貝萊德 (BLK) 2013 Q2 法說會逐字稿

Good morning.

My name is Susan, and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the BlackRock Incorporated second-quarter 2013 earnings teleconference.

Our hosts for today's call will be Chairman and Chief Executive Officer Laurence D. Fink; Chief Financial Officer Gary Shedlin; and General Counsel Matthew Mallow.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer period.

(Operator Instructions)

Thank you, Mr. Mallow, you may begin your conference.

Thanks very much.

Good morning, everyone.

This is Matt Mallow, and I am General Counsel of BlackRock.

Before Larry and Gary make their remarks, let me point out that during the course of this call, we may make a number of forward-looking statements.

And we call your attention to the fact that BlackRock's actual results may differ from these statements.

As you all are aware, BlackRock has filed reports with the SEC, which lists some of the factors that may cause the results of BlackRock to differ materially from what we say today on the call.

BlackRock assumes no duty and does not undertake to update any forward-looking statements.

With that, I will get out of the way, and let the call begin.

Gary?

Thanks, Matt, and good morning, everyone.

It's my pleasure to be here to present our second-quarter results for the first time as CFO of BlackRock.

Today I will provide some opening comments on our financial performance, and also reference selected pages from our earnings supplement, which has been posted on the BlackRock investor relations website.

I will be discussing primarily as-adjusted results.

These results exclude, among other items, the financial impact of a significant charitable contribution in the second quarter, which I will review in more detail shortly.

Finally, I will outline some changes we made to our earnings release to improve transparency and facilitate a better understanding of the drivers of our Business.

As I discussed at investor day a few weeks ago, we are focused on three key drivers of shareholder value -- organic growth, operating leverage and capital management.

Despite some market volatility over the last six weeks of the quarter, we delivered on each of these drivers, resulting in a strong quarter and continued earnings growth.

We generated second-quarter earnings per share of $4.15, up 34% compared to 2012.

Operating income was $982 million, 18% higher than a year ago, reflecting record base fees in the quarter and continued margin improvement.

Non-operating results reflected a $22 million increase in the market value of our seed and co-investments, as well as a $39 million non-cash pre-tax gain relating to the PennyMac IPO, which we disclosed in our first-quarter 10-Q.

The second-quarter as-adjusted tax rate was 27.3%.

During the quarter, we benefited from a number of discreet tax items totaling approximately $29 million, which were primarily attributable to the realization of loss carry forwards.

For planning purposes, we continue to believe that 31% is an appropriate run rate based on what we know today.

Underpinning our results was continued organic growth, which we achieved despite a challenging market.

In the second quarter, we generated approximately $12 billion of net new long-term flows.

As Larry will discuss in more detail, these flows continue to demonstrate the diversity of our multi-client platform, as our retail and institutional channels drove our organic growth this quarter, offsetting the outflows experienced in our iShares business during the month of June.

Despite the fact that organic growth for the quarter was below our stated target, we generated approximately $130 billion of adjusted net new long-term business over the past 12 months, representing a 4% organic growth rate.

Because 83% of these net flows were generated by our retail and iShares channels, our organic revenue growth was even higher, as these channels have higher effective fee rates compared to the Firm's overall average fee rate.

As you can see on page 10 in the supplement, second-quarter revenues were $2.48 billion, up $253 million or 11% from a year ago.

Base fees reached record levels on the back of historically strong markets and organic growth.

We experienced year-over-year base fee growth across all traditional long-dated asset classes.

In the second quarter, we continued to experience strong performance across a number of our single strategy hedge funds, contributing to a significant year-over-year increase in performance fees.

Lower performance fees versus the first quarter were a result of seasonal factors.

Given recent market volatility and the majority of funds that lock in the second half of the year, we will continue to update you on performance throughout the year.

Our BlackRock Solutions franchise continued to benefit from robust activity.

Revenues in the second quarter were $138 million, up $7 million compared to 2012.

Our Aladdin business benefited from continued trends favoring global investment platform consolidation, and clients seeking multi-asset risk solutions, while our FMA business saw momentum from ongoing regulatory change, especially in Europe.

The Aladdin pipeline remains strong, especially driven by demand from asset managers.

And while year-over-year results were impacted by the timing and recognition of certain fees, we continue to expect mid-teen growth rates for the business.

Securities lending revenue grew 21% versus the first quarter, led by seasonal demand, but declined on a year-over-year basis as a result of spread compression.

Turning to page 12 of the supplement, expenses were up $103 million year over year, driven primarily by revenue-related items, including direct fund expense and compensation.

This was a 7% increase from a year ago compared to an 11% increase in revenue over the same period, and resulted in an operating margin of 41.3%, 210 basis points higher from a year ago.

We continue to believe that scale is critically important to our Business, and we see scale advantages in a number of areas -- growing our passive business, leveraging our brand spend, offsetting technology costs to our Aladdin business, and absorbing the increased cost of regulation and compliance.

In particular, as we indicated last quarter, we will continue to invest in our brand, especially when there is an opportunity to deliver important messages at a time the messages will have the most meaningful impact.

As such, we increased our brand spend in the second quarter to levels more consistent with the year-ago quarter.

We still expect our full-year brand investments to be in line with 2012 levels.

Our margin has recently benefited from positive mix shift and rising global market levels.

However, in the last six weeks of the quarter, we witnessed outflows in certain high-margin products, and a decline in market levels.

As we emphasized during investor day, we remain committed to dual objectives -- running the Firm as efficiently as possible, while also investing for future growth.

While our margin will fluctuate as a function of mix shift and beta, we remain confident that we can maintain minimum margins of 40% in stable market conditions.

We remain committed to using our cash flow to optimize shareholder value [as] the first priority to invest in our Business.

In May, we announced the acquisition of MGPA, a private equity real estate investment advisory company.

This deal will double the size of our real estate advisory business, and extend its reach to Asia-Pac and EMEA.

The acquisition will not be material to earnings per share, and is expected to close in the third quarter subject to customary regulatory approvals and closing conditions.

While not included in the current quarter, on July 1 we completed the acquisition of Credit Suisse's ETF business with assets under management of $16 billion.

This acquisition will extend our footprint in the Swiss market, and bring a broader range of opportunities to Swiss investors through our iShares platform, while also adding an array of complementary products to serve our clients across Europe.

Our capital management policy remains consistent.

We repurchased approximately $250 million of shares in the second quarter, matching the value of shares we repurchased in the first quarter.

As we have previously stated, in the current environment, we would expect to continue this level of repurchase for the remainder of the year.

Before I turn it over to Larry, I want to address the impact of PennyMac on our quarterly results, and some changes to our earnings release.

Between 2008 and 2012, BlackRock made a series of investments in PennyMac, a leading national mortgage lender and servicer.

In May, PennyMac completed an initial public offering.

BlackRock was not a seller in the IPO.

However, as a result of the IPO, we recorded a non-cash non-operating pre-tax gain of $39 million related to the carrying value of our equity method investment, which is included in our as-adjusted results.

As Larry will discuss more fully, subsequent to the IPO in June, BlackRock made a charitable contribution of approximately 6 million units of our PennyMac investment to a new donor-advised fund.

The fair value of this contribution was $124 million, and is included in G&A expense on our GAAP income statement.

In connection with the charitable contribution, we also recognize an additional non-cash non-operating gain of $80 million, and recorded a net tax benefit of $57 million.

Among other items, the financial impact of the entire charitable contribution has been excluded from as-adjusted results.

Page 28 of the earnings supplement details the financial impact of both the PennyMac IPO and related charitable contribution.

Going forward, BlackRock will continue to account for our remaining 20% PennyMac holding as an equity method investment.

Finally, as some of you may have noticed, we have made some changes to our earnings release.

Given the diverse nature of our multi-client platform, we feel that our AUM and flows are best viewed and analyzed through a comprehensive lens.

With that in mind, we have added incremental AUM disclosures by client and product, in order to provide greater transparency on our business drivers, including the addition of average AUM data based on relevant month-end averages.

Given this additional disclosure, we have also decided to discontinue the reporting of our net new business institutional pipeline.

This decision is not meant to signal any change in the outlook for our institutional business.

In fact, our pipeline at July 11 was $49.3 billion, up $13.9 billion from April 11, with a mix of business largely in line with prior quarters.

We trust these changes will facilitate a better understanding of our overall business.

With that, I will turn it over to Larry.

Good morning, everyone.

Thank you, Gary.

Thanks for joining us today on this call.

Before we start, I would like to reiterate how excited I am to have Gary on board.

He has been a close partner of mine, and advisor to BlackRock for many years, and it's great to have him as a full-time member of our team.

Let me begin with a little market context.

What started out as a relatively steady first two months of the quarter for markets took a turn in late May, following a series of global events, all within a concentrated period of time.

The Fed's comments on May 22 suggesting a change in narrative, a change in the idea of tapering their bond purchasing program, led to markets aggressively selling off of the [long] end of the curve.

What we witnessed to see also was a rapid sell off from leveraged investment products.

At the same time, growing uncertainties surrounding Japanese policymakers going all in on their stimulus efforts triggered approximately a 20% three-week sell off in the Nikkei after a very large run up.

Finally, continued market worries about Chinese growth and emerging market capital flows sparked a downturn in emerging markets.

These events drove a material uptick in market volatility, and we saw different types of investor react in different ways, highlighting the stability of BlackRock's multi-client platform.

In fact, we saw very little in the ways of changes from our largest institutional clients, as they remain committed to their long-term investment objectives.

We did see a market change in trading-oriented investor behavior, particularly with respect to long-duration fixed income and emerging market equity exposure, as those clients used liquidity in our iShares products to reposition their portfolios.

Many of these macro and policy concerns that attracted attention in the markets remain, along with the ongoing political uncertainty of the Middle East, are likely to continue to drive global capital market volatility.

However, I remain just as constructive on the long-term upside of US equities as I have been over the last two years.

We have spoken frequently about the benefits of our diversified business model at BlackRock, and we saw strong evidence of that again this quarter -- generated record long-term base fees of $2.1 billion and long-term net inflows of approximately $12 billion, taking our flows to $51.4 billion year to date.

We benefited from the diversity of the client segments we serve, the diversity of our product set, and the diversity of the geographies in which we operate.

During the quarter, we had 11 funds across retail and iShares generated more than $1 billion in flows.

These funds did not include our traditional growth engines global al and equity dividend, which I believe showcases BlackRock's highly scalable product breadth, with representation across all major classes, client segments and, importantly, geographies.

In recent quarters, iShares delivered a substantial portion of BlackRock's overall organic growth.

This quarter, it was our retail and institutional businesses driving growth and offsetting iShares outflows.

Positive net flows in the quarter were led by multi-asset products, unconstrained fixed income, and retail alternatives, three key areas of focus where we have been investing to building market-leading position.

Our flows also reflect the benefit of our broad platform and BlackRock's global reach, with positive contributions from both our active and passive franchises, and strong flows in our India and Asia-Pacific regions.

Before I walk through the results, I would like to take a minute to discuss some macro trends that have been a key driver of flows at BlackRock, and I think will continue to drive BlackRock's coming quarters.

This is about the great rotation.

The great rotation in equities has been much discussed.

We are seeing a rotation at BlackRock, but it's not from fixed income into equities, it's a rotation within fixed income.

Over the past several quarters, we have been warning our clients about the asymmetric risk in their fixed income portfolios.

The 30-year bull market, which I was witnessing through my career, in fixed income products has meant that more than a generation of investors had never seen the losses in their fixed income portfolios.

In the past few months, obviously that started to change.

10-year yields spiked more than 100 basis points from the lows of early May through the first week of July.

And the Barclay aggregate bond index fell nearly 5% during the same period.

There is a great rotation we believe is going to be out of core Barclay aggregate-type products, the types of products that have been benefiting from duration extension in the past, but are now sources of increased risk.

We expect to see flows moving into more flexible, non-traditional fixed income products.

Industry flows into flexible bond products across the industry has increased seven-fold year to date versus the same period last year, while flows in more traditional bond categories have fallen as great as 80%.

We built BlackRock on our reputation in fixed income.

We let that performance get away from us in 2008.

And we spent a great deal of time rebuilding the performance platform at BlackRock.

We fixed the Business over the past few years, and I'm proud to say that we are well positioned in fixed income space, more than we have ever been, and we are now ahead of most of our competitors.

As of the end of June, we are outperforming in a number of key fixed income areas.

We've seen strong recent outperformance in our total return fund, which is a top decile for the one-year period, and should prove to have a better defensive position relative to our peers.

Our low duration bond fund is a top quartile for a three-year period of time is in the sweet spot for yield-starved investors searching for some strong performance with minimum duration risk.

And perhaps most importantly, our unconstrained strategic income opportunity fund, our SIO, is in the top quartile for one- and three-year period.

SIO is designed to provide yield, capital return and downside protection in diverse interest rate environments.

It took in more than $1.6 billion in the quarter, and now has $6 billion in assets.

We are very encouraged by the retail adoption of this product.

As we introduce the fund outside the US and to institutional investors, SIO is well positioned to be one of BlackRock's largest and most important products in the coming years.

So, across the board, we are well positioned to benefit from the changes in fixed income.

We have developed strong offerings across unconstrained, across floating rate alternatives, and multi-asset categories.

For example, this quarter we launched the Asia floating rate income fund, which was designed to protect against rising rates, and we saw more than $300 million in flows.

In the alternative space, we saw $1.1 billion of US retail flows in our global long/short credit mutual fund, a product designed to eliminate interest rate risk, and provide credit-driven solutions.

Our multi-asset income fund, our MAI, has been a strong fixed income substitute.

It's five-star go-anywhere income solution that continues to see strong momentum, taking in more than $1 billion for the second consecutive quarter.

As investors begin to more fully appreciate the risk in their fixed income portfolios, we have the solutions our clients need; we are well positioned to reap the benefits of the rotation within fixed income.

The types of outcome-oriented solutions I just discussed have been a key driver in our retail and institutional client businesses, which generated healthy flows despite the challenging investment landscape.

In retail, our diversified platform continues to deliver results.

This quarter we generated $5.1 billion in net inflows with key themes of income, alternatives, and outcome-oriented solutions driving positive results across all geographies.

US retail and high net worth had long-term net inflows in the second quarter of $3.5 billion.

I just mentioned SIO, MAI, and our global long/short credit fund, all of which netted north of $1 billion in net flows in the quarter.

Alternatives are rapidly moving into the mainstream, as the funds we launched in the past two years have more than $2.5 billion in AUM, having raised $1.1 billion in our second quarter.

During the quarter, we also launched the emerging market allocation fund, an innovative, actively managed product leveraging our 12 separate emerging market teams that create product breadth that few, if any, of our competitors can match.

International retail, we saw long-term net inflows of $1.6 billion, reflecting global consistency in targeted growth areas, including strong multi-asset, fixed income and alternative flows.

Multi-asset net inflows demonstrated increasing interest in our global allocation, managed volatility and dynamic asset allocation offerings, as retail investors looked for us at BlackRock to provide them solutions to address the market volatility.

Let me turn to fundamental equities.

It still is a mixed story.

However, we are pleased with the strong start we are seeing in some of our new managers, in US fundamental equities and across the board.

In our basic value fund, a great example of the turnaround, over 275 basis points of outperformance in the past six months.

Our European equities continue to strengthen, led by our top decile performance across a number of our funds, including our euro market fund, offset by outflows in our natural resources where we had a dominant position and remain to be dominant, but where we are seeing outflows in commodity type products.

And we saw outflows in our UK equities.

What I am particularly pleased to be set up when we see a refreshed inflows, and that is in our emerging market equities.

One of our new managers has been with us close to two years now is Andrew Swan, who continues to outperform, beating the benchmark by more than 300 basis points year to date.

Our global allocation fund, which has performed very, very well while managing risk exposure, for the last rolling 12 months, it earned over a 12% return to our investors.

Let me turn to institutional where we generated $7.8 billion in long-term net new business.

Flows are driven largely by a combination of continued shift to passive, and demand for multi-asset solutions.

The tone of our conversation with institutional clients remained positive, as evidenced by clients adding to positions amidst all this market volatility.

This also speaks very loudly how our clients are looking for BlackRock for helping them to provide solutions.

In that sense, we are seeing barbelling that continues to be a dominant theme, with large strategic clients investing in both equity and fixed income index mandates, alongside alternative solutions to achieve uncorrelated returns.

Institutional active products saw positive flows for the first time in eight quarters, with $1.3 billion of net inflows.

Strong multi-asset flows offset fundamental equities and active currency challenges.

We benefited from our proactive client dialogue around regulatory changes, as the implementation of RDR-like regulation in Europe drove a large, highly customized multi-asset strategy sub-advisory win for the quarter.

We expect to see more types of opportunity, working alongside our distribution partners as they try to respond to RDR, and we believe we will see more sub-advisory type of relationships as that continues.

Once again, our key growth sub-segments, specifically defined contributions and official institutions, continue to be strong contributors.

We generated $4 billion in our target date LifePath product in the quarter, which now nets over $7 billion in new flows.

We also saw more than $6 billion of flows from official institutions, primarily into passive equity mandates.

We continue to evaluate ways to connect our products and clients for the overlay of risk management through BlackRock Solutions and our Aladdin platform.

Our Aladdin business continues to grow, with multiple successful implementations, and an expanding client base, much of which is global in nature.

As Gary mentioned, we continue to expect mid-teen revenue growth in our Aladdin business.

We signed a record number of advisory assignments in Q2, and we continue to see opportunities to have clients use Aladdin, especially now with the new regulatory environment we are all living in.

We also announced during the quarter the alliance with MarketAxess, which will allow our clients to tap into a deeper liquidity pool for US credit from the Aladdin platform.

We remain well positioned across BlackRock solutions, and our financial advisory business continue to showcase the differentiated and strong multi-client platform.

We were recently retained on two new assignments that speak to our unique analytical capabilities.

The first is the assignment on behalf of Her Majesty's Treasury to provide advice on Royal Bank of Scotland, and the second is a significant country-wide banking diagnostics.

We are proud to be a trusted advisor for global leaders when they are faced with issues involving significant financial complexities.

We also work very closely with all the regulators related to the implementation in terms of new focuses on risk management, leverage ratios, and we believe with this greater and greater scrutiny, more and more clients are going to be looking for Aladdin as a source of risk management tools.

Now, let me turn to iShares.

As Mark Wiedman, who runs our iShares business, told you at investor day, iShares are used as both an investment vehicle, but also it's used as an exposure tool by our clients.

Amidst market volatility in June, we saw clients again turn to iShares to express their views, in this case on emerging markets and long-duration fixed income.

In the three weeks following May 22, clients redeemed nearly $15 billion in iShares.

The ability to exit quickly, the ability to exit efficiently and in bulk is part and parcel of our value proposition to an important client segment, a trading-oriented investors.

These investors prefer iShares as the broadest, most liquid suite of ETFs.

They use iShares when they want to take on fresh risk, as they did earlier in the year and the fourth quarter of 2012, and when they want to exit as they did following the Fed comments on tapering.

The consequences is that our quarterly flows and our flow market share will be volatile.

Since quarter end, the flows have reversed, with more than $6 billion of inflows through yesterday, and more than $30 billion of net flows year to date.

In fact, despite the volatility we saw in June, we are running at the same rate of growth as we did last year.

Last year we saw a summer swoon in our ETF market.

We love our position in our business, and we expect the same type of future.

But importantly, we look to longer horizons.

Over quarters and years, our market share of assets have been stable.

In 2012, for instance, we grew in line with the global industry, with 27% AUM growth and a 14% organic growth.

The flows in the second quarter reflect the fact that iShares delivered the liquid market exposure that our clients expect.

This was true even in the products that experienced the most selling pressure, including emerging market equities and fixed income ETFs.

EEM, our flagship emerging market fund, traded a record $5 billion in a day, all in the secondary market without any creations or redemptions.

Similarly, for the first time we saw a $1 billion-plus trade-in day in our leading US corporate ETF like HYG and LQD.

So, overall, our products performed in a challenging period, but we welcome continued dialogue around the mechanics of ETFs.

We are constantly working with market makers and exchanges to ensure that ETFs are working appropriately.

As the market leader in the industry, we believe we have a responsibility to lead the charge on market practices and investor education, not just with respect to iShares, but in the ETF market globally at large.

Turning to the business results for global iShares, we ended the quarter with $1 billion in net outflows.

We've seen a healthy start in the third quarter, with $6.2 billion in net inflows through July 16.

iShares base fees of $723 million represents a 21% year-over-year increase.

Fixed income outflows was $1.5 billion, driven a rotation out of a long-duration fixed income.

We also experienced outflows in our commodity-like products of $2.2 billion, in line with the macro pressures in that segment.

Equity net inflows in our ETF products was $2.7 billion, showcasing the breadth of our offerings, as outflows in emerging markets products were offset across the franchise.

A key driver in our new flows was our minimum volatility equity suite, where we launched a new marketing campaign during the quarter.

This set of products offers investors equity exposure with flatter peaks and valleys.

It's an innovative solution that we developed in-house, and we raised more than $7.6 billion since the launch of this product only two years ago.

Let me just also add, regionally iShares results were supported by strength in Europe and Latin America, offsetting the weakness that I talked about in the United States.

EMEA iShares retained its leading position with $2.5 billion in net inflows.

Flows were led by equities with $2.2 billion in net inflows.

We actually had our 25th consecutive month of positive ETF fixed income flows in EMEA.

Overall, we remain very pleased with the direction of our iShares business.

However, we must remain aggressive in pursuing new opportunities through both product innovation and tapping into new market segments.

Let me give you three examples.

First, we recently launched our fixed income iShares bond series targeted towards traditional fixed income investors.

Second, we launched our core series products, which we designed for the buy-and-hold segment, and we delivered $3.6 billion of net positive flows in the quarter.

And third, last quarter we announced our long-term strategic alliance with Fidelity to provide access to iShares in the self-directed segment.

And that partnership is off to a great, great start.

In summary, iShares provides solutions both for investors focused on liquidity, and those looking to build long-term portfolios using beta products.

We believe that we continue to be in a secular bull market for ETFs and that, as a market leader, we will both drive the growth and benefit from the growth of the market.

I will wrap up my comments with a few other significant events that occurred during the quarter.

Our brand campaign continues to drive increased awareness and recognition, and we backed it up with targeted marketing towards our key investor segments and products.

We are helping our clients to answer the question to what to do with their money, and we are focusing their attention on the solutions they need to be successful in the current investing environment.

We are also trying to remind our clients that their objective is, in most cases, about retirement.

The noise we saw in the last six weeks truly has little consequences in terms of their long-term objective needs.

And as I said earlier, we have not seen investor behavior change by what I call our traditional long-term clients.

I think our ad campaign is helping our clients understand that we need to be focused not on the noise of the day, but on the objectives over a long cycle.

As Gary discussed, during the quarter we used a portion of our ownership stake in PennyMac to fund a philanthropic entity by seeding a donor-advised fund.

As a leader in our community, as a leader in the industry, we are committed to the well being of our communities where we live and work.

This new charitable initiative will deepen our commitment to public responsibility that has always been fundamental to our Business.

We expect the fund to be operational in early 2014, and will be a cornerstone of BlackRock's philanthropic efforts, including, among other things, helping to promote financial education for low income families and individuals.

I would like to personally congratulate and thank Stan Kurland and the entire PennyMac team for the work they have done in building that business, and creating value that will benefit BlackRock shareholders for the years to come.

Finally, in June we hosted our inaugural investor day.

Our goal was to provide more exposure to the depth and talent of our team, and provide a deeper dive into the growth prospects for the Firm.

I have been fortunate to be surrounded by a talented and dedicated global team for many years, and that team is a key driver of our performance and growth.

As the results this quarter shows, even in periods of volatility, we have a platform designed to deliver for both client and shareholders.

We are well positioned to benefit from long-term market trends, including the rotation within fixed income space, with our unconstrained alternatives, and multi-asset offerings, as well as the continued shift to passive and the use of beta products to generate alpha with our iShares business.

We will continue to strive to stay ahead of secular changes, and put our clients in a position to meet their investment goals.

We have an exiting opportunity in front of us to execute on the growth plan we laid out a few weeks ago.

I believe that growth plan is intact, and I believe we will continue to drive the types of growth rates we discussed in much more detail during investor day.

I would like to thank everybody, and all the hard work for all the employees.

And with that, I will open it up for questions.

(Operator Instructions)

Michael Carrier, Bank of America.

Larry, one question on the fixed income business.

You gave a lot of detail.

In terms of BlackRock, how you are set up from a fixed income product mix, what is your offering when you look at the mix of the core products versus what you characterize as the alternative or the flex products?

And also from a fee perspective, if we continue to see more of that shift over time, what tends to be the fee rate in those products versus some of the more core products?

On the unconstrained type of products, the margins or the fees are higher than our core products.

I wouldn't say dramatically higher.

As we see more and more growth, obviously we will look to change that but right now the fees are higher than our core products and as I said for the one and three-year period of time, after fees, we have out performed our peers in that.

So, that is one positive thing.

We are going to have a lot of clients who aren't going to be able to move out of core.

We have great performance in our core offerings also.

It's my view that more clients should be moving more toward the unconstrained type of products and I do believe you are going to see more and more investors moving in that.

Let me also add, two thirds of the fixed income assets are held by institutional clients.

They are generally slower in terms of movement but I do believe the dialogues we are having more and more institutional clients are asking the question how should they be looking at their fixed income portfolio.

As I said in my prepared speeches, we had a 30 year bull market.

People were very accustomed and very convinced of having their assets in a core product was a foundational component of their fixed income allocation.

I think that is -- that will change over time.

I think we'll be a big beneficiary of that change but as I said, institutions are slow to adapt.

They have to work with their consultants.

I don't mean that in a negative way.

They have to act as a fiduciary making sure they are -- they need to make sure that they are meeting the needs as a fiduciary.

But importantly, also, many of our fixed income investors, whether they are insurance companies or other types of organizations, they are looking to match their assets to their liabilities.

So a lot of fixed income investing is liability based investing and those type of investors are not, they are going to -- they are not unhappy with rising rates if their liabilities are moving alongside with that.

That's why we are here to say there is going to be a rotation.

It could be large in some segments of fixed income owners and in some segments it is going to be much less.

Okay.

That's helpful.

As a follow-up, you mentioned some of the volatility in May and June and how the ETFs performed.

On the fixed income side, you mentioned the relationship with MarketAxess, you announced something with Tradeweb, during that same period of time, May and June, given the regulations, dealers holding less inventory, any insight in terms of is it a big fixed income player, how the markets performed and based on those relationships, what you guys are trying to do longer term?

Sure.

That is more related to iShares.

Yes.

One thing that is very clear, people are using -- I think one of the big trends that even surprised me, many investors use iShares and fixed income for beta exposure.

Sometimes some investors used to use some form of derivatives and swaps and other forms of options.

Now they are using ETFs.

That is one of things that was designed.

There was no question during those few moments during late June, there was periods of pretty poor liquidity in the fixed income market, especially in credit.

I'm not particularly alarmed about this.

I think the street has done a very good job of trying to manage their balance street issues, managing their leverage ratio issues, managing their capital issues.

We, as long-term investors, are going to have to deal with this.

This is why I believe more and more fixed income will be traded on electronic platforms in the coming years and I think we will find a new source of liquidity.

But in the short run, there are bouts of ill liquidity that the entire market, and I want to underscore the cash part of the market, the ETF component of the market, we saw periods of times of ill liquidity.

As I reflect now in more calm periods today, what I am particularly surprised at how well the exchanges and the market participants of fixed income ETFs performed.

As I said, we saw $1 billion of flows in one day.

The creates and redeems worked very well.

There was periods of time during the day where there were appearances of discounts but all that was an indication of where the cash market was going.

Obviously there is many cases in which -- in global bonds where markets were closed overseas and the ETF market from that close looked like a discount but it was really telegraphing where the markets were going to go the next morning.

So, we were very pleased with how they performed.

Nevertheless, as a market leader, we are doing whatever we can to assure as great a market liquidity as possible.

It is our responsibility to educate and to inform, to making sure that we have a more liquidity market.

The overall fixed income market is going through this evolutionary change now as Wall Street is relying less on balance sheet, spending much more time on flow.

They are dealing with and developing their own electronic trading platforms, MarketAxess is another one, and as long-term investors, this is something that we are going to have to live with and adapt.

Got it.

Thanks.

Marc Irizarry, with Goldman Sachs.

Following up on fixed income allocations from institutions in terms of going from core to non-core products, how are fixed income ETFs playing into those discussions and following on the discussions around the, what sound like, market dislocations if you will that were temporary versus tracking your long-term fixed income?

Maybe you can talk about the market share opportunity.

Mark Wiedman here and he is going to be able to answer that question with a lot more granularity than I can.

So, Mark, why don't you answer that.

There are two things I think you listed in your question, let me address them separately.

The first is about growing adoption by what I would call fixed income specialists of fixed income ETFs.

Historically the users of fixed income ETFs have been wealth managers and asset allocators, call them generalist investors.

That's where the bulk, even today, of our fixed ETF holdings are.

What's the big transformation that is occurring is we are seeing fixed income specialists who control 98%, 99% of the global fixed income assets actually starting to use fixed income ETFs in their portfolios.

For liquidity purposes, they are using them for tactical positioning.

It's our aspiration with the iShares bond launch that we actually penetrate beyond the tactical position into longer buy and hold segments, whether they be in insurance, or bank, or corporate balance sheets or individuals around the world.

That is the broad trend and we see it everyday.

It gets a bit masked when you see people flowing out of an asset class because it looks like they are exiting the ETFs.

What they are doing is using the ETF in those tactical traders for the exact purpose of which they bought it, which is the ability to get out quickly when they want to.

The second question you are addressing is the -- Larry used the appearance.

I think that's the right word of a gap between the underlying and the ETF price.

I think the issue here is volatility you can see versus volatility you can't.

What ETFs do is they shine a light on intraday volatility in the underlying asset class, the cash market, the underlying securities.

An optical gap can open in the short term versus net asset value which is the industry convention by which we, for example, even ETFs we report the value.

It's important to understand that's because the NAV depends on historical pricing.

It's a disciplined, conservative tool for valuing securities at the last known transaction price.

The problem is in fast moving markets, those prices go stale.

So, if you are talking about the example of overnight equities, emerging market equities or Japanese equities, for example, the ETF will keep repricing based on news during the day.

We have seen this historically in 2011 after the nuclear disaster in Japan.

We saw it recently with the sell off in Japan that our leading ETF for Japan, EWJ, keeps trading as if it's a continuous market with the Nikkei in Tokyo.

So that's the first part.

The second thing is on the bonds.

You have to understand that the prices in the NAV are recorded at historical last transaction.

What that means is, for example, in our high yelled ETF, the leading one, HYG, 30% of the underlying securities are priced at NAVs three months or more old.

30% of those prices are 3 months or more old.

That is the industry convention is how we price our ETFs for disciplined conservative valuation practices.

But it creates optical illusions versus the underlying cash markets because there are securities in which there haven't been transactions.

That is the basic issue.

We believe our securities have performed -- actually our ETFs in particularly high yield and emerging markets performed better than they ever have.

That's why our clients are happy to be using them and that's our key take away.

Okay.

Then if you can give some color on your EM, active EM business, both in equity and debt.

Obviously we have seen a good bout of volatility here.

Are you sensing or seeing from your clients any change in thinking about being active in EM versus passive in their allocations toward EM?

A core group of our investors believe active management EM is part of their core philosophy and this is why we have been so aggressive in building our EM fixed income team and our EM equity team and EM, as I suggested, our EM alternatives.

We did have a $500 million win in our EM fixed income team.

This is on the active side.

As they talked about Andrew Swan in terms of his out performance in a component of that.

But there is another core group of investors and some of them, the official institutions, they are investigating in EM principally through beta products.

So, our job, as I said for many quarters, is to provide an active solution and a beta solution.

Marc, I have not seen any dramatic shift out of beta into active or vice versa.

I think those who believe in active will continue to invest in active and those who believe in -- who want exposure and they are not as concerned about excess performance, they will go into beta.

Larry, on the active equity business, the flow trends, they look like they decelerated or improved sequentially a little bit.

How much of the improvement is redemptions slowing versus wins in active equity?

Are you seeing the end of the bout of redemptions or is it gross sales picking up?

I think a lot of it, a lot of the redemptions are the component of when we transition our managers, we expect large out flows.

And so some -- obviously that is behind us.

Our investors are starting to see the positive turn around.

We have probably more dialogue than ever before.

Some of our trends we are seeing continued flows in European equities where we have a five, three, and one year track record that is in top quartile.

And, so, some of it is -- it's a combination of both.

The other thing that we are seeing, we continue to see more and more interest in multi-assets where clients are looking for equity exposure but in more of a multi-asset type of strategy where you can navigate around.

So, the other thing is it's undeniable.

Our scientific active equity team has had great results.

I expected to start seeing more in flows but we aren't seeing any out flows as you suggested.

I think it's fair to say the out flow drag is probably behind us and now it's opportunity.

Great, thanks.

Robert Lee, KBW.

Question going back to capital management on the debt side.

How are you thinking about managing the debt side of the ledger?

I think you had around $750 million of some notes that matured.

Should we expect that the objective is to chip away at outstanding debt overtime as part of the capital management strategy?

Rob, it's Gary.

How are you?

So, our next maturity is in December.

So, we are a little more than a year away from that.

That is about $1 billion.

We are obviously monitoring.

There is the constant trade off.

I would say there is two trade office, one is basically trying to get a feel for where we think rates are going to go and spreads over the next 16 months.

So, we are going to be very mindful of that.

We are also mindful of the negative carries.

We are going to try and balance both of those items in terms of having an outlook and understand the negative carry.

But we are certainly not going to play that too cute.

So, whether it's next month or six to eight months from now, that remains to be seen based on our continued analysis.

We are very mindful of it.

I know you didn't provide the balance sheet and I could be mistaken.

I thought you maybe had some floating rate notes that matured back in April or May and I was curious how you --

Those were pre-refinanced last year at the time of the Barclays buy back.

Okay, great.

Follow-up question on Aladdin, I want to make sure I understand how some of the new business flows.

You talked about having strong pipelines and expecting double-digit growth there.

Am I right in assuming that there is some up front costs as you bring on those mandates so that maybe it takes a while for profitability on the new mandates to flow through.

With that, given the strong growth you've had there the last couple of years, should we be expecting some acceleration over the coming years in Aladdin's growth?

As we said, both Gary and I said, we expect double digit revenue growth.

Obviously it's lumpier.

Over the course of a year we expect that.

We signed five new mandates in the first quarter and five new mandates in the second quarter.

We have never seen this type of volume.

We are about to sign one of the largest mandates we ever had.

As I said, more and more institutions are looking to take on Aladdin as their risk management solution and this is asset managers, this is official institutions, insurance companies.

So, we continue to see huge upside and opportunity to build Aladdin.

We crossed the button of the $14 trillion mark in terms of assets that we are now analyzing risk on behalf of our clients.

It continues to be an industry leader.

I believe as an industry leader, because of the increased regulatory issues that we all have to face, having a risk system that is across product, that encapsulates regional issues, regional differences, compliance issues, it allows investors, especially the more regulated investors to deal with the regulatory compliance in a far better way than they would have otherwise -- especially in Europe as you have each country now adapting regulatory issues a little differently.

The regulatory issues that we are all facing, BlackRock included, is enormous.

If we did not have at BlackRock -- I'm going to speak for ourself for a second -- if we didn't have a mono line platform of risk management, risk understanding, mono line platform of -- in terms of trade entry, trade discovery, inventory management we would have far more difficulties.

One of the reasons why we continue to have better than industry average in margins has been because of having this technology in face of all the regulatory added needs we have to face.

Our competitors who are asset managers obviously have the same issues.

They are now becoming our clients.

They are facing the same issues and they are trying to achieve the same type of simplicity and operating structure that we have at BlackRock.

We are happy to make them our clients.

Rob, I would just add specifically that the year over year comparison in terms of it being up 5% was to your question is definitely the result of timing and recognition of renewals and implementation fees.

There is no question there is some timing issues in there.

To Larry's point on the pipeline, I would say the one very good piece of news is while we are adding -- we added five clients in the first quarter and five new clients in the second quarter.

The run rate of revenues for that group of clients is increasing fairly dramatically.

In fact, in the pipeline as Larry mentioned, the run rate of those new clients is even greater than the second quarter.

Great.

Thanks for taking my questions.

Bill Katz, Citigroup.

Thanks very much for the ad disclosure and the shorter prepared remarks.

We appreciate both.

I thought I went too long.

Much better than the last few quarters, Larry.

In terms of the money market, you didn't really touch on it.

I know you covered it at the analyst day recently, but there has been no more movement by the IRS and I'm curious what has been the feedback from your client base as they have had a chance to ruminate a little bit on some of the proposed changes by the SEC and what might be the behavior around any of these changes?

As I said during the investor day, I don't think we are going to see that much change.

This has been so well telegraphed, if we get the IRS changes as you suggested, we need the DOL changes.

That is something that is going to be very important.

If we get these changes which I think are coming forth, we have been working closely with the regulators as they finalize this.

They have asked for input as they have asked for other peoples input.

We are providing input to the regulators from input that we have had from our clients.

As I said, this is so well telegraphed we are going to have some clients we're going to have to move more to the government oriented funds.

They require some form of guarantee or some sort of backstop and they have to have a constant NAV.

Some clients are going to be able to adapt to have a floating NAV.

The reality is, Bill, because we publish every day now what our NAV is, it really has almost an employed floating NAV even today.

As our clients are watching -- all clients that are in money market funds, they are saying how the NAV is staying much more constant.

The industry has done a very good job of self policing itself.

So, I think much of this is already in the marketplace.

One last thing, we have a final comment letter is due in September.

As I said, we are getting feedback and we are providing that feedback to the regulators from our clients.

As I said on investor day, I'm very calm about this.

Helpful.

Quick question for Gary.

I heard you on the $250 million is a good run rate in terms of repurchase.

With the stock trending where it's at right now and your earnings building, how do you think about on a go forward basis?

The real question is as you think about the share count, should we expect that to continue to migrate lower or will that start to stabilize at this point?

I think we are obviously going to continue to try and be as consistent and predictable in terms of our capital management policy, Bill, as we possibly can.

As I said, the run rate for the moment, I think we feel very comfortable with the $250 million a quarter.

We are going to try and be really systematic about that as opposed to overwhelmingly opportunistic.

With that, I would expect for basically the second, the third and the fourth quarter you'll expect the share count to come down and obviously generally it gets offset in the first quarter of the year based on employee comp issuance.

Overall, you will see that count continue to come down.

We have not discussed this with our board.

This is a discussion that we would have in our later board meetings but it's very clear that as long as we generate the free cash flow that we are generating, Bill, which obviously will grow as we grow earnings, it would be my expectation the board would authorize us to continue with the process of reducing our share count.

That is subject to a conversation.

We do have board authorization for 7 million, 8 million more shares outstanding right now.

But right now our board has agreed to the current rate that we are purchasing right now.

Just pay attention to our free cash flow.

We don't need to discuss any more.

One point of clarification.

Thanks for taking my questions.

The $6 billion you got on iShares quarter to date, did you provide dynamics of where that is coming in to in terms of products?

I might have missed that.

No, we did not.

It's all public data.

Mark, quickly answer that.

Broadly distributed.

I don't have off hand the numbers for core series by assets.

The -- into where they have come but I will give you one example of how the core series is achieving its purpose relative to more high velocity trading vehicles.

We launched IEMG, which is our low cost broad EM exposure vehicle, lower liquidity, doesn't have the derivatives of ecology of its big sister EDM.

IEMG launched in October is nearly $2 billion.

That money kept flowing in even during massive out flows out of EEM.

What that shows is there are two different segments, there are consistent buyers coming in a trickle and then you see other buyers and sellers who are moving in and out much faster.

I would say look at the core series for a long-term investment trends so we can get you that data.

It is out there public.

Then for -- you look for more fast money products like EM and HYG.

Thanks very much, guys.

Matt Kelley, Morgan Stanley.

Thanks for taking my questions.

Two quick ones for me.

I would be curious to get your comments on the demand for allocation funds from segment into institutional and retail demands.

As you think about financial advisories and you think about institutions, where is the increase or decrease at the margin in pick up in demand and how are your EM allocation funds fitting within that as well?

EM allocation fund that we discussed?

So where we see clients looking for BlackRock to do the allocation, these are generally fiduciary mandates where we are working alongside with them and we are working with them.

We are seeing a rise in fiduciary types of businesses.

Principally these allocation types of products are retail oriented products.

That's what they are designed for, where that is where we are seeing in the RIA channel and other channels where clients are looking to have these types of products.

In global al, obviously that is a very large-scale retail product and it is expanding now in the RIA channel in itself.

So, one should not expect large scale institutional money moving into these types of products.

For those clients who are looking for investor decisions as a fiduciary, that will continue to be a larger business of ours.

In fact, in this week's P&I there is a whole article about fiduciary business, talking about how that is a growth area in the investment management business.

That's where we are going to continue to see that.

The other area where we see it, Matt, is in our defined contribution or LifePath business where, as I said earlier, we had another $4 billion of growth, $7 billion over the quarter.

This is where we are taking that investment decision or allocation process.

As a follow-up, I saw some news out that BlackRock is considering the launch of a Swiss fund range.

I know that is something that you touched on in the Swiss market at your investor day.

So, when you think about that, what have you set up and what do you still need to set up?

Are all the pieces in place, now it's about execution and distribution?

Mark?

I think what you are referring to is we acquired the Credit Suisse ETF platform.

That gave us a platform in Switzerland.

The primary rational for that was offering Swiss ETFs to Swiss buyers who, for tax reasons, can't by usage funds.

It is important to understand that gives us a foundation which we will be building on for offering a broader Swiss compliment beyond just ETFs in Switzerland.

Just to follow-up on that, I was actually referring to the broader launch.

I'm not sure if that is something you can comment on.

In Switzerland -- we are a big believer in Switzerland.

We believe, whether it's in Swiss Franks, whether it is specifically the investment management platform we have in Switzerland, I think you are referring to our Swiss country manager spoke about launching of some Swiss oriented product, Swiss based and that's just a continuation of our desire to build a stronger presence in Switzerland.

Excellent.

Thanks for the clarification and for taking my questions.

Ken Worthington from JPMorgan.

Hi, good morning.

First on sort of Barclays ag versus unconstrained, how much capacity do you think there is in this unconstrained market?

It seems very intuitive that you would see the switch from core to alternative.

Is there enough supply to absorb this meaningful potential demand?

From my perspective the investment process is no different than managing an ag.

Obviously it requires more flexibility, a lot more technology making sure that you are managing to the level of risk that you want to take.

But there are many competitors in this product.

JPMorgan has a great product.

PenFed has a product.

Our product.

I believe the capacity in the industry is in the trillions.

I think this is going to be a very large component of the future bond market.

And I look to key participants to be a big player in it.

We happened, as you noted in your research report, we have really great one and three-year performance.

We continue to drive great performance in this area and we are continuing to see accelerated flows in these products.

Great, thanks.

2Q I think you opened your prepared remarks saw two very different markets, April, May was very different than June.

I think it was mentioned that the tone with many clients has not changed.

But I assume with some clients it has changed.

I would say, maybe first, with which clients has the conversation or the tone changed and what actions do you expect them to take because of the change in rates, particularly on the unintuitive side?

You mentioned Barclays ag to unconstrained but are there other areas where you are seeing leading indicators for change, whether it be dividend stocks, real estate, FX products by retailer, institutional, any other things worth highlighting there outside of unconstrained versus Barclays ag?

When we see these shifts in attitude, when you see 100 basis point movements in rates, you certainly have an accelerated dialogue with your clients.

Even our most deliberate of clients who are looking at long-term solutions, they required a lot of handling also.

They ask many questions but overall, as I said, institutionally we did not see much behavior change.

As I said, reiterated, the dialogue we are having related to movement out of core products into unconstrained is one consistent dialogue.

I would say two or three more trends that we had with our clients, one is we continue to see more questions related to bar belling.

The volatility reminds clients, frightens clients that markets can move very rapidly, very violently.

Bar belling becomes a bigger component of what the clients are asking.

As a result of that, we have not seen any slow down in the use of index products or beta products.

We are also seeing more and more clients looking for more uncorrelated type of products, equities, fixed incomes and other types of products.

Some of our alternative products we have a lot of dialogue in that.

The key to -- every time you have these bouts, clients have to relook at how much ill liquidity they can afford.

One of the key things -- one of the key things that I think clients, why they are moving towards more beta products is these bouts of ill liquidity frighten them and you have more structural liquidity in index based products.

That trend has not changed.

The other thing -- on the same side, as an indication of the bar belling, we have more than $3 billion of ill liquid commitments in our pipeline.

So, we continue to see the same type of behavior but the need for hand holding, the need to talk about long-term solutions became more and more apparent during these bouts of ill liquidity and during the great change in rates and the psychology of rates.

We have not seen much behavior change in dividend stocks.

Globally you still continue to see -- you didn't see any real out flows in dividend stocks as the industry.

I think they were a great example of showing less beta.

Surely show less beta on the upside and they showed less beta downside during the market set back.

Now we are back to almost the highs again.

The key for us is to provide consistency in our messaging to our clients.

As I said, our hand holding has to be consistent and we have to talk to our clients above the noise.

In ETFs, I think Mark and his team -- because Mark and his team deal with a lot of clients more in the component of the iShares is more the fast trading people.

His team had to have very different dialogues.

So, once again, it speaks loudly of the diversity of our clients at BlackRock but the core institutional clients behavior didn't change.

Obviously we saw a lot of hand holding need in retail.

Probably the greatest hand holding needs were in the iShares area where we saw the extreme volatility where people were using these products for beta exposure and in the case of June it was negative beta exposure, not positive beta exposure and that's okay.

Great, thank you very much.

Luke Montgomery, Sanford Bernstein.

You touched a lot already on the ongoing debate about whether ETFs help of hurt liquidity during times of stress, I think particularly with asset classes like fixed income where underlying OTC liquidity is thin and getting thinner.

If I could ask you to be as objective as possible, to what extent would you acknowledge that we are in unchartered territory because this is an open question and do you think the naysayers make any good points and what could go wrong here that would damage your reputation as an ETF vehicle in the minds of investors and what keeps you up at night?

This is a great question.

I'm going to listen to Mark first and I'll give my response after.

Hi, Luke.

I would say the first thing is we have learned we have a lot more work to do in educating clients and other stakeholders about how these vehicles behave, what does the current market price actually represent versus, as I mentioned, values and the like.

A lot in educating people how the tools work.

The good news is the clients who use the tools are all very happy with how they actually perform.

So that's the good news.

It's a lot of work in educating a very broad group of people, including clients about how the actual vehicles work.

I think one of the things that I think is underlying is that expectations of market liquidity on ETFs require a little bit of clarification.

The minimum liquidity of an ETF is the underlying liquidity of the asset class less arbitrage cost, that is the minimum liquidity.

If the underlying is the liquid, the ETF itself also might be ill liquid.

But, some ETFs create additional secondary liquidity, which Larry mentioned aggregate EEM, for example, $5 billion.

We see it every day with our Russell 2000 product, IWM, which trades huge sums every day which you could never trade in the underlying.

So, there is additional liquidity creation.

Those are the kinds of -- that distinction there I think is important for people to understand so if you are trading in an obscure asset class like some Yemeni securities, you should expect --

We don't trade in those.

Not yet.

Basically that ETF will also be a liquid.

It doesn't just by becoming an ETF have magical liquidity.

I think that key distinction is the number one thing we need to get out there in the market place for people to properly understand how these vehicles are supposed to perform.

I would add the markets, there is heightened scrutiny of ETFs right now, which I actually believe is a good thing.

There is no question during the moments of stress there was heightened inquiry related to the flows and the quality of the markets of ETFs.

We welcome this type of scrutiny.

It's this type of scrutiny that, in my mind, helps us strengthen the market for the future.

I am not here to suggest I don't lose sleep over our commitments in the ETF market.

It's a large commitment.

We have a lot of responsibility for the fluidity of this market, for the success of this market.

I don't take that responsibility lightly.

I know Mark and his team does not take that responsibility lightly.

We believe the potential ETFs, as we stated in some BlackRock research, would be greater than $2 trillion.

We believe this will continue to grow and, so that responsibility is only greater to assure that this market performs as we described.

As Mark suggested, it requires a lot of education and education can go only so far.

We need to make sure that our regulators are updated continuously.

We have to make sure that all our competitors are taking that fiduciary responsibility as importantly as we do.

We need to make sure that the quality of the products can withstand the test of time, the tests of bouts of ill liquidity and the test of time of variances in the markets.

If we can achieve that, the trends that we see by investor behavior, the ETF market will be more than $2 trillion which is a great opportunity for the entire market.

Mark is now telling me $5 trillion.

We are at $2 trillion now globally.

We are going to $5 trillion.

Up to $5 trillion.

There is a great opportunity to continue to build that and as I said from our viewpoint despite the noise, the ETF market performed very well, especially when you consider the underlying ill liquidity.

It's so important to note and I have to reiterate it, I think that point was not understood.

The fact that we were able to trade $5 billion of EEM without creating or redeeming adds $5 billion of market liquidity.

You didn't have to put $5 billion of stocks into the marketplace.

I think that is a very important component of these products.

I should also remind people, when you have at the end of the day big in flows or out flows of mutual funds, you don't have that recreate and redeem, that then results if there is redeems, that then creates out flows and stock pressure.

So, let's not think of iShares or ETFs as something very different.

It's just flowing 24-7 or during the market time opening where in the mutual fund at the end of the day.

I'm just trying to say, the markets are very similar, one is much more transparent.

Having the ability to do that creates a redeem through the market makers, is a very powerful differentiating feature.

I think that is the last of the questions, Operator.

Is that correct?

Ladies and gentlemen, we have reached the allotted time for questions.

Mr. Fink, do you have any closing remarks?

No.

As I said repeatedly, what makes me very proud at leading this firm is the diversification of our platform, our multi-client platform, having multi-products, global distribution, risk management in times where we saw big outflows in one business, we saw big in flows in another business really illuminates how this platform has been built and really allows us to be a very differentiated player in the world of investing.

Thank you, everyone.

Thank you for your patience.

Thank you for all the time you have given us today.

Have a good quarter.

This concludes today's teleconference.

You may now disconnect.