Investors are pulling back from certain products as they take a "defensive posture" to a flurry of potential geopolitical risks, BlackRock Inc. Chairman and CEO Larry Fink said.
With the continued rise of global protectionism, increased trade tensions and another projected interest rate hike from the Federal Reserve on the horizon, investors withdrew from a host of the world's largest asset manager's investment products during the third quarter.
BlackRock, which now manages more than $6.444 trillion in assets, posted total net outflows for the third quarter of $3.11 billion. A year earlier, BlackRock saw total net inflows of $96.11 billion. The exodus was largely led by institutional investors, who withdrew $24.8 billion from index and active products as they, along with other investors, looked to reduce their exposure to holdings that could be impacted by fluctuating macroeconomic conditions.
"Many of the challenges facing our clients continued in the third quarter and have accelerated with recent market volatility," Fink said Oct. 16 during a third-quarter earnings conference call. "Divergent monetary policy and macro and geopolitical uncertainty continues to impact investor sentiment and our financial markets, leading many clients to reduce risk in their portfolios."
BlackRock's fixed-income products and strategies saw an uptick in flows, as clients looked to hedge their investments. Fixed-income products for the company tallied $22.91 billion in net inflows for the quarter. Meanwhile, BlackRock's iShares exchange-traded fund business posted long-term net inflows of $33.67 billion for the quarter.
As a whole, BlackRock posted adjusted net income attributable to the company was $1.21 billion, or $7.52 per share, up from $966 million, or $5.90 per share, a year earlier.
The S&P Global Market Intelligence consensus normalized EPS estimate for the quarter was $6.86.
BlackRock's stock fell on the market's open Oct. 16, after the company posted its third-quarter results. As of 10:19 a.m., BlackRock shares were down 4.29% to $408.61.
The third-quarter outflows came ahead of a market rout that has dominated headlines throughout the first few weeks of the fourth quarter. The market downturn is largely a result of hedge funds reducing their risk, said Fink, who added that the market activity may continue if the global political landscape continues to shift.
"If the markets remain to be uncertain and political risk remains large, you will continue to see clients pause," Fink said.