What's Blackrock's Financial Risk If Equity iShares Inflows Slow Down Going Forward?

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BlackRock’s financial results of late have been largely reliant on strong growth in its extremely popular equity iShares offerings, as they have seen consistent and impressive inflows. This reliance is demonstrated by the fact that if the assets under management for these offerings grow at just 7% annually (which is still fairly strong) instead of the ~15% we currently forecast , then the company’s valuation could see a downside of over 10%.

We capture the impact of slower growth in equity iShares assets on BlackRock’s financials as a part of our interactive model here . You can modify assumptions such as the expected rate of growth in these assets and the fees per dollar invested in equity iShares offerings to come up with your own forecast for BlackRock’s financial performance over coming years.

We maintain a price estimate of $550 for BlackRock’s shares, which is slightly below the current market price.

BlackRock’s Equity iShares Have Seen Faster Asset Growth Than Any Other Offering

BlackRock’s Equity iShare assets surged from under $500 billion in 2012 to more than $1.3 trillion at the end of 2017. Over the same period, BlackRock’s total long term assets under management (AUM) grew from around $3.5 trillion to over $5.8 trillion. The total share of Equity iShares as a proportion of the company’s total AUM increased from under 4% to over 20% over that period. While ETFs as a whole have seen substantial growth over this period due to their convenience and transparency, iShares have grown faster than the industry thanks to BlackRock’s strategy of targeting retail investors through low-cost offerings

The continuing popularity of BlackRock’s iShares offerings is expected to keep growth in these assets elevated over the near future – making them the single biggest profit driver for the asset management giant over coming years. But as we detail in our interactive model, a sharp decline in growth volume across the ETF industry, or diminishing market share for BlackRock in the fiercely competitive industry, presents a sizable downside to the company’s profits and share value.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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