貝萊德 (BLK) 2014 Q4 法說會逐字稿

Good morning.

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

At this time I would like to welcome everyone to the BlackRock, Inc.

fourth-quarter and full-year 2014 earnings teleconference.

Our host for today's call will be Chairman and Chief Executive Officer Laurence D. Fink, Chief Financial Officer Gary S. Shedlin, President Robert S. Kapito, and General Counsel Matthew Mallow.

(Operator Instructions)

Thank you.

Mr. Mallow, you may begin your conference.

Thanks very much.

Good morning, everyone.

I am Matt Mallow, the General Counsel of BlackRock.

And before Larry and Gary make their remarks I want to remind you that during the course of this call we may make a number of forward-looking statements and call your attention to the fact that BlackRock's actual results may of course differ from these statements.

As you know 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.

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

So with that let's begin the call.

Gary?

Thank you, Matt, and good morning, everyone.

My pleasure to be here to present our fourth-quarter and full-year 2014 as adjusted results.

Overall 2014 was another strong year for BlackRock's clients, shareholders and employees.

We continue to drive shareholder value by generating consistent organic growth, demonstrating the benefits of scale through our operating leverage and systematically returning excess cash to our shareholders, even in an increasingly volatile macroenvironment.

As Larry will discuss in more detail our 2014 results highlight the stability and diversification of our business model and evidence the significant investments we have made in recent years to enhance the depth and breadth of our global platform.

For the fourth quarter BlackRock delivered earnings per share of $4.82 and operating income of $1.2 billion.

Full-year earnings per share of $19.34 was up 17% compared to 2013 and operating income of $4.6 billion was 13% higher.

Non-operating results for the quarter reflected a $2 million decrease in the market value of our seed and co-investments, down $63 million year-over-year driven primarily by a reduced economic investment portfolio and lower gains from investments in our hedge funds and fund to funds vehicles.

Our 25.4% as-adjusted tax rate for the fourth quarter benefited from $39 million of nonrecurring items.

While we continue to estimate that 30% remains a reasonable projected tax rate for 2015 the actual effective tax rate may differ as a consequence of additional nonrecurring items that arise during the year.

BlackRock's fourth-quarter results were driven by $88 billion of long-term net new business, our highest ever quarterly net flows representing an annualized organic growth rate of 8.3%.

For the full-year 2014 BlackRock generated total long-term net new business of $181 billion representing an organic growth rate of 4.5%.

Together with net flows from our cash management business, BlackRock generated over $200 billion of net inflows for the year.

During 2014 we achieved organic asset growth of 11% in iShares, 11% in retail and 1% in institutional in-line with the growth targets we outlined at our June Investor Day.

This resulted in organic base fee growth in excess of organic AUM growth as we benefited from positive mix change associated with our faster growing, higher fee retail and iShares businesses.

Equally important, net long-term flows were diversified by asset class and region with positive flows across all categories for both the quarter and the full year.

Fourth-quarter revenue was flat with a year ago as growth in base fees and revenue from BlackRock Solutions was offset by a decrease in performance fees.

Full-year revenue grew 9% for 2013 driven by growth in base fees and revenue from BlackRock Solutions both of which reached record levels in 2014.

Fourth-quarter base fees rose 5% year-over-year as average AUM increased due to organic growth and market appreciation.

However, base fees were down 3% compared to the third quarter due to a lower fourth-quarter AUM entry rate, the continued impact of divergent beta and ongoing dollar appreciation against foreign currencies.

While the S&P 500 was up 2% on average during the fourth quarter the MSCI World was down 2% with emerging markets and natural resources indices lagging even further, down 8% and 12% respectively.

Such divergent beta impacts our financial results as only 34% of our equity base fees are generated in US markets.

In addition, ongoing dollar appreciation led to a $59 billion decline in long-term AUM in the quarter.

Performance fees for the quarter were $144 million driven by a broad sweep of single strategy hedge funds, real estate and hedge funds solutions offerings.

Performance fees decreased $124 million from the fourth quarter of 2013, which included a large fee associated with the partial liquidation of a closed-end [fund launch costs].

The decline also reflected relatively weaker performance across a variety of hedge fund products in line with broader industry trends.

BlackRock Solutions revenue of $170 million for the quarter was up 8% year-over-year and 3% sequentially due to increases in both Aladdin and FMA revenue.

Our Aladdin business, which represented 75% of BlackRock Solutions revenue in the quarter grew 9% year-over-year and 4% sequentially.

We completed a number of large global implementations in 2014 and expect continued business momentum from trends favoring global investment platform consolidation and multi-asset risk solutions.

Our FMA business ended 2014 with $161 million in revenues.

While revenues benefited from meaningful transaction-based disposition activity during the year, our business model remains well-positioned to help clients navigate and implement requirements attendant to CCAR and the new ECB single supervisory mechanism.

Total expense for the fourth quarter was flat year-over-year as increased direct fund expense was offset by decreased levels of G&A expense.

Full-year compensation expense increased $273 million, or 8% reflecting higher headcount and higher incentive compensation driven by higher operating income.

Importantly, our compensation to revenue ratio declined 30 basis points in 2014 to 34.2% driven by continued reshaping of our employee base and the benefits of scale across our platform.

Fourth-quarter G&A expense decreased $23 million year-over-year, or 6% reflecting lower professional services and other G&A expense and various lease exit costs included in the fourth quarter of 2013.

Sequentially, quarterly G&A expense increased $61 million primarily due to volatility in FX remeasurement, the planned seasonal uptick in yearend marketing and promotional spend, and closed-end fund launch costs associated with the $437 million BlackRock Science and Technology Trust.

Overall, total expense for 2014 increased 6% from a year ago compared to a 9% increase in revenue over the same period resulting in an as-adjusted operating margin of 42.9% for the full year, 150 basis point increase over 2013 levels.

Since closing the BGI merger at the end of 2009 we have expanded our operating margin by over 450 basis points while also significantly reinvesting in our business.

In line with that commitment on November 5, BlackRock entered into an agreement to acquire certain assets of BlackRock Kelso Capital Advisors, the external investment advisor to BlackRock Kelso Capital Corporation.

This transaction enhances our fixed-income platform through the addition of a middle-market private credit capability.

Pending BDC shareholder approval we expect the transaction to close in the first quarter of 2015.

During 2014 we returned approximately $2.3 billion to shareholders through a combination of dividends and $1 billion in share repurchases representing a total payout ratio of 71%.

As we enter 2015 we remain committed to a predictable and balanced approach to capital management.

Consistent with this our Board of Directors has declared a quarterly cash dividend of $2.18 per share of common stock representing an increase of 13% over the 2014 level.

Since instituting a dividend in 2003, BlackRock has grown its dividend on a compound annual growth rate of approximately 22%.

Our Board has also authorized the Company to repurchase an additional 6 million shares under our existing share repurchase program giving us authorization to repurchase a total of 9.4 million shares including 3.4 million shares which are remaining under our prior program announced in January 2013.

Our consistent earnings growth and stable financial results reflect the benefits of our differentiated global business model.

Fourth-quarter net flows were positive in both our active and index franchises as well as in each of geographic regions with $62 billion from the Americas, $15 billion from EMEA and $11 billion from APAC.

BlackRock's global retail franchise saw long-term net inflows of $23 billion during the fourth quarter bringing full-year inflows to $55 billion representing 11% organic growth for the full year.

As usual, fourth-quarter retail flows reflect a seasonal impact of reinvested capital gains distributions.

Fourth-quarter US retail flows of $21 billion were driven by strong fixed-income flows across a diverse set of products including our top-performing total return and high-yield franchises and our flagship strategic income opportunities fund.

SIO was the leading unconstrained bond fund in the fourth quarter with nearly $5 billion of quarterly net inflows.

Our multi-asset income fund, or MAI, continued its momentum with nearly $2 billion of flows of the fourth-quarter making it the top multi-asset income fund in the industry ranked by 2014 flows.

Fourth-quarter international retail net inflows of $2 billion were driven by BlackRock's fixed-income, multi-asset and index capabilities which more than offset headwinds and ongoing outflows from our European equities franchise.

Global iShares generated over $44 billion of net new business in the fourth quarter and approximately $101 billion for the year representing full-year organic growth of 11%.

iShares once again captured the number one share of global ETF industry flows.

During the fourth quarter iShares record fixed-income flows were broadly diversified by asset class, duration and geography.

We continue to aggressively target growth in the fixed-income ETF market and were the global leader in fixed-income inflows in 2014.

Fourth-quarter equity iShares flows of $24 billion were driven by flows into the Core Series with particular demand for US equity exposures.

The Core segment remains an important growth channel for iShares posting an organic growth rate of 30% in 2014.

Our institutional business generated approximately $21 billion in long-term net inflows for the quarter and $25 billion of net inflows for the year representing the highest quarterly and annual institutional flows we have seen in the past five years.

The investments we have made in our diverse global platform position us well to meet the ever-changing needs of a sophisticated institutional client base and we expect this momentum to continue in 2015.

Barbelling continues to be a key theme as institutional clients pair cost effective beta exposure with alternatives and other high conviction alpha solutions to achieve uncorrelated returns.

We continued to see sizable asset allocation driven flows both into and out of institutional index products resulting in net inflows of $20 billion in the quarter.

Institutional index equity flows were driven by clients looking to increase risk exposure while fixed-income inflows reflected asset allocation decisions and solutions based LDI activity.

Institutional active net inflows were paced by positive flows from fixed-income, multi-asset and alternatives.

Fixed-income net inflows of $3 billion were diversified across exposures and we continued to see institutional demand for our unconstrained strategies.

Multi-asset net inflows of $2 billion were highlighted by solutions based wins as well as continued demand for our LifePath target date suite.

Excluding approximately $600 million of returned client capital institutional alternatives generated nearly $2 billion of net new business led by hedge fund solutions and private equity solutions.

In addition, we had another strong fundraising quarter for illiquid alternatives raising nearly $3 billion in new commitments reflecting ongoing momentum in infrastructure debt and renewable power.

Over the last two years we have raised more than $12 billion in commitments and have nearly $9 billion dollars of committed capital to deploy for clients.

While return of capital impacts our net flows immediately, committed capital only translates into flows in AUM as those dollars are invested.

Outflows from both scientific and a fundamental active equities continued in the fourth quarter.

Despite strong performance client demand for scientific active equity remains muted.

Fundamental active equity outflows continued in products with historical performance issues.

However, these flows were partially offset by select wins in categories where our new managers are building strong track records including large-cap growth.

In summary, in a year marked by periods of increased volatility our diversified business continued to deliver solid and consistent financial results.

We remain confident that our differentiated business model is well-positioned to meet the needs of our clients and shareholders in the year to come.

With that I will turn it over.

Thanks, Gary.

Good morning, everyone, and thank you for joining the call.

2014 closed with heightened volatility due to political and social instability and that volatility obviously is continuing today and into the new year.

However, markets proved resilient in 2014 and the fourth quarter marked the eighth straight quarterly rise for the S&P 500 with data suggesting a rebound for the US economy.

As Gary discussed, US equity markets outperformed emerging European and Asian markets and certainly outperformed natural resource markets and the US dollar continued to appreciate relative to other currencies.

This market divergence is likely to persist in 2015 creating both large challenges and large opportunities for our investors.

Anemic global growth has led to an overdependence on politicians to implement reforms to rebuild the global economies.

But we've seen limited action globally from politicians and as a result we continue to rely on accommodative central bank policies, whether we are talking about Europe, China, Japan and even at this moment even the United States.

This will also put more pressure on the US dollar as it will rise higher as well as a mixture of regional policy successes and failures, again increasing more global volatility.

The technology revolution that most people always underestimate is so evident in the oil industry and through this technology the growth in supply of oil is outpacing demand which has led to a period of volatile price discovery in the petroleum markets with greater than a 50% drop in oil prices.

This is leading to a global redistribution of wealth which people underestimate how this is going to transform the world.

With the high cost of energy production the economy is experiencing major headwinds.

Countries like the US, like China, like India will be seeing huge benefits and stimulus and countries that have seen currency devaluations such as Europe in recent months will experience only modest and moderate gains.

We see more shocks as production decisions in the demand-side equilibrium but overall this oil price movement should be of great benefit for the global economy.

With a backdrop in divergent market performance volatility, regulatory reform, persistent low rates, our clients near- and long-term investment challenges are becoming more complex but our goals at BlackRock steadfastly remain the same.

We are a fiduciaria and BlackRock is well-positioned to address our clients' needs and deliver return for our shareholders in all market environments.

The combination of our global multi-asset platform, our insight and thought leadership and Aladdin, our unified technology and risk management platform has resulted in a more deeper client interactions than we have ever seen before.

It has also enabled our investment team to collaborate ahead of key macro events to both protect assets and in most cases generate alpha for our clients.

In the fourth quarter, BlackRock generated $88 billion of long-term net inflows, the strongest quarterly long-term flows in our history and for the full year BlackRock saw long-term net inflows of [$181 billion] (corrected by company after the call) and together with the net flows from our cash management business we generated more than $200 billion in net inflows in 2014.

But I want to emphasize one important thing.

It is not about the magnitude or the scale of the assets that we raised but I want to emphasize the composition of the flows, which we believe is much more important.

For the year we saw $35 billion in active and $146 billion in index flows.

We saw $52 billion in equities, we saw $96 billion in fixed-income, $29 billion of flows in multi-asset and $4 billion in alternatives where we had -- where we put the money to use.

We saw $55 billion of flows in retail, $101 billion of flows in iShares and $25 billion of flows institutionally.

And we saw these flows in all regions, from all investor types and importantly, in the face of a wide range of economic and investment conditions.

One thing I would like to highlight is there were 13 countries where we had net inflows of excess of $1 billion in 2014.

We now manage assets in excess of $1 billion for clients domiciled in 41 countries demonstrating the increasingly global and differentiating nature of the BlackRock platform.

In addition, we added our first Aladdin client base in Latin America and now have clients actively using the Aladdin system in 47 countries around the world.

As the nature of our clients' investment challenges change, so does the nature of the solutions they require.

More and more a single investment product, asset class or style does not provide a sufficient long-term solution.

BlackRock's business model, which was deliberately built to deliver a multifaceted solution to clients, and BlackRock's ability to leverage these capabilities across our truly diverse global platform of active and indexed equities, fixed-income, multi-asset and alternative strategies all backed by Aladdin analytics and risk management has resulted in continued organic growth and revenue growth for the firm.

BlackRock saw 27 distinct retail and iShares products each generating more than $1 billion of net flows in the fourth quarter.

For the year 56 individual retail and iShares products generated more than $1 billion in net flows compared to 43 such products in 2013.

The breadth of our platform is resonating with clients as they continue to seek a diverse set of global investment solutions.

As Gary mentioned, we made significant long-term investments over the past few years and our people, our process and our platform and those dividends and those investments have paid off in 2014 and I strongly believe this will continue to differentiate BlackRock overtime in an increasingly competitive industry.

The strength of BlackRock's fixed-income business is an area where past investments are translating into differentiating result for our clients and for our firm.

BlackRock was built on a foundation of superior fixed-income performance and now we have 91% of our active taxable [fixed-inc] platform outperforming the benchmarks or peers for the three-year period.

And no single category was a primary driver of the $96 billion of flows we gathered this year.

Active and index flows were diversified across high-yield, unconstrained and core bond offerings and positive across all client businesses.

And we saw several key buy list ads across categories in 2014.

Our flagship strategic income opportunity fund, or SIO, raised more than $13 billion in 2014 and we now manage more than $31 billion across our unconstrained fixed-income franchise for both retail and institutional clients.

BlackRock saw increased client interest in our total return fund, which is in the top 3% of our peer group for a one year, for three years and for five years.

Total return generated $2 billion of net inflows in the quarter and represents a meaningful long-term opportunity for us.

Fixed-income is also a core strategic priority for BlackRock's iShares, which led the industry in fixed-income ETF flows for the quarter and for the year driven by iShares constituting 15 of the top 25 fixed-income ETFs by net flows in 2014.

Assets across classes, BlackRock's iShares franchise, as I said earlier, generated more than $100 billion in net flows this year and was the industry leader in flows in the United States, in flows in Europe and in flows globally.

We continue to focus on growing global iShare market share and driving global market expansion and we expect client and product segmentation to drive the next wave of our iShares growth.

We saw $32 billion in flows in our global Core Series in 2014 as buy and hold investors are increasingly turning to iShare for efficiently constructing larger portions of their portfolio.

iShares are used as financial instruments where ETFs are providing a compelling alternative to individual securities, to swaps, to futures.

And we are seeing a strong initial progress in this newly formed area of the marketplace.

And clients are also using iShares as precision exposures to express targeted investment viewpoints to generate alpha with efficiency.

In the fourth quarter BlackRock kicked off iThinking, an innovative new initiative designed to help distill market insight into clear, actionable ideas for our clients in matching them with different iShare solutions.

We continue to be product innovation was evident in December when we launched our CRBN, or our low carbon targeted ETF, designed for individuals and institutions who are focusing on environmental sustainable activity.

The United Nations' Joint Staff Pension Fund and the University System of Maryland Foundation provided the initial funding for this ETF.

And BlackRock now manages more than $250 billion in socially responsible strategies across our global platform.

2014 was a turning point for our institutional business and as we enter 2015 with substantial momentum.

Our scale of our global presence enables BlackRock to interact with our increasingly sophisticated client base in a highly specialized manner and our financial institution group business is a great example.

In 2014, BlackRock was selected to manage mandates spanning multi-asset, fixed-income, infrastructure debt and full balance sheet outsourcing for global insurance clients driven by regulatory changes, by M&A and investors are looking for better ways to navigate in this low interest rate environment.

In conjunction with asset management mandates, many of these clients also chose to partner with BlackRock and Aladdin on an evaluation, on risk and advisory services, on even acquisition support through our BlackRock Solutions business.

BlackRock is the only firm in the industry that can bring all of these components together to meet the needs of our clients and we do this with dedicated relationships and with investment teams who speak with our clients in their own language, we understand their industry and we can partner with them to create their needs to provide the most proper solutions to their issues.

Another area where we are creating tailored outcomes is in the alternative space, particularly in the emerging Alternative Solution business where BlackRock is building a holistic multidimensional solution portfolio, leverages our full global platform.

We've seen strong fundraising across our illiquid alternative product set as a targeted strategy we laid out at investor day unfolds.

BlackRock raised nearly $6 billion in new commitments in 2014, across a variety of strategies including private equity, hedge fund solutions, opportunistic credit, renewable power and infrastructure debt.

We recently completed our annual institutional clients rebalancing survey, which indicated that institutions are looking to significantly increase allocations to real estate, including infrastructure.

In the fourth quarter BlackRock closed our second renewal power infrastructure fund, positioning us as one of the leading global renewable platforms in the industry.

2014, BlackRock raised commitments of nearly $800 million in renewable power and $1 billion in infrastructure debt.

Momentum in this space demonstrates BlackRock's proprietary transaction sourcing capabilities and ability to act as an extension of our clients' internal teams.

The tangible impact of the investments made to date in our renewable power fund is also being felt by providing energy and electricity to more than 100,000 households.

We continue to make progress on the reinvigoration and globalization of our fundamental active equity business, and have seen meaningful impact and performance for some of our clients.

We have seen a major improvement in the performance of our UK equity strategies.

We generated top quintile performance as we hit our three-year anniversary in our new management team in Asian equities, and our European equity strategies has posted leading market share and solid broad-based three and five-year investment performance.

The most recent leg of our investments in this area was focused on US equities.

We hired a world-class group of investors with strong processes and track record for generating alpha.

We are now in our second year of the investment and seeing good progress, and hopefully we will improve on our investment performance although we have a lot of work to do and quite frankly we are not at the space where I would like to be at this moment.

2014 was a challenging year for our active managers with only 20% of the industry US active equity funds outperformed their benchmarks.

We saw a significant rise in volatility in fourth quarter but it was encouraging to see many for active teams deliver strong performances in the environment, especially in December.

Our basic value strategy achieved top quintile performance since the manager inception.

Our large-cap series, the strategy has improved to a second quartile from a fourth quartile and our US opportunity strategy is in the top quintile over three years.

While our active business continues to feel the impact of clients balancing high conviction alpha strategies now with index exposures, the breadth and diversity of our platform and the presence of the only scale player in both active and index around the world will differentiate us in the ability to give our clients the full menu of solutions they need.

We expect investor preference to vary over time and BlackRock's ability to evolve alongside our clients is critical in the future for our success.

Before I open it up for questions I would like to take a moment to thank our employees for their hard work, incredible dedication in 2014 and helping our clients in the most complex investment challenges in the world by helping them provide solutions.

I would like to thank my entire management team, many of them who are thriving in their new role following successful organizational changes earlier this year, and I would like to recognize some of the milestones that BlackRock achieved in 2014.

In retail we crossed over $500 billion in assets under management.

In iShares in 2014 we closed with more than $1 trillion in assets under management.

In institutional we garnered the best flows that we've seen in over five years.

Since the financial crisis or essentially since the end of 2007, the final year of the pre-crisis earnings, BlackRock has grown EPS by 142% versus the S&P 500 growing at 76% and the S&P Financial Index growing at only 9%, highlighting both the differentiation of our business model and our ability to execute on key growth strategies.

All of the areas I have spoken about whether it is fixed-income, iShares, our financial institution group, alternatives, infrastructure, our active equity platform, all are areas where we made significant strategic investments over time and we will be seeing the impact of those investments over time to our shareholders and to our clients.

We will continue to make investments in BlackRock's future and keep very high margins and utilize the full scale of our Aladdin risk management and technology capabilities to meet our fiduciary duties to our clients and to deliver return for shareholders in 2015.

With that, operator, let's open it up for questions.

(Operator Instructions) Luke Montgomery, Bernstein.

I think obviously some unusual dynamics have been helping the institutional fixed-income ETF usage but it is a question really about the long-term opportunity.

You have been adding talent the sales force there.

I think given the need for customized portfolios and immunization of specific liabilities in that context, how do you envision fixed-income ETF shares fitting into institutional portfolio construction?

I think it's a question about how you characterize the value proposition rather than any liquidity challenge they might help address in the fixed-income market.

That's a good question.

I'm going to let Rob Kapito answer that.

So the fixed-income ETFs have been in increased demand as people are learning about the product.

We are still in the early stages not only of institutions using the product but retail using the product as well.

So there are very -- there are three segments.

There is the buy-and-hold segment where people are using ETFs as a part of their fixed-income portfolio for the beta and fixed-income and we have products that are focused on that.

The second thing is that as the financial markets change, ETFs are a surrogate for many financial instruments that have because of regulatory reasons and liquidity reasons, become very expensive and they are surrogates for example in swaps and futures where ETFs are now being used in fact more than futures are being used.

And as people learn about that they add that into their portfolios.

On the other side of that, they are also being used as we call it, precision instruments, where people are looking for a specific allocation and ETFs provide that specific precision tool for them to be investing in.

So this is just the beginning of where fixed-income ETFs go and as you know, the fixed-income markets are much larger than the equity markets are, so we just see continued growth in that.

So for retail we are attacking that by adding on to our Core Series where we are adding products that can offer the full suite to what a retail investor would need over the long term in ETFs, whether that be in high-yield, in corporates, in treasuries or just generic fixed-income.

And then on institutions because they are looking for more of a trading vehicle and they are looking for the transparency and they are looking for the liquidity, we are adding more specific type of precision instruments for them.

So I would tell you that the demand to learn about ETFs grows and grows and we just think this is a market that we are very positive on going forward.

And also for portfolio managers that are managing large portfolios, getting the beta exposure from ETFs is cheaper.

It is more diversified and it is more liquid than the alternative.

I might add that is really important when you are in a low interest rate environment like we are in.

So we look forward to more growth in the fixed-income and to be the leader in the ETFs in that area.

And one other point, fixing ETF utilization is far less than equity utilization and the opportunity is for that to converge quite a bit.

Okay.

Thank you very much.

Dan Fannon, Jefferies.

I guess kind of building upon that and just thinking about your comment about substantial momentum in the institutional business heading into 2015, outside of what we just talked about there with the fixed-income ETF can you get a little more specific about where you see that demand and kind of maybe a way to characterize it versus previous periods in terms of either size or opportunity?

Well, the momentum is, as I said, carrying on into 2015.

We are seeing -- I think much of it has to do with the continuation of performance that we have generated with some top decile performance in our core business, our leading performance in our unconstrained fixed-income, our top quartile, maybe top decile performance in high-yield.

So across the board the performance in all of the different fixed-income products continues to be quite large.

And we are seeing more and more clients who are just also using beta products for fixed-income.

So across the board we are seeing that but in terms of where we are seeing clients looking to put more money to work, we are seeing increased activity in the defined contribution area where we've had some rather substantial wins.

We continue to see in terms of insurance companies always at the beginning of the year they get big infusions of cash.

This is one of the fundamental reasons why we thought rates would be going down in the first part of the year.

Obviously we did not expect some of the activities that occurred but fundamentally you always see some very large activities from insurance companies because of the beginning of the year.

So it's across the board.

It is geographically dispersed -- diverse too.

So we think this is going to continue but I must say with where rates are at this moment, more and more clients are going to be looking for different types of expressions of exposure.

I do believe where rates are it's going to lead to more and more clients searching things like infrastructure debt, other activities like that.

And this is one of the reasons why we have so heavily invested in our infrastructure teams.

We will continue to see clients reaching for yield and high-yield whether that is a good strategy or a bad strategy.

I specifically believe rates are going to stay lower longer.

And I think the activities that you are seeing in Europe, whether the court's approval of the OMT for the ECB and the possible greater possibility of QE from the ECB, the continual easing in Japan and importantly, as Chairwoman Yellen has said, she's going to be very data-dependent related to what the Federal Reserve does.

So I actually believe this creates more money in motion and more opportunity for BlackRock especially with our flows.

Great.

That's helpful.

And then Gary, if you could please just characterize the budget and how your outlook for 2015 with regards to any kind of core expense growth.

I would say let's break it down.

I think that in terms of G&A, I think when we look at the fourth quarter on G&A obviously it was slightly elevated by virtue of some closed-end fund launch cost and obviously some FX remeasurement.

But once you kind of exclude those two items I think the fourth quarter is generally a decent run rate for the year in terms of G&A.

And then more broadly, as we think about margins obviously notwithstanding some of the seasonality that we have in our own margins, especially in the first quarter, margins more broadly are dependent on lots of things, especially the beta environment, the future business mix, the various reinvestment opportunities that we see in our business and obviously the competitive compensation environment.

So I don't -- our margin guidance really hasn't changed.

As you know we don't manage the business to a specific margin target and we remain ever committed to generating operating leverage.

We are also reinvesting in the business.

Great.

Thank you.

Craig Siegenthaler, Credit Suisse.

First, I was wondering if you could provide a quick update on SIFI?

Found new commentary from both the SEC and FSOC, especially related to some of the activities that it seems like they are targeting like ETFs, alternatives, derivatives, securities lending with those being pretty relevant for you guys.

A, I don't think they are targeting any one product.

I think they are investigating products where there is obviously large growth and where there is areas where you may have mismatches of liquidity and/or you may have need for greater disclosure.

So A, there is nothing new from our point.

If a regulator asked us to provide information we do that worldwide.

We are embracing in a very positive way the movement towards the review of activities.

We will be the largest beneficiary if the market is perceived to be stronger or transparent, easier to understand by more investors, we will be one of the largest beneficiaries of that event.

And so we are embracing the concept of a better financial ecosystem for our clients.

And if that means greater disclosure, greater transparency, we will embrace that.

But I think it is incorrect to say they are targeting because I don't think they are targeting at all.

The conversations we are having are open dialogues.

They are expressive.

We are providing information as asked.

Obviously the dialogues are one-dimensional.

They ask a question, we provide information.

And that's all we know.

We presume these questions are being asked by -- asked with dozens and dozens of different managers.

But we are welcoming this process and we will all wait and see alongside with you what the outcomes will be.

And I think this will be quite granular.

I think we will see how this plays out but unquestionably you're going to see probably different disclosure requirements, or different liquidity issues in some products.

By and large we are in support of that.

Thanks, Larry.

Very clear.

Second question, 2014 was a year where we saw big pickup in pension risk transfers, pension closeouts.

I was wondering if you have any thoughts on how this could trend in 2015 given some of the drivers like the change in the mortality tables?

And given that BlackRock is a large manager of assets for clients on both sides of the aisle, pension plans, insurance companies, really maybe share some perspective here.

I don't know how this is going to play out with where rates are today going forward.

I think it's very hard in most cases to be closing out pension funds.

But let's step back for a second, why have we seen elevated pension closeouts because you have had significant rallies in US equities over the last five years.

Companies have been closer to meeting their liabilities and they have a desire to minimize income statement volatility because of the issues related to the pension fund.

So we are in dialogues with many people.

Some of the firms have used annuities and working with insurance companies.

As you said, we are in dialogue with many organizations.

Some of the organizations are transforming their DB plans to DC.

As I said we are seeing elevated growth in our DC business in the fourth quarter and we expect that in the first quarter.

And we are having dialogues with many many institutions worldwide about these -- about the possibilities.

But I would just caution that with rates being so low unless you see significant equity rallies it becomes a little harder to do that, or the companies are going to have to infuse some type of money to making sure that they are matched.

I would say unquestionably BlackRock's global platform, the ability of having our strength and target date and in terms of DC plans and having LifePath on the DC side, we have a lot of components in working with our clients whether it is LDI products, which obviously will create a de-risking.

And obviously we could help quite a bit in helping them think about how to -- how can a pension fund ultimately transfer some of the risks.

But I don't -- I don't want to call it unified across the board.

I do believe depending on where each company is related to their liability, and as you suggested quite correctly about the elongation of age, these are all big issues.

We have actually had conversations with organizations that did LDI years ago and now how do they factor in this elongated aging process and are they properly matched.

So one thing is very clear to companies that have done the de-risking, it is not a static one-time event.

They have to be constantly monitoring this depending on how their liabilities are changing.

And as I said earlier, we are very involved in these dialogues and I do believe this plays really well with our global platform of having great analytics and helping companies think about it.

We have a long period of time of being involved with insurance companies and doing a lot of liability matching type of products for insurance companies so that plays really well into LDI and other areas for us.

Thanks, Larry.

Robert Lee, KBW.

I guess my first question is I am just going to capital management.

You guys have certainly been very clear on how you think about capital management and you had the dividend increase that you just announced.

But I'm just curious, if we look at the 250 commitment to share repurchase per quarter, that has been in place since the beginning of 2013 and I think since the end of 2012 GAAP earnings are up maybe about 35% or so.

So is it reasonable to be thinking that that kind of 250 base commitment may be subject to some upward revision, too, as you continue to scale the Company?

Let's see if Gary can answer this question.

So I think broadly we remain committed to consistent capital management.

I think that we spoke last year a little bit about some of the uncertainty in the environment, which I think is clearly still out there.

I think Larry commented more broadly on it.

So I think consistent with that and as we have seen the earnings trajectory increase we did obviously increase the dividend at our Board meeting yesterday by 13% to $2.18.

Our buyback program is clearly a function of a number of things.

We've already mentioned beta and other reinvestment opportunities that we see.

As Larry likes to say it is data dependent.

I think you mentioned that earlier.

But our expectation more broadly is that for the year the buyback program would be greater than the billion dollars that we repurchased last year.

Obviously we're going to watch markets as they evolve during the year and plan accordingly.

Great.

Thank you.

And maybe just a follow-up, and Larry I know you did mention you've had some nice wins in the DC space and this is the inevitable question about money in motion and fixed-income, but where do you think we are in the DC replacement cycle?

I know you had talked about that in the past given strong performance you guys have had and how well entrenched or ubiquitous maybe one of your competitors has been.

Do you feel that that is still in the early stages of that 401(k) replacement cycle, or is that kind of well underway?

Well, I truly believe that the successes we had in 2014 will continue in 2015.

The composition of our successes in fixed-income across so many different product whether it's unconstrained, high-yield, total return.

MIA is a great indication of the breadth of our platform and importantly where we believe continued flows will be.

On DC specifically I think we are in the early component of that.

We are in dialogue with many different defined contribution platforms.

And I do believe in the DC side one of the reasons why we have the dialogue is our strength in our beta products in fixed-income, our strength in our index equity, our target date products.

And because of the large and in-depth conversations we have with our clients it is giving us a great avenue to help them think about how they are going to be thinking about the DC business.

As I have said, our total return business, total return product in DC is in the top 3% for one, three and five.

So you come across whether as I said target date or other products we are in a very good position to win our clients' pool of money as that money remains in motion.

Great.

Thanks for taking my questions.

Bill Katz, Citi.

Larry, you went through just a ton of things that are working very well for BlackRock.

But one area that seemed to not get that much attention was active equity.

I am sort of curious just stepping back maybe for BlackRock and for the industry at large, where are we in terms of investor appetite for coming back into that type of product versus as you mentioned earlier the barbell dynamic?

Yes, well the one area that I'm having -- I had a large amount of dialogue most recently is in factor-based equity investing.

That is probably, that's the biggest most recent type of dialogue.

So the one area where we have done quite well is in the model-based equity, then we are still not seeing really any flows but we've had now five years of great success there.

I do believe the traditional fundamental equity business is alive.

It is not well.

It had poor performances in industry, I think that's who you are alluding to.

We have seen great movement as an industry, movement out of maybe more the fundamental investing into index.

But I would say now, Bill, if you believe in a greater divergent market, a more volatile market -- I have been asked many times questions related should I be in an index product with a great divergence because I cannot capture some of the great opportunities that are going to be masked by the great failures.

So when you think about the energy market, if you think about an emerging market world context, a China/India is going to be hugely benefited by this.

Countries like a Russia, Nigerian, potentially Brazil are going to be harmed by this.

How would you play that?

And so this is why more and more of our clients are asking about things about smart beta, factors.

And so I do believe we're going to need to capture different ways of finding alpha.

But importantly in our actions related to fundamental equities we have always said this is a five-year project.

2015 begins the third year.

We are committed to this and if you do believe in the world of great divergence, if you believe in a world that one day you will have -- whenever that day will be -- higher rates, it generally -- historically you would think this is a better environment for stockpicking and fundamental equities.

So our model is purposely built in position to benefit on this active and passive world.

But the one thing that I'm going to be pretty loud about, I do believe the most neglected component of equity investing is basically model- or factor-based investing where we have a great platform.

We've had great returns, especially overseas.

And I am very bullish on building this out as a component of our active equity area.

And I am quite frustrated, to be frank, that we haven't seen the momentum that I would have thought we would.

But this is an area where in my most recent meetings last week in Asia, every client asked me about factor-based investing in a divergent world.

And so we will see how this plays out, Bill.

But I do believe in this divergent world and the way we are built the model of BlackRock we'll be a beneficiary of that.

Okay.

That's helpful.

Thank you.

Brian Bedell, Deutsche Bank.

Larry, if you can just comment on the inflow situation from the money in motion and PIMCO and other competitors in terms of your fixed-income franchise and do you think a lot of that went into the ETF component and might shift over as those investors reallocate throughout the year?

And do you still see that as a tens of billions opportunity next year?

Yes, so we see because of where rates are and the expectation of where rates might go, I think people are focused on having a higher allocation to fixed-income ETFs than they are the generics.

And there is a lot of money in motion because of peoples' plans for fixed-income and rate views for fixed-income this year and certainly because some money is flowing from various competitors.

I think that money, because of where rates are, because of where fees are in general in the asset management business that ETFs will see a larger percentage of (inaudible).

I would just add one thing.

There is so much noise about our West Coast friend and competitor.

Much of the money in motion is totally unrelated to what is going on there.

I think there is more dialogue going on because of this low rate environment and how should that be played out.

And I think that is the compelling story, how does an income-oriented investor, whether it's an insurance company, a retiree who is struggling to meet the income needs, this is where we are hearing much greater dialogue.

I have had great dialogue on where interest rates are and what does it mean for some of the largest sovereign wealth funds, so I think the dialogue starts with the macroenvironment and how to play it.

And that is the most forceful reason why there is so much money in motion.

Obviously you have cyclical changes of one manager versus another but that is always evident in the marketplace.

And I think there is just way too much commentary related to that and it is masking what low rates are doing related to clients' needs.

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

Mr. Fink, do you have any closing remarks?

Yes, let me just touch on one more thing.

Our fourth-quarter and full-year results, as I think we had kind of expressed in our formatted speeches and in the Q&A, truly highlight the diversity and the differentiated platform of BlackRock.

We are seeing the impact of our large-scale investing that we made over years and we are continuing to make those large-scale investing in infrastructure and equities.

We're going to continue to make these investments.

And those investments are going to pay off in the next few years.

And I think it is vital to understand that we believe this differentiated platform is the key component of what has been delivering this type of compounded growth that we have had on behalf of our clients for our shareholders.

And I think that will continue.

And most importantly, what I am proud of as an organization we are able to deliver these investments -- and I am not here to tell you all investments paid off -- but we've been able to continue to deliver these investments.

And at the same time, as Gary discussed, we saw a consistent increase in our margins over the course of the last five years.

I think this is what differentiates BlackRock.

And I am certainly not suggesting that will continue forever, but I do believe that continual investment in people -- I have to remind people, three years ago we only had less than 10,000 employees.

Today we have 12,000 employees.

This is just an investing in our platform, investing in our client connectivity and investing in products and in most cases we are delivering.

And this is something that really has given us that differentiated business model and I do believe it is going to continue to drive our future at BlackRock.

So I just want to thank you, everyone, for taking the time this morning and thank you for your interest in BlackRock.

Have a good quarter and hopefully the next few weeks are going to be a little, less volatile than the last few weeks.

So, enjoy.

This concludes today's teleconference.

You may now disconnect.