BlackRock's adorably small fees lead to ridiculously big money (even in a downturn)
Check your 401(k) or brokerage account... There's a high likelihood you've got some money in a BlackRock fund, since it's the world's largest money manager.
- But the investment giant's profits fell 23% as its individual and institutional customers panic-sold stocks for liquid cash. Less money to manage = less profit for BlackRock.
- Assets under management shrank from $7.4T at the end of 2019 to $6.5T at the end of March. Still not too shabby, considering America's GDP was $21T in 2018.
Not Apple's social media arm... iShares is BlackRock's exchange-traded funds unit, and also one of its profit puppies. In addition to the $$$ BlackRock makes from investment advising and lending, it also charges tiny management fees for its ETFs.
- ETFs are like investment smoothies which track multiple stocks, a sector, or an index. For example, with just one share of an S&P ETF, you can own a part of all 500 S&P companies. You get to track the index without individually purchasing each stock.
- BlackRock customers poured only $14B into iShares ETFs this quarter (their worst performance since 2018). Vanguard, the world's 2nd largest money manager, took in 3X the amount of ETF investments.
Tiny fees (on a large scale) = billions in profit... Big investment firms like Blackrock and Vanguard sell their own ETFs across various brokerages in high volumes. If they charge a 0.03% fee on an ETF, they make only 3 cents off every $100 you invest. But because they operate at such a large scale, those tiny fees can add up to big profits. Blackrock made $800M in profit last quarter on the $6.4T it managed (annualize that, and it's only 0.05% of $6.4T).