Key Takeaways
- • BlackRock's performance fees reached $630 million in the third quarter, roughly $200 million above analyst estimates, with the bulk of the increase tied to a single hedge fund that measures results annually.
- • Liquid alternatives fees rose from $100 million to $409 million in one quarter, according to BlackRock's filing, and performance fees more than doubled from $305 million in the second quarter.
- • Adjusted EPS rose 38% to $15.93, client net inflows totaled $205 billion, and assets reached a record $15.5 trillion.
- • Crypto-linked investments added to income: an $80 million gain on Securitize and a $22 million gain on Circle, the latter compared with a $115 million loss a year earlier.
- • The hedge fund behind the fee jump does not reach its next annual measurement date until the third quarter of 2027, so the fee benefit is not expected to recur in the fourth quarter.
Summary
BlackRock beat third-quarter forecasts with help from a single hedge fund, according to the company's filing. Performance fees, which BlackRock earns when funds beat set targets, hit $630 million, about $200 million above analyst estimates. Adjusted earnings per share rose 38% to $15.93, clients added $205 billion, and assets reached a record $15.5 trillion. Shares rose about 3% before the market opened.
Performance fees more than doubled from $305 million in the second quarter. Most of the increase came from hedge-fund-style products that BlackRock categorizes as liquid alternatives, where fees rose from $100 million to $409 million in one quarter. BlackRock tied the year-over-year rise largely to one hedge fund that measures its results once a year, with the measurement period closing in the third quarter. Those fees made up nearly half of BlackRock's $668 million revenue increase from the second quarter. BlackRock did not name the fund in its earnings release. The company gave a similar explanation in 2020, when then-finance chief Gary Shedlin credited "a single hedge fund that locks annually in the third quarter" for a jump in fees.
Crypto-linked holdings also contributed. BlackRock booked an $80 million gain on Securitize, a firm that converts funds and stocks into blockchain tokens, whose stock rose 15% in September following a US regulatory exemption. It also recorded a $22 million gain on Circle, issuer of the USDC stablecoin, compared with a $115 million loss on the same stake a year earlier. Both gains reflected higher valuations rather than sales. Circle stock fell 11% in a single day in September, illustrating how quickly such valuations can move. BlackRock said higher income outside its core business helped adjusted EPS grow 38%, while adjusted operating income rose 27%.
Looking ahead, Chief Executive Larry Fink said BlackRock enters its "seasonally strongest fourth quarter with accelerating momentum." Because the hedge fund behind the quarter's fee jump does not reach its next annual measurement date until the third quarter of 2027, investors should not expect a comparable performance fee contribution from that source in the fourth quarter.
Performance fees more than doubled from $305 million in the second quarter. Most of the increase came from hedge-fund-style products that BlackRock categorizes as liquid alternatives, where fees rose from $100 million to $409 million in one quarter. BlackRock tied the year-over-year rise largely to one hedge fund that measures its results once a year, with the measurement period closing in the third quarter. Those fees made up nearly half of BlackRock's $668 million revenue increase from the second quarter. BlackRock did not name the fund in its earnings release. The company gave a similar explanation in 2020, when then-finance chief Gary Shedlin credited "a single hedge fund that locks annually in the third quarter" for a jump in fees.
Crypto-linked holdings also contributed. BlackRock booked an $80 million gain on Securitize, a firm that converts funds and stocks into blockchain tokens, whose stock rose 15% in September following a US regulatory exemption. It also recorded a $22 million gain on Circle, issuer of the USDC stablecoin, compared with a $115 million loss on the same stake a year earlier. Both gains reflected higher valuations rather than sales. Circle stock fell 11% in a single day in September, illustrating how quickly such valuations can move. BlackRock said higher income outside its core business helped adjusted EPS grow 38%, while adjusted operating income rose 27%.
Looking ahead, Chief Executive Larry Fink said BlackRock enters its "seasonally strongest fourth quarter with accelerating momentum." Because the hedge fund behind the quarter's fee jump does not reach its next annual measurement date until the third quarter of 2027, investors should not expect a comparable performance fee contribution from that source in the fourth quarter.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.