Base Fee Organic Growth
Q: When can BlackRock achieve 5% base fee organic growth?
A: Management expressed confidence in reaching 5% organic growth in base fees, supported by durable growth and a healthy trajectory of flows. They highlighted solid trends in organic fee growth over the last two quarters, noting that March new base fees annualized at target after a slower start. Key positive trends include $7 billion in retail flows with 40 to 50 basis point fees, and $15 billion in active flows, particularly $9 billion in institutional and retail active fixed income. They believe mandates across investment management and technology will support the 5% growth target.

Margin Expansion vs. Investment Spend
Q: How are you balancing investment spend with margin expansion?
A: Management emphasizes delivering profitable growth by investing prudently while expanding margins. They noted 180 basis points of margin expansion year-on-year, with revenue, operating income, and EPS all rising double digits. Over the last 18 months, AUM grew by $2.5 trillion while headcount remained flat or slightly lower. They plan for full-year low to mid-single-digit core G&A growth and flat headcount, excluding the GIP transaction. The levers for margin expansion include driving fixed cost scale through technology, automation, AI, and organizational design.

Private Markets and GIP Acquisition
Q: Will you pursue more acquisitions after GIP in private markets?
A: Management views the planned acquisition of GIP as transformational, extending capabilities in private markets. They are open to pursuing additional opportunities if they make sense but are focused on closing the GIP transaction first. The acquisition is expected to enhance capital formation, especially in infrastructure, and open up avenues with companies and countries. They also see opportunities to bring GIP's capabilities to private wealth globally and retail retirement platforms in the U.K. and Europe.

Fixed Income Flows and Competition
Q: What's impacting fixed income flows and competition?
A: Management notes that investors are currently getting paid to wait due to an inverted yield curve and concerns around inflation and the Fed. In the first quarter, BlackRock saw $42 billion in fixed income flows, with strength in bond ETFs and about 25% of flows into active strategies. They observe renewed demand for active fixed income, with $9 billion flowing into high yield, unconstrained, and total return strategies. They anticipate that as the yield curve normalizes, demand for intermediate and longer-term fixed income will increase.

Fee Rate Outlook and Pipeline
Q: How do flow trends affect fee rate and base fee outlook?
A: Management reports good base fee momentum, with base fees excluding securities lending up 9% year-on-year, largely due to market movements and organic growth. The second-quarter entry fee rate is expected to be flat compared to the first quarter on a day-count equivalent basis. Positive trends include flows into active strategies, with $15 billion in active flows and $7 billion in retail flows, supporting favorable fee rate trends due to mix.

Performance Fees
Q: Are performance fees at a new normalized level?
A: Performance fees were $204 million in the quarter, up about four times year-on-year. Roughly half came from private equity funds with successful realizations, and the other half from liquid hedge funds and systematic strategies. Management aims to deliver long-term performance for clients, and supportive markets could lead to lower compensation-to-revenue ratios as performance fees increase. Talent remains a key investment area.

Europe ETFs and Competition
Q: How is the competitive landscape for Europe ETFs evolving?
A: BlackRock's iShares leads the European ETF market with about 30% market share of inflows, twice that of the number two player. Inflows exceed those of the next two players combined. The European iShares franchise has $850 billion in AUM, larger than the next five players combined. Management sees strong trends and competitive positioning, with regulation trending favorably and significant growth opportunities as ETFs gain traction in Europe.

Multi-Asset Growth and LifePath Paycheck
Q: How will LifePath Paycheck contribute to growth?
A: Multi-asset strategies saw $5 billion in inflows in the quarter, driven by $9 billion of flows into LifePath Target Date offerings, which have $470 billion in assets and 8% organic growth rate. BlackRock is the #1 DC investment-only firm with 70,000 DC plans. The upcoming launch of LifePath Paycheck is expected to be a significant area of future organic growth, transforming retirement by providing more certainty for individuals. Management is in discussions with 14 corporations to implement LifePath Paycheck, with the first plan launching in the next few weeks.