Good Morning. My name is Jamie and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Incorporated fourth quarter and full year 2018 earnings teleconference. Our host for today’s call will be Chairman and Chief Executive Officer, Lawrence D. Fink; Chief Financial Officer, Gary S. Shedlin; President Robert S. Kapito; and General Counsel Christopher J. Meade. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer period. [Operator Instructions]. Thank you. Mr. Meade, you may begin your conference.

Good morning everyone. I’m Chris Meade, the General Counsel of BlackRock. Before we begin, I’d like to remind you that during the course of this call, we may make a number of forward-looking statements. We call your attention to the fact that BlackRock’s actual results may of course differ from these statements. As you know, BlackRock has filed reports with the SEC. The results of BlackRock could differ materially from what we say today. BlackRock assumes no duty and does not undertake to update any forward-looking statements. With that, I’ll turn it over to Gary.

Thanks Chris. Good morning and happy new year to everyone. It’s my pleasure to present results for the fourth quarter and full year 2018. Before I turn it over to Larry to offer his comments, I’ll review our financial performance and business results. While our earnings release discloses both GAAP and as-adjusted financial results, I will be focusing primarily on as-adjusted results. As a reminder for one last time, all year-over-year financial comparisons referenced on this call will relate current quarter and full-year results to recast financials reflecting the adoption of FASB’s revenue recognition accounting standard, which became effective on January 1, 2018. In 2018, BlackRock delivered positive organic asset and base fee growth, increased year-over-year revenue, and expanded our operating margin while also maintaining an investment mindset and returning significant cash to shareholders. Our performance was sustained by the investments we have continuously made to leverage our scale and optimize our strategic positioning. We generated $123 billion of long-term net inflows during the year, representing 2% organic asset and 2% organic base fee growth, and achieved these results despite $92 billion of low fee institutional indexed equity outflows associated with client de-risking and a volatile equity market. The stability of our operating model allowed us to continue to invest in high growth opportunities such as retirement, illiquid alternatives, ETFs, and factors. We also continued to extend our leadership in technology and lead the industry shift from product selection to portfolio construction, all while simultaneously expanding our full-year operating margin by 20 basis points to 44.3%. After investing for growth, we returned approximately $3.6 billion of cash to our shareholders during the year, an increase of over 30% from 2017. The strength of BlackRock’s diversified global investment and technology platform enabled us to continue to execute against our framework for…

Thank you, Gary. Good morning everyone and happy new year. BlackRock’s performance in 2018 reflects the deeper partnerships we are building with clients through our solution-based approach. We have consistently and strategically invested to create the most diverse global asset management and technology services firm in the world, and we’re having more comprehensive conversations with more clients today than any time in our history. Our ability to deliver investment strategies from ETFs to alternatives to our industry-leading portfolio construction and risk management technology, and our historic deep capital markets expertise through the BlackRock Investment Institute is what differentiates BlackRock and helps us with our clients worldwide. The diversity of our platform is reflected in our results. We generated $124 billion of net inflows in 2018 despite, as Gary discussed, over $90 billion of low fee institutional indexed equity outflows as some of our clients, many of whom are global, de-risked against a difficult market backdrop. Seven different countries and 59 different products each generated more than a billion dollars of net inflows. Our Aladdin and Digital Wealth technologies are accessible to clients now in more than 50 different countries, including thousands of wealth advisors who serve millions of end investors. 2018 was marked by heightened uncertainty about the future. Political, economic and social outlooks globally remain clouded and unclear, which resulted in extreme periods of volatility in the financial markets. For only the second time in nearly 30 years, annual market returns were negative in both global bonds and in equities. Throughout the year and particularly in the fourth quarter, U.S. rate policy, tightening financial conditions, and a deepened concern regarding economic growth and corporate profitability dragged down equity performance throughout all the world indexes. The impact of a weak growth backdrop on European markets was exacerbated by concerns over…

[Operator instructions] Our first question comes from the line of Alex Blostein with Goldman Sachs.

Hi Alex, good morning.

Hi Larry, good morning everybody. First question around just the strength in the iShares business, and particularly I was hoping to kind of zone in on the events of late December. You guys have seen considerable strength there in light of--despite, actually I should say, de-risking and substantial outflows from mutual funds. Any additional color you could provide there would be helpful, just to think about how the customer base reacted in the utilization of the product in what I would imagine would have been more of a risk-off scenario.

Sure, I’ll let Rob start it off and I may conclude that answer.

So we saw, obviously as you heard Larry say, strong iShares flows in the fourth quarter, but this year the activity was very high because of people that wanted to take risk off, do more tax efficient trades, and what they looked to do is to move out of their current products into a more defensive product, and it made a lot of sense. They moved primarily into short-duration product and, more importantly, they moved into precision products that are of course higher fee, like EEM and HYG. This was done in larger volume than I think anyone would have expected. 81 billion inflows is the highest flow quarter in iShares history, and it was broad - $61 billion went into equities even as the equity market fell dramatically, which should answer questions about how ETFs will perform in a volatile and bear market, we had no instances of any issues or anybody had any issues with liquidity; $19 billion in fixed income, and $2 billion in multi-asset and alternative ETFs. So this was an important way for our clients to get defensive very quickly, to utilize the tax efficiency which is a very important feature of this wrapper versus a mutual fund, and to quickly use the liquidity in the market when, as you know, in the equity markets there was a lot of issue with liquidity, especially in late December. So they performed as we would have expected and as we predicted. The use of them was some of the best features of iShares, and we were the beneficiary of that volatility, and even though we may have had outflows in other areas, the benefit of having such a diversified portfolio is that we were able to capture the outflows back in inflows in different areas and different products, and as Gary mentioned a lot of those went to actually the higher fee ETFs that we have.

Let me add a little bit more, Alex. I truly believe it’s becoming more recognized, the superior nature of the ETF structure versus a mutual fund. We’ve heard many instances in which--many mutual funds who had negative NAV at the end of the year, but they also had capital gains taxes that they were identifying to their clients, and their clients in many cases just got quite aggravated by paying taxes with a negative NAV. Obviously with an ETF, you control your tax basis, and I think this is becoming a bigger and bigger issue. Navigating for the long term your tax position for taxable individuals and institutions is very important. We also believe the movement in the wealth management space away from stocks and products, navigating more towards models and portfolio construction, we are seeing elevated and continually elevated flows into ETFs. We think that trend is beginning. It wasn’t something that was short in nature. We believe that will continue throughout 2019 and maybe ’20, and this is one of the reasons why we continue to believe the ETF industry is going to continue to grow very largely, and I think the big surprise in the fourth quarter, as you suggest, was in a very volatile negative marketplace, you’re seeing portfolio reallocations being done out of mutual funds because we had elevated mutual fund outflows as an industry and into ETFs. I also believe people are starting to think about ETFs more as a technology, not just a product. If you think about what makes companies really good, a lot of people ride on convenience. The convenience of ETFs versus other instruments far outweighs the other instruments, and I do believe the key towards ETFs and the convenience is now becoming an accelerant.

Your next question comes from the line of Craig Siegenthaler with Credit Suisse.

Hi Craig.

Hey, good morning, Larry. I wanted to see if you could share any additional color on the large redemptions in Asia, and also the institutional equity index in just the fourth quarter, because it looks like they both could be related, and I wanted to see if it included maybe one or two very large client outflows. Also just kind of as a little follow-up here, if you can share any fee rate color on the outflows in Asia or institutional equity index, that would be helpful too.

Sure, I’ll let Gary begin with that and I’ll follow up.

Good morning, Craig. We clearly have been seeing accelerated activity in redemptions in our institutional index equity book. I think a couple things are important there. One is to remember that this is really a scaled offering for some of our largest institutional clients, and while institutional index equity represents roughly a quarter of our assets under management, it only accounts for 6% of our base fees. When you strip out the impact of securities lending, the average effective fee rate on that book is around three basis points. As you correctly identify, we had fourth quarter outflows there. I would say that they were almost entirely driven by on a net basis by one large institutional client in A-Pac, and when you look at this on a full-year basis, I think there were some broader trends, really primarily linked to de-risking, asset allocation and cash needs by official institutions, primarily outside of the U.S. as well as DV plans in the U.S. Given the outflows in many cases are really from our more significant scale clients, the average fee rates on those outflows are in fact generally lower than the overall three basis point fee rate that I quoted on the general book. But again, keeping it into broader perspective, we look at the institutional business as a broad-based business. We saw continued demand from clients for our higher fee products - illiquid alternatives, multi-asset solutions, OCIO, LDI strategies to name a few, and in fact notwithstanding those low fee institutional outflows for the year which made the net flows go negative for the year, we actually generated 2% organic base fee growth in the institutional business overall.

Your next question comes from Robert Lee with KBW.

Thanks. Good morning, and happy new year.

Happy new year.

Thank you. Larry, I’m curious - I mean, maybe you hinted at this a little bit, but as you survey and think about the kind of changing landscape out there in terms of distribution and products and how you access clients, and maybe the Microsoft partnership is an example of this, but do you think it’s imperative or a need that you have direct access to the end retail investor at some point, as opposed to obviously institutions? Is that part of how you’re thinking about this Microsoft partnership, is that you may be able to develop some solutions that can get you directly to the end investor instead of through intermediaries?

Our business model is not changing at all. Where we believe our retirement solution business, especially with Microsoft, is going to go is working with our institutional clients through their DC plans and providing technology to assist our DC plan clients to provide the technology for them to better serve their employees. It is not for us to go direct; it is providing technology to help the companies have deeper, better connections with their employees, and one thing that we have seen, there has been a separation between the employer and the employee as defined contributions have become the dominant form of retirement. Historically when you had a defined benefit plan, there was an emotional, legal connection between the employer and employee, and in an era now of 3%-ish unemployment, whatever the level is - 3.7%, more and more companies are trying to find better connectivity with their employees to have better retention. But also, I believe going forward corporations are going to have greater responsibility and needs in terms of working with their employees to have their employees to have more confidence in their retirement plans. We are developing the technology and, I should say, the pipes to tech-enable our clients, not for us to go direct ourselves but to have deeper connections, and we believe having that type of pipe and technology is going to be a way that we can enhance our value chain. It certainly is going to build more opportunities to build deeper relationships and ultimately more flows. It also can connect what we’re doing with Aladdin for wealth, where I believe it’s going to be transformational for BlackRock over the next 10 years. That is going to allow us to have deeper connection with the financial advisor. We have already heard examples where those wealth advisors who are using Aladdin for wealth, they have been able to secure bigger assignments from their clients because they’re providing their clients with better transparency of their portfolio, better risk analytics for their portfolio. Our job is to enable our distribution platforms. Our job is to enable our institutional clients with better pipes and technology, and that’s how we believe we could generate robust opportunities which will entail better flows, but most importantly deeper and better connected relationships that will sustain ourselves over many years to come.

Your next question comes from the line of Bill Katz with Citi.

Hey Bill, happy new year.

Hi, good morning. This is Brian Wu on for Bill Katz. Thank you for taking my question. Regarding the cost saving initiatives, could you provide some color on areas of potential reallocation or reinvestment of those savings, in what geographies, business lines or areas of technology you would likely focus on? Thank you.

Sure, I’ll take that. I think the goal of this restructuring, as it was a couple years ago when we last took a similar approach, is in a market where we’ve seen beta take over $500 billion off of our assets and obviously a significant amount of revenue off of our entry rate for the year, we continue to believe that the model that we have here really affords us the opportunity to continue to play offense. We see some amazing opportunities for growth. Our desire is to really take advantage of a marketplace where a number of participants in the industry are being forced to cut back more than they would like, and so we are doing everything we can to be as disciplined and as smart as possible to continue our growth standpoint. That obviously takes some challenges. We’ve got to basically move decisively to make sure we’re focusing those more limited resources where the impact will be greatest, and that’s why we took the recent steps to modify the size and shape of the organization. Recall that we’re global, so I think really everything that we’re talking about and the areas that we’re focused on are all entirely global, so it’s less really about a geographic targeting, and in fact some of the areas that we’ve identified for growth are in fact geographic in nature, like A-Pac and China in particular; but the key areas for us that we’re focused on making sure we continue to invest in are ETFs, multi-asset solutions, illiquids, and technology. When we talk about technology, that’s broad-based technology, that’s technology in terms of Aladdin and Aladdin Wealth. In particular, it’s technology to continue to help drive better investment decisions, it’s technology to leverage our distribution capabilities, and obviously to continue to invest in the infrastructure and the operational efficiency of the firm.

Your next question comes from the line of Ken Worthington with JP Morgan.

Hi, good morning. Just on the active franchise, so active equity sales seemed to hold up really well this quarter. I think you even had retail active equity inflows despite what we all saw was a terrible fund flow quarter for the industry. You’ve clearly made various changes to the active equity product both in terms of distribution and pricing, so at least on the equity side, what do you think is resonating or why did both the institutional and retail active equity businesses hold up so well? Then on the other side, active fixed income, we saw that sort of same challenging market environment in credit that we saw in equities, and retail and institutional investors stepped up the active fixed income outflows and I think you mentioned high yield and unconstrained on the retail side. But given the same challenging environment for both credit and equities, why did equities hold up so much better than fixed income on the active side?

I’m going to let Gary answer most of the question, but let me--I think what we did in our U.S. domestic equity platform resonated. We actually had good returns in many of our U.S. equity platform and that certainly created a stability that we didn’t see in 2017, just the relative nature and the results of that change. We did see outflows, though, in some of our European products where we actually had core return, so I don’t want to--. We are seeing evidence of our portfolio team changes having an impact where we made changes. We still have more work to do. On the fixed income side, I think we saw elevated outflows predominantly because of the huge rally in fixed income rates in December, when we saw rates go from as high as, on the 10-year, 3.20 to the 2.60 range and I think many people were just taking profits. We saw some people get out of some fixed income active funds to go into our low duration ETFs, and so we saw asset allocation, some cannibalization. As Rob suggested, though, we actually picked up share in the fixed income side through our ETF platform, so I don’t think there was one single trend that we could give specifics, other than we are starting to see positive response by the client base related to our restructuring of our U.S. equity team that Mark Wiseman did, and we had positive returns Rob or Gary, do you want to fill it in more?

Yes, I think--well look, on the active equities side, when you look at both fundamental and systematic, I think on the institutional side we definitely saw some lower levels of outflows for the quarter. On the retail side, I think we’ve seen some benefit from our advantage series, which was part of our restructuring of our equity business about 18 months ago, which was a recognition of trying to migrate to a lower fee, more quantitative model. I think that’s actually benefited us and has done very well. We’ve recently launched that feature as well. I think on the retail side more generally, though, on equities, keep in mind that there is some seasonal impact of capital gains reinvestment that we see in the quarter, that always helps the fourth quarter a little bit. On the fixed income side, I think on the retail side we talked about some industry-wide outflows in both unconstrained and high yield, migration to the shorter duration product as well as just risk-off sentiment in high yield that basically impacted the entire industry, and obviously we have very significant market share in both of those products.

But I’m pleased to say in high yield, we actually had really good performance, so I think it was, as Gary just said, was a risk-off situation but as long as we continue to drive good performance, when there’s risk on again, we’ll benefit.

Your last question comes from the line of Mike Carrier with Bank of America.

Good morning, Mike.

Morning. Gary, one question for you just on the expense side. Maybe just a few clarifications - just on the G&A, given that throughout 2018 there was some items in that line, when you’re talking about keeping that kind of flat in this environment for 2019, just wanted to try to get a sense of what base you’re thinking that comes off of. Then just from an environmental standpoint, I think in 2018 you mentioned if the environment continues as you kind of expect and the comp ratio would trend lower, so when we think about the comp ratio in 2019 and beyond, given some of the restructuring plus some of the investments that you guys are making, just wanted to get an update there on how you’re thinking about navigating that.

Sure, so on the G&A side, the way I would think about it is we referenced the fact that our G&A went up year-over-year about $200 million. I would say that in our view, about half of that are what we could consider non-budgetable-slash-manageable items, so we have FX re-measurement, we have the purchase price contingencies that are obviously more one-time in nature and have revenue hopefully associated with that going forward. We tend to have some product launch costs tied to booking costs on closed-end funds that may launch in any given year, and then last year in particular we had a number--we had some elevated professional fees as it related to some M&A deals, obviously Brexit preparations as well as tax planning across the organization. About 50% of that increase effectively of that $200 million, I would attribute to those non-core items, so hopefully that gives you a sense when we talk about--looking at last year, you know, my sense is that $100 million, to the extent we don’t have to see that again this year, is something that we would expect to decline year-over-year. So if you’re looking at it more on a full-year basis of stated last year to what we would hopefully expect this year on a more core basis, my guess is it’s down in the 3% to 4% type of area. On the compensation, you asked a good question on compensation. We did see a decline year over year of roughly 110 basis points in comp to revenue, and as we’ve mentioned, obviously that’s driven in part by a continued strategy to embrace technology more broadly and to leverage our iHubs. When I talk about iHubs, we now have one in India, we have Budapest, and as you know, we’re planning on getting…

Ladies and gentlemen, we have reached the allotted time for questions. Mr. Fink, do you have any closing remarks?

Thank you, Operator. Thanks again for everyone joining us this morning and your continued interest in BlackRock. I believe our 2018 results are directly linked to the investments we made over time. Results are deeply connected to our deep partnerships we have developed and built with our clients globally through our solution-based approach, and we are going to continue to leverage our differentiated scale. We’re going to continue to invest in the investment and technology capabilities, and I believe it is those investments - those investments in technology, those investments in working with our clients worldwide, is going to continue to deliver value to our clients but just as importantly, value and opportunities for our shareholders. Have a good start of the year. It started off okay, and let’s hope everyone has a very good 2018. Thanks.

This concludes today’s teleconference. You may now disconnect.