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BlackRock profit jumps 26 percent in third quarter

The BlackRock logo is seen outside of its offices in New York January 18, 2012. REUTERS/Shannon Stapleton

By Jessica Toonkel

(Reuters) - BlackRock Inc (BLK.N), the world's largest money manager, said on Wednesday that third-quarter earnings rose 26 percent, boosted by an improved performance of its fixed income funds.

Net income increased to $917 million, or $5.37 per share, from $730 million, or $4.21 per share, a year earlier.

Excluding a tax benefit, earnings were $5.21 a share, beating the analysts' average estimate of $4.69, according to Thomson Reuters I/B/E/S.

BlackRock ended the quarter with $4.5 trillion in assets under management, up 10 percent from a year earlier, while net inflows rose almost 4 percent to $28.7 billion.

Chief Executive Officer Larry Fink told Reuters that BlackRock had been winning business throughout the year, particularly in its fixed income funds.

"We have raised $48 billion year to date in fixed income net flows," Fink said.

Flows into those funds have accelerated over the past few weeks, Fink said, largely due to their improved performance rather than solely from clients leaving rival Pacific Investment Management Co after the Sept. 26 departure of its star manager, Bill Gross.

Fink would not say how much money has flowed into BlackRock funds since the announcement that Gross was leaving Pimco for Janus Capital Group Inc (JNS.N).

The firm sees an opportunity in the tens of billions of dollars in the fixed income space over the next several quarters, Fink told analysts on a call.

BlackRock's taxable fixed income funds have outperformed their benchmarks over the past one-, three- and five-year periods.

Their outperformance comes after BlackRock spent the past six years rebuilding its fixed income business, Fink said.

BlackRock's third-quarter inflows were almost evenly split between stock and bond funds, with $10.2 billion going into the equity side and $11.1 billion into fixed income. Multi-asset funds had $7.4 billion in inflows.

About $18.2 billion, more than 60 percent of inflows, went into BlackRock's iShares exchange-traded fund business.

Institutional investors added $5.5 billion to BlackRock's funds, and the company's retail funds had $5 billion in inflows.

BlackRock's alternative funds had $80 million in outflows in the third quarter. Fink said $7 billion had been committed to them but was not yet invested.

Analysts agree that BlackRock is well-positioned as clients move their money away from Pimco, which Keefe, Bruyette & Woods described in an Oct. 8 report as "the Bill Gross effect."

Clients may move money to firms like BlackRock for actively managed fixed income funds, but they also may decide that passively managed funds are safer, according to the report.

In the first few weeks of October, BlackRock had more than

$7 billion of net new flows into fixed income iShares ETFs.

BlackRock shares were down 1 percent at $303.78 in midday trading on the New York Stock Exchange.

(Reporting by Jessica Toonkel in New York; Editing by Lisa Von Ahn)