How BlackRock Makes Money: Investment and Advisory Fees (2024)

BlackRock Inc. (BLK) is by some measures the biggest investment management company across the globe, with more than $10.0 trillion in assets under management (AUM) as of Dec. 31, 2021. As a major publicly traded company with a market capitalization of about $112.3 billion, BlackRock provides investment and technology services to both institutional and retail clients around the world.

The firm offers a variety of funds and portfolios investing in vehicles such as equities, money market instruments, and fixed income. Clients look to BlackRock for access to mutual funds, investments focused on objectives related to retirement income and college savings, and exchange-traded funds (ETFs).

BlackRock is the parent company for the iShares group of ETFs, the largest global provider of ETFs. BlackRock derives the majority of its revenue from investment advisory and administrative fees charged to its clients. Among BlackRock's major competitors are The Vanguard Group, State Street Corp. (STT), and T. Rowe Price Group Inc. (TROW).

BlackRock's Financials

BlackRock announced in mid-January financial results for Q4 of its 2021 fiscal year (FY), the three-month period ended March 18, 2021. The company reported a net income of $1.6 billion, up 6.1% compared to the year-ago quarter. Revenue grew 14.0% year over year (YOY) to $5.1 billion. The company's AUM rose 15.4% YOY to a new high of $10.0 trillion.

BlackRock generated $212 billion of net inflows during the quarter. The Americas region led all other regions with long-term net flows of $139 billion. The company's ETF offerings generated $104 billion in long-term net inflows, more than the long-term net inflows of retail and institutional investors combined.

BlackRock's Business Segments

BlackRock operates as a single business segment and does not report on income for individual parts of its business. However, it does divide its revenue according to categories for "Investment advisory, administration fees, and securities lending revenue," for "Investment advisory performance fees," for "Technology services revenue," for "Distribution fees," and for "Advisory and other revenue."

Investment Advisory, Administration Fees, and Securities Lending Revenue

BlackRock derives the majority of its revenue from investment advisory and administration fees levied over time and is typically based upon predetermined percentages of AUM. This category of BlackRock's business includes fees related to the firm's equity, fixed income, multi-asset alternative, and cash management services. In Q4 FY 2021, this category accounted for $4.0 billion in revenue, or about 78% of total revenue. This was up 16.9% compared to the year-ago quarter.

Investment Advisory Performance Fees

In contrast with administrative fees, performance fees are assessed to certain types of BlackRock accounts when performance exceeds a predetermined threshold. Performance fees accounted for $329 million in revenue, or about 6% of total revenue in Q4 FY 2021. This was down 21.5% compared to the year-ago quarter.

Technology Services Revenue

BlackRock offers a range of investment management technology systems, risk management services, wealth management, and digital distribution tools to various insurance company, bank, pension fund, and asset manager clients. Technology services accounted for $339 million in revenue for Q4 FY 2021, or about 7% of the total. This figure was up 11.1%.

Distribution Fees

BlackRock levies fees associated with the distribution and service of its various products, as well as for support services related to investment portfolios. In Q4 FY 2021, this category accounted for $411 million in revenue, or about 8% of total revenue for the year. This was up 30.9% compared to Q4 FY 2020.

Advisory and Other Revenue

BlackRock also separates out a category of revenue associated with its advisory services for global financial institutions, regulators, and governments. These fees are set at a fixed rate. In Q4 FY 2021, this category accounted for $59 million in revenue, or about 1% of total revenue. This was up 25.5% compared to the year-ago quarter.

BlackRock's Recent Developments

On March 3, 2022, BlackRock said that it had halted purchases of all Russian securities in both its active and index funds amid Russia's recent invasion of Ukraine. Russian securities comprise less than 0.01% of the company's clients' assets.

How BlackRock Reports Diversity and Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of BlackRock and its commitment to diversity, inclusiveness, and social responsibility. We examined the data BlackRock releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether BlackRock discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether BlackRock breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.