Investment bank BlackRock’s (BLK) purchase of Barclay’s (BCS) struggling iShares unit during the Great Recession could have been one of the best forward-thinking business decisions of all-time. With more than $650 billion in ETF assets and more than 250 ETFs, BlackRock has cemented itself as the largest ETF issuer and manager on the block.
Its funds — like the iShares MSCI Emerging Markets (EEM) and iShares Russell 2000 (IWM) — are some of the most popular ETFs in their respective categories with both individual and institutional investors. That position and huge assets under management has allowed BLK to reap incredible profits from its ETF division.
For the latest quarter, BlackRock managed to generate about $727 million in fee income. That amount of cash helped drive BLK’s overall earnings and net income growth of 14% during the third quarter.
Earnings growth should keep on rising as BLK’s iShares division continues to see more long-term inflows from investors of all kinds. BlackRock reported that iShares has gained about $80 billion worth of new investor money over the last year. That amounts to an 11% annualized growth rate in new assets. With plans to launch an aggressive sales campaign, BLK predicts that it should continue to see that kind of growth for the foreseeable future.
Shares of BLK aren’t exactly cheap, with a forward P/E of 17. However, investors are getting the premier ETF asset manager at that price. As the industry grows, so will BlackRock’s position in the sector.