The head of BlackRock warns about inflation, as staff enjoy an 8% pay rise

BlackRock CEO Larry Fink has warned that the United States should prepare for a period of higher inflation, as the world’s largest asset manager gave most of its employees an increase in about 8%.

The forecast came a day after figures showed the U.S. consumer price index rose in June at the fastest pace in more than a decade, worrying that the economy may be warming.

“We have been accustomed to inflation below 2%,” said Fink, who did not rule out keeping inflation above 3% thanks to a mix of higher energy costs, global supply chain disruptions and the focus of the Federal Reserve in employment growth.

“In conversations with business leaders, they see higher commodity prices and some increase their prices and wages,” Fink told the Financial Times.

BlackRock announced the base salary increase for all employees to the director level included, along with second-quarter earnings that comfortably exceeded analysts ’expectations.

With a rebound in equity markets, BlackRock’s managed assets rose to $ 9.5 million. Revenue rose 32% to $ 4.8 billion, exceeding expectations of $ 4.6 billion, thanks to strong organic growth and higher performance fees.

Net income rose 14% to $ 1.381 billion, while adjusted earnings per share reached $ 10.03, surpassing the $ 9.48 expected on Wall Street.

Fink said the decision to increase base pay for nearly 95 percent of its 16,500 employees reflected a desire to share the benefits of the group’s growth, rather than a reaction to the broader inflationary pressures it may be facing. the staff. The increase will take effect in September.

The boom BlackRock is enjoying was highlighted by its operating margin, which rose to 40.1% in the quarter from 38.5% a year ago.

While managed assets set a new record, net inflows of $ 81 billion over the three months to the end of June ended a four-quarter streak in which they had surpassed $ 100 billion.

Long-term investment flows, a metric that excludes cash management, reached $ 60 billion, shy of what analysts expected of $ 94 billion. A client of the U.S. pension fund pulled $ 58 billion from a equity index mandate during the quarter.

“While the client’s loss of pensions weighed on the overall flow, the underlying trends were solid,” said Kyle Sanders, an analyst at Edward Jones.

Wall Street remains optimistic about BlackRock’s long-term growth prospects, given the considerable advantage it has over rivals in ETFs and technology services through its Aladdin platform. Like competitors, the group also points to the boom in investment in environments, social and governance.

Active in BlackRock IShares franchise rose above $ 3 million for the first time in May. Net income for the quarter was $ 75 billion, up from $ 51 billion the previous year. The asset manager told investors in June that it expects the current $ 9 billion global ETF market to reach $ 15 billion by 2025.

China remains another important area of ​​long-term growth for the group, as Beijing opens the country to foreign fund managers.

BlackRock obtained approval to operate as wealth manager, in a joint venture with China Construction Bank and Singapore state fund Temasek during the quarter. Last month he became the first foreign asset manager to get approval to launch a wholly-owned mutual fund business in China.

“BlackRock has invested in the region and has spent time building relationships that will help them become a major asset manager in China,” said Craig Siegenthaler, an analyst at Credit Suisse.

Shares of BlackRock, which closed the record high this week, fell 4% in New York trading. Shares have risen 21% this year, surpassing the 16.7% gain in the S&P 500.