BLK BlackRock Inc

By Sarah Krouse 

The head of the world's largest asset manager said investors no longer know what to do with their money as they wrestle with historically low interest rates, the U.K.'s decision to exit the European Union and uncertainty surrounding the next U.S. election.

"They are afraid and they are pulling back," BlackRock Chief Executive Laurence Fink said as he discussed the company's second-quarter results with analysts Thursday.

BlackRock stock was relatively flat Thursday, recently down 0.42%, while shares in other asset managers rose along with the market.

BlackRock attracted $1.54 billion in net new money during the second quarter, the company's weakest inflows since the second quarter of last year. Most of the new money went to its large exchange-traded fund business, where fixed-income products were particularly popular during the period. Clients pulled $2.2 billion from equity products.

BlackRock reported a profit during the quarter of $789 million, down from $819 million a year prior. Revenue fell 3.5% to $2.8 billion. The results met Wall Street expectations.

BlackRock is considered a bellwether for the money-management industry because of its size and diversity of products and clients. One analyst said BlackRock's performance wasn't a good sign for rivals.

"We're used to seeing really big inflows at BlackRock and they barely were positive," said Kyle Sanders, an analyst at Edward Jones. "Outside of BlackRock and Invesco Ltd. I don't think any other asset managers are going to have inflows," for the second quarter, he added.

Individual savers and institutional investors are grappling with a low-return environment that is forcing them to save more, revise their targets or take greater risks to meet their goals.

"Clients are worried about how much cash they have and how they reinvest it to meet their liability needs," Mr. Fink said in an interview. "It's a push and pull: you can't make a return in cash and yet where should they invest to make some return?"

Mr. Fink said more than $55 trillion held in bank deposits in the U.S., Japan and China was evidence of investor concern globally.

Some are retreating from equities in favor of bonds. In the U.S., investors pulled more than $11 billion from mutual funds in the second quarter, according to fund-research firm Morningstar Inc., with the majority of those redemptions coming from stock funds.

Mr. Fink told analysts that many clients who sat on the sidelines as equity markets rallied recently "find themselves feeling even further behind." The U.S. stock market reached new highs this week after global markets slumped in the wake of the U.K.'s surprise vote to leave the EU.

Stock and fixed-income markets have continued to diverge since the vote, with bond yields falling and equities climbing.

BlackRock benefited from a rush to fixed-income investments during the second quarter as its iShares unit attracted $15.7 billion in new money, $10 billion of which went into bond ETFs. In the ETF business, which makes up about a quarter of BlackRock's assets under management, the firm offers funds that trade like stocks on an exchange and typically track an index or other basket of assets.

The New York firm reported net outflows from equity products and net inflows to fixed-income strategies, leading to higher fee revenue in fixed income and lower fee revenue in equity offerings. Performance fees also decreased due to lower fees from alternative and equity products.

Its assets under management reached a record $4.89 trillion.

Several analysts said they remain bullish on BlackRock's prospects. Erik Oja, an analyst at S&P Capital Global Market Intelligence, raised his 12-month price target for the firm to $390 per share, up from $370, and said he expects the money manager to further increase its market share. Still, Mr. Oja expects lower assets under management growth for the firm and, as a result, trimmed his 2016 and 2017 earnings per share estimates.

--Austen Hufford contributed to this article.

Write to Sarah Krouse at sarah.krouse@wsj.com

(END) Dow Jones Newswires

July 15, 2016 02:47 ET (06:47 GMT)

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