Daily Brief: BlackRock’s Record-Setting Haul Suggests It’s Hit Upon The Perfect Strategy

Daily Brief: BlackRock’s Record-Setting Haul Suggests It’s Hit Upon The Perfect Strategy

almost 3 years ago3 mins

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BlackRock – the world’s biggest investment firm – reported better-than-expected earnings on Thursday, and the announcement was one for the record books.

What does this mean?

Investors piled a record $172 billion into BlackRock’s funds last quarter – particularly into bond funds, which have benefited from higher yields. Throw in rising stock markets that pushed up the value of the firm’s investments, and the amount of money under BlackRock’s management hit a record $9 trillion. And since the company makes most of its money from the fees it charges on that pot, the all-time high drove a 17% jump in profit last quarter compared to the same period last year – as well as yet another record high for the firm’s share price.

BlackRock extends earnings surprise streak

Why should I care?

Zooming in: BlackRock loves it when a plan comes together.

BlackRock is the world’s biggest provider of exchange-traded funds (ETFs), which passively track groups of investments. But the firm’s also working hard to attract more investors to its lineup of “actively managed” funds, which – given the constant tinkering they demand from fund managers – earn the company more in fees. That strategy seems to be paying off: a third of the money invested with BlackRock last quarter went into actively managed funds.

BlackRock stock
Source: Google Finance

The bigger picture: ETFs aren’t going anywhere.

Still, BlackRock’s ETF business – which, alongside Vanguard’s and State Street’s, is one of the world’s biggest – is as much a priority as ever. That’s especially true since investors have piled a trillion dollars’ worth of new cash into ETFs over the past 12 months. But spare a thought for their smaller competitors, which are merging with one another to avoid being crushed by the big three. Case in point: French fund managers Amundi and Lyxor decided to combine last week, creating what will be the second-biggest ETF player in Europe.

Keep reading for our next story...

Delta Air Lines Reported Its Fifth-Straight Quarterly Loss

Delta Air Lines reported its fifth quarterly loss in a row on Thursday, but the world's biggest airline reckons the cabin fever might finally have broken.

What does this mean?

The beginning of the year still looked bleak for the airline industry, with coronavirus cases and travel restrictions on the rise. So investors weren’t exactly surprised when Delta reported a $1.2 billion loss last quarter. But they finally got some good news: bookings have been climbing as more potential jetsetters get their vaccines, and Delta even started generating cash again for the first time in a year last month.

That’s come as a relief to the airline, which now thinks it’s officially turned a corner. And with its domestic leisure bookings at 85% of pre-pandemic levels, it might well be right. So even though international and business travel are some way off getting back to normal, the airline was willing to double down: it stuck to its previous forecast that it’ll turn a profit in the third quarter of the year.

Delta passenger yield
Source: The Wall Street Journal

Why should I care?

The bigger picture: Delta chops off one head, two grow back.

Delta’s massively boosting its capacity in anticipation of a bumper summer, and it’s not the only one: American Airlines is planning to offer 90% of the domestic seating capacity it did before the pandemic. Combine that with the arrival of two new low-cost airlines – Avelo and Breeze Airway – that are starting US flights this year, and competition in the industry could be about to get hot hot hot this summer.

Zooming out: Stimulus checks are the gift that keeps giving.

Then again, there are more than enough itchy-footed customers to go around – especially now they have a $1,400 government stimulus check burning a hole in their pocket. If they have any of it left, that is: new data out on Thursday showed US retail sales rose by nearly 10% in March, suggesting they’ve been more than happy to spend big already.

US retail sales
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