It’s tough trying to be the Amazon.com of ETFs.
While BlackRock Inc. raked in $74 billion in exchange-traded fund flows in the second quarter, that record was in part obscured by revenue that failed to beat estimates.
The revenue miss was largely driven by lower performance fees on two long-only funds that didn’t beat their benchmarks by as much as they did a year earlier and weaker securities lending revenue hampered by less merger-and-acquisition activity, said Chief Executive Officer Laurence D. Fink in an interview with Bloomberg.
Like Amazon did with online retailing, BlackRock got into the ETF arena early and has focused relentlessly on building its business by volume — gathering as much investor money as possible. And just like Jeff Bezos, who ceded profit to win share and trounce rivals, Fink has seen expenses rise.
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Revenue, while up, missed estimates for the fourth straight quarter, according to data compiled by Bloomberg.
BlackRock’s second-quarter costs increased in almost every category including employee compensation and distribution and servicing costs. But assets under management increased about 5 percent from last quarter to $5.7 trillion.
BlackRock shares fell 2.9 percent at 9:40 a.m. in New York trading on Monday.
Asset managers are facing pressure as money flows out of more expensive active funds into lower fee passive products, where prices are headed to zero.