Equity Income Composite Composite Benchmark Gross of fee Net of fee Number Composite annualized annualized Total assets at Percentage Benchmark Total firm assets Calendar year composite composite of dispersion 3yr Standard 3yr Standard end of period of firm return (%) (Euro mi
Slide 145: BlackRock Pan European Equity Income Composite
BlackRock Pan European Equity Income Composite Notes 1. For purposes of compliance with the Global Investment Performance Standards (GIPS®), the "firm" refers to the investment adviser and national trust bank subsidiaries of BlackRock, Inc., located globally, with the exception of BlackRock Capital
Slide 146: BlackRock Asian Equities (ex Japan & ex Australia) Composite
BlackRock Asian Equities (ex Japan & ex Australia) Composite Composite 3 yr Benchmark 3 yr Gross of fee Net of fee Total assets at Benchmark Number of Composite annualized annualized Percentage of Total firm assets Calendar year composite composite end of period return (%) portfolios dispersion (%)
Slide 147: BlackRock Asian Equities (ex Japan & ex Australia) Composite
BlackRock Asian Equities (ex Japan & ex Australia) Composite Notes 1. For purposes of compliance with the Global Investment Performance Standards (GIPS®), the "firm" refers to the investment adviser and national trust bank subsidiaries of BlackRock, Inc., located globally, with the exception of Blac
Slide 148: Performance notes
Performance notes Past performance is not indicative of future results. Except as specified, the performance information shown is as of March 31, 2016 and is based on preliminary data available at that time. The performance data shown reflects information for all actively and passively managed equit
Slide 149: Important information regarding iShares ETFs
Important information regarding iShares ETFs Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained by visiting w
Slide 150: Important information regarding iShares ETFs
Important information regarding iShares ETFs There can be no assurance that an active trading market for shares of an ETF will develop or be maintained. Investment comparisons are for illustrative purposes only. To better understand the similarities and differences between investments, including inv
Slide 151: Important notes
Important notes The opinions expressed herein are as of June 2016 and are subject to change at any time due to changes in the market, the economic or regulatory environment or for other reasons. The information should not be construed as research or relied upon in making investment decisions or be u
Slide 152: BlackRock
BLACKROCK’