Blackrock

BlackRock ended September 2026 with a record $15.488 trillion in assets under management, up 0.9% sequentially and 15.5% year over year. The firm benefited from solid flows for its active and exchange-traded fund platforms, more than offsetting market losses during the third quarter.

Why it matters: BlackRock continues to outperform its traditional asset management peers from an organic AUM growth perspective with its mix of index funds and ETFs, while an expansion of the firm's private capital platform has only added to its ability to generate positive flows on a more consistent basis. Net inflows of $175 billion during the third quarter represented an annualized organic AUM growth rate of 5.2%, just above the top end of our annual target rate range of 3%-5%. We expect we'll see lower rates of growth from most of BlackRock's peers when they report their third-quarter results. The iShares platform remains the biggest driver of flows for BlackRock, with the company picking up $135 billion in net inflows, equivalent to an 8.6% annualized organic AUM growth rate, from its ETF business during the September quarter.

The bottom line: We expected the third quarter to be difficult, given how both the equity and credit markets traded off after the Fed raised short-term rates last month and signaled that more hikes could be coming, with the US equity markets increasing just 2.3% while the US bond markets declined 3.4% during the period. We expect to leave our $1,280 per-share fair value estimate for wide-moat BlackRock in place. We view the shares as modestly undervalued right now, trading at around a 15% discount to our fair value estimate. We remain conservative with our near-term assumptions for BlackRock and the rest of the US-based asset managers, believing that the ongoing Iran war, as well as US fiscal and monetary policies, will keep the equity and fixed-income markets more volatile (with a good chance of a downward move in the markets) in the near term.

In the third quarter, BlackRock delivered double-digit year-over-year increases in AUM, revenue, operating income, and earnings per share, with most of these measures reaching record levels. Third-quarter GAAP revenue increased 19.1% year over year to $7.8 billion on higher average AUM, slightly higher fee rates, and a larger contribution from the alternatives business.

Ongoing client demand for private markets, active ETFs, and systematic products continues to lift the fee rate on net long-term flows (which exclude cash management flows). In particular, the company's generation of $169 billion in net long-term inflows during the third quarter represented 11% annualized organic base fee growth. 

Performance fees of $630 million during the September quarter represented a 22.1% increase over the $516 million reported in the year-ago period, driven primarily by the firm's alternatives segment. Quarterly technology services and subscription revenue (which includes the Aladdin and Preqin operations) was up 14.2% year over year to $588 million. Annual contract value increased 12% year over year, with the firm remaining committed to its target for low- to midteen annual growth in this metric.

BlackRock's adjusted revenue, which excludes pass-through fees like distribution and investment advisory fees that are distributed to third-party partners, increased 18.7% year over year during the September quarter to $7.0 billion. Adjusted operating income, which excludes expenses tied to deferred cash compensation plans, acquisition-related costs, certain lease costs, and net income (loss) attributable to noncontrolling interests, increased 27.1% to $3.3 billion during the third quarter. 

This was equivalent to an adjusted operating margin of 47.8%, up 315 basis points year over year. For the first nine months of 2026, BlackRock generated an adjusted operating margin of 46.2%, which was 240 basis points better than the results from the year-ago period. Employee compensation and benefits expense, which tends to be the biggest expense line item for asset managers, represented 31.5% of revenue, compared with 36.2% in the year-ago period, as BlackRock continues to benefit from its expansion into the alternatives segment.

BlackRock's adjusted earnings per share of $15.93 for the third quarter of 2026 were up from $11.55 in the year-ago period. This was much better than the FactSet consensus estimate of $14.32, as well as our own forecast of $14.50 (with most of the difference on our end due to higher performance fees and lower expense ratios than we were forecasting for the period). 

Looking more closely at BlackRock's flows during the third quarter, total equity inflows of $52 billion were driven primarily by $51 billion in positive flows from the firm's ETF operations and $25 billion from its active equity fund offerings, offset by $23 billion in outflows for its institutional equity index platform.

Equities remain BlackRock's largest asset class category, accounting for 57% of firmwide AUM—spread across its active (4%), institutional index (22%) and iShares (31%) platforms—at the end of September 2026 and 51% of base management fees during the third quarter. Given the meaningfully higher fees BlackRock charges for its active equity operations (of 42 basis points right now relative to 18 basis points for iShares equity ETFs and 3 basis points for its institutional equity index offerings), improvements in the investment performance and/or organic AUM growth in the active equity segment tend to be beneficial to base fee growth.

The key to keeping flows positive in the firm's active equity operations is to have the group's three-year and five-year investment performance results in the upper quartile consistently. BlackRock ended the September quarter with 65% of fundamental equity funds above their benchmarks or peer medians on both a three-year and five-year basis, which explains the improved flows we've seen from the firm's active equity fund platform of late—noting that the performance was a big improvement on the 51% and 42% of fundamental equity funds that were above their benchmarks or peer medians on a three-year and five-year basis, respectively, at the end of March 2026.

Actively managed systematic equity funds, which have historically posted better performance numbers and flows than BlackRock's fundamental equity operations, had 93% and 95% of AUM beating their benchmark or peer median on a three-year and five-year basis, respectively, at the end of September 2026. This has been responsible for keeping client demand for systematic products elevated, which has contributed to the rise in fee rates on net long-term flows at the firm.

BlackRock's fixed-income platform, which accounted for 22% of firmwide AUM—spread across its active (8%), institutional index (5%), and iShares (9%) platforms—at the end of the September quarter, as well as 18% of base management fees during the period, posted $78 billion in net inflows for the third quarter. Total fixed-income organic AUM growth was driven by $66 billion and $14 billion in positive flows for BlackRock's ETF and actively managed bond operations, respectively, offset by $2 billion in outflows for its institutional index offerings.

Active taxable fixed-income performance has recovered to the point where 85% and 84% of taxable bond funds came in above their benchmark or peer median on a three-year and five-year basis, respectively, at the end of the third quarter of 2026, despite the impact of the Fed's tightening on the US bond markets. The tax-exempt portion of the company's fixed-income portfolio continues to struggle, though, with 58% and 47% of assets above their benchmark or peer median on a three-year and five-year basis, respectively, at the end of the September quarter.

As for the remainder of BlackRock's asset class exposure, the company generated positive flows with its multi-asset ($5 billion) and alternatives ($39 billion) platforms, which accounted for 9% and 3% of total AUM, respectively, at the end of the third quarter of 2026, as well as 7% and 15% of base management fees during the period.

While not included as part of its long-term AUM (or organic AUM growth), BlackRock reported a record $1.101 trillion in money market fund AUM at the end of the September quarter. Inflows of $31 billion for the firm's money market operations during the period were not too surprising, given that we saw total industry money market AUM remain elevated at $7.891 trillion at the end of the third quarter, up 2.0% from $7.733 trillion at the start of the year and 7.1% from $7.365 trillion at the end of the year-ago period.

Looking at a few corporate-level action items, BlackRock came into 2026 expecting to spend $450 million per quarter (or $1.8 billion during the year) on share repurchases, with management noting that the firm would increase its allocation to buybacks if shares traded at a significant discount to intrinsic value. During the first and second quarters, the company bought back $450 million worth of its common stock, but then announced in July that it would be repurchasing at least $550 million of shares per quarter in future, which is what happened during the third quarter.

As for the dividend, BlackRock increased its quarterly dividend by 10% to $5.73 per share (from $5.21) early in the first quarter, and we don't expect there to be any adjustments before the first quarter of 2027. The firm's current payout implies a yield of 2.1% based on a closing price of $1,066.12 per share on Oct. 13, 2026. We forecast the company's dividend to increase at a mid-single-digit rate annually over the next five years, leaving the payout ratio (based on our forward earnings estimates) at 35%-40% on average annually during 2026-30.

For more insight into the trends and other issues affecting the traditional asset managers, which influence our long-term forecasts for firms like BlackRock, please see our latest Industry Pulse, "US Traditional Asset Managers: 2026 Q3," which was published on Sept. 18, 2026. We also have a broader industry primer available for the US-based asset managers in our annually updated Industry Landscape, "US Asset Managers," which was last published on Dec. 18, 2025.

We've raised our fair value estimate for BlackRock to $1,280 per share from $1,200 to account for improved expectations for fee-earning AUM, revenue, and profitability since our last update. Our revised fair value estimate implies a price/earnings multiple of 22.5 and 19.5 times our adjusted earnings estimate for 2026 and 2027, respectively. For some perspective, during the past five (10) years, BlackRock has traded at an average trading multiple of 21.0 (20.2) times trailing earnings on an adjusted basis, with the highest (lowest) multiple being 24.9 (14.1) times. We use a 21% US statutory corporate tax rate and a 10.2% (9.8%) cost of equity (weighted average cost of capital) in our valuation.

BlackRock exited June 2026 with $15.345 trillion in AUM, up 22.5% year over year. Net long-term inflows of $335 billion during the first half of the year represented an annualized organic AUM growth rate of 5.2%, just above the top end of our annual target range of 3%-5%. The iShares platform remains the biggest driver of flows for the firm, with BlackRock picking up $310 billion in net long-term inflows, equivalent to an 11.3% annualized organic AUM growth rate, from its ETF business during the first two quarters of 2026. We expect the firm to generate around 5.0%organic AUM growth during 2026, with the company closing out the year with more than $16.0 trillion in managed assets.

Our outlook for BlackRock has organic AUM growth expanding 5.2% on average annually during 2026-30, which is just above our target range, driven by better equity flows, as well as a more meaningful uptick in bond fund flows and alternatives fundraising. With fee compression expected to be on par with what we've seen during the past decade and the firm expanding its higher fee-generating alternatives platform, while also growing its technology and risk management operations, we are projecting 10.1% top-line growth on average annually during 2026-30 (up from 9.5% previously).

We also assume more growth and stability in BlackRock's operating profitability than we expect from its peers during the next five years, owing primarily to the scalability of its passively managed ETF operations. We envision the firm generating adjusted operating margins in a 44%-50% range during 2026-30, compared with 43.1% last year and 43.8% on average annually during 2021-25.

We project a bull-case fair value estimate of $1,980 per share and a bear-case valuation of $770 per share. The key factors affecting our scenario analysis include the firm's ability to expand its ETF franchise, as well as the expected change in its overall realization rate as a result of this growth and changes in BlackRock's overall product mix.

Our upside case implies a price/earnings multiple of 24.4 and 21.2 times our adjusted earnings estimate for 2026 and 2027, respectively. This scenario assumes that growth efforts pay off more than in our base case, with revenue at a 12.2% compound annual growth rate during 2026-30. We also assume that the company's ETF platform, which is significantly more scalable than BlackRock's core asset management business, and its higher fee-generating alternatives business, become even larger parts of the company's product mix, with adjusted operating margins averaging around 50% during our five-year forecast.

Our downside scenario implies a price/earnings multiple of 19.4 and 16.8 times our adjusted earnings estimate for 2026 and 2027, respectively. In this case, we assume BlackRock struggles to generate organic AUM growth with both its active and passive offerings, with revenue growth affected by less robust AUM levels and declining fees for most of its product offerings. With the firm more dependent on market gains for AUM growth, the net result is a 7.6% CAGR for revenue during 2026-30. We also assume BlackRock's adjusted operating margins drop below 45% and stay there over the course of our five-year forecast period.

We believe the asset management business can be conducive to the development of economic moats, with switching costs and intangible assets being the most durable sources of competitive advantage. Although the switching costs might not be explicitly large, inertia, the uncertainty of achieving better results by moving from one manager to another, and the potential tax consequences of selling a fund with significant gains have tended to keep investors in place. As a result, money that flows into asset managers tends to stay there.

For the overall industry, the average narrow retention rate, exclusive of exchange redemptions, was 75% or greater annually during the past 5-, 10-, 15-, 20-, 25-, and 30-year periods. Including exchange redemptions, the retention rate was greater than 70%. Firms offering niche products with significantly higher switching costs—like retirement accounts, funds with lockup periods, and tax-managed strategies—have tended to hold on to assets longer.

While BlackRock does not break out its gross sales and redemptions, we assume, based on its historical record of organic AUM growth, that the company's average annual retention rate has been somewhere around the industry's annual rate. During 2021-25 (2016-25), the firm's organic AUM growth rate averaged 4.6% (4.6%) with a standard deviation of 1.2% (1.5%), which meant the firm was, in most years, compensating for investor redemptions with net new flows into its products.

We currently expect the firm to generate 5.2% (4.9%) average annual organic AUM growth during 2026-30 (2026-35), with a standard deviation of 1.4% (1.3%). This is in line with management's long-term target for 5% annual organic AUM growth, as well as at the upper end of our long-term annual target range for 3%-5% growth.

We believe the traditional asset managers can maintain their switching costs advantage by leveraging their product variety, distribution networks, and global presence, along with their strong brands and record of generating above-average investment performance relative to peers. While the barriers to entry are not particularly significant for the industry, the barriers to success are extremely high. It takes time and skill to not only put together a long enough record of investment performance to start gathering assets, but also to build the scale necessary to be competitive.

As a result, larger, more established asset managers have tended to have an advantage over smaller firms, especially in gaining cost-effective access to distribution platforms. That said, we do not think a cost advantage moat source applies to the traditional asset managers—except in the case of index fund and ETF providers—as scale does not always confer better-than-average operating profitability, with the industry tending to behave as an oligopoly when it comes to pricing.

Competition for investor flows can be stiff and has traditionally centered on investment performance. Although institutional investors and retail gatekeepers are exerting pressure on pricing, price-based competition has been rare, aside from what we've seen in the US market for exchange-traded funds. While compensation remains the single largest expense for most asset managers, supplier power has been manageable, as many firms have reduced their reliance on star managers and tied manager and analyst pay to both portfolio and overall firm performance.

Asset managers that have demonstrated an ability to gather and retain investor assets across different market cycles have tended to produce more stable profitability, with returns exceeding their cost of capital for longer periods. While the more broadly diversified asset managers are structurally set up to hold on to assets regardless of market conditions, it has been firms with solid product sets across asset classes (built on repeatable investment processes), charging reasonable fees, and with singular corporate cultures dedicated to a common purpose that have done a better job.

BlackRock, in our view, has a wide economic moat. The company is at its core a passive investment shop, offsetting many of the secular headwinds facing the US-based traditional asset managers with a few tailwinds of its own. We believe the company's size and scale, the strength of its brands, and the diversity of its AUM by investment strategy, asset class, distribution channel, and geographic reach will continue to provide it with a leg up over the competition.

BlackRock is the largest asset manager in the world, overseeing $15.345 trillion in AUM at the end of June 2026, with 58% of AUM (50% of base management fees) in equity strategies, 22% (19%) in fixed-income offerings, 9% (7%) in balanced funds, 7% (6%) in money market funds, and 4% (18%) in alternatives.

Passive strategies make up two-thirds of long-term AUM, with the company's ETF platform, which accounts for 41% of managed assets (and 45% of base management fees), maintaining a leading market share both domestically (29%) and globally (29%) at the end of June 2026.

Product distribution is weighted more toward institutional clients, which account for around 80% of AUM. BlackRock remains geographically diverse as well, with clients in more than 100 countries and more than a third of its AUM coming from investors domiciled outside of the US and Canada.

Benefiting from a steady stream of investor inflows, driven by its ability to offer insights and expertise across multiple asset classes, a specialized distribution and client engagement model, low-cost fund offerings with repeatable investment strategies, and its existing relationships with large institutional clients, BlackRock has generated above-average levels of organic AUM growth on a more consistent basis.

Furthermore, the firm's cost-conscious culture has allowed it to consistently generate GAAP operating margins in excess of 35% (and adjusted operating margins exceeding 40%), one of the highest levels among the traditional asset managers we cover.

BlackRock is the largest asset manager in the world, with $15.345 trillion in AUM at the end of June 2026 and clients in more than 100 countries.

Product diversity and a heavier concentration in the institutional channel have traditionally provided BlackRock with a much more stable set of managed assets than its peers.

BlackRock's well-diversified product mix makes it agnostic to shifts among asset classes and investment strategies, limiting the impact that market swings or withdrawals from individual asset classes or investment styles can have on its AUM.

The sheer size and scale of BlackRock's operations could end up being the biggest impediment to the firm's long-term growth.

Despite accounting for 50% of total AUM, direct institutional client arrangements generate only 32% of BlackRock's base management fees, given the lower fee structure attached to these larger investment mandates.

While actively managed funds account for 24% of total AUM, they generate 42% of base management fees, increasing the pressure on BlackRock to get the performance of its active equity and fixed-income offerings on a more consistent footing.