WSJ Interview About Gains in ETFs

Matt Reiner recently commented on CIA’s ETF investments with money manager, iShares—a brand of BlackRock Inc., the world’s largest money manager. BlackRock (BLK) just marked its best quarter ever, posting fourth quarter net income of $690 million.


Retirement Calculator

In his interview with the Wall Street Journal, Reiner said iShares’ large product offering–280 ETFs in the U.S.–allows him exposure to diverse segments of the market, and the company’s size makes him feel safe.

According to Reiner, “We don’t feel worried about them going out of business,” Mr. Reiner said. “That’s an issue with the smaller niche ETF players.” Reiner also said that BlackRock immediately capitalized on Vanguard’s ETF index change, providing additional marketing material illustrating why investors should move to BlackRock from Vanguard. “It gave iShares a great sales point.”

BlackRock’s revenue jumped to $2.5 billion, a 14% increase compared with the same quarter in 2011, as investors poured $36 billion into ETFs managed by the firm’s iShares division. That helped boost fees collected by BlackRock by 11% to $2.1 billion in the quarter.

“You’re seeing much more of an adaptation toward using ETFs” by investors, Laurence Fink, BlackRock’s chairman and chief executive, said in an interview.

The company is benefiting in part from a big marketing push launched in 2012 to boost its iShares brand nationwide.

Yet BlackRock continued to suffer outflows from its active-managed equity funds, with investors pulling $5.5 billion out during the fourth quarter and $18 billion during all of 2012. Mr. Fink said the outflows were to be expected after a reshuffling of some of the firm’s equity teams in order to improve performance.

Analysts said the continued movement of investors out of actively managed funds is likely to hammer other large, publicly traded money managers that will report earnings in coming weeks, including Legg Mason Inc. and AllianceBernstein Holding LP.

“The challenge is industry-wide,” said Dan Fannon, an analyst at Jefferies Group Inc.

While BlackRock is the largest provider of exchange-traded funds in the U.S., it had been losing investors to rival Vanguard Group Inc. over the last three years. In 2012, BlackRock saw net inflows of $60.7 billion, the most of any provider in the U.S., while Vanguard, the third-largest ETF provider, saw inflows of $52.8 billion.