Good morning. My name is Gerald [ph] 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 2020 Earnings Teleconference. Our host for today's call will be Chairman and Chief Executive Officer, Laurence 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.

Thank you. 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, which list some of the factors that may cause the results of BlackRock to differ materially from what we see today. BlackRock assumes no duty and does not undertake to update any forward-looking statements. So, with that, I'll turn it over to Gary.

Thanks, Chris. Good morning and Happy New Year. I hope everyone and their families remain safe and healthy through the holidays, and it’s my pleasure to present results for the fourth quarter and full year 2020. Before I turn it over to Larry, 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 our as-adjusted results. Throughout BlackRock’s history, we have consistently and systematically invested in our business with a commitment to serving clients, employees, shareholders, and the communities in which we live and operate. As a result, while the world faced unprecedented challenges in 2020, we were well prepared to provide clients with thought leadership, investment insights, and risk management tools to ensure the physical and emotional well being of our employees and to give back to our communities. BlackRock’s strong performance during this challenging year is a testament to our diverse and resilient business model. Our steadfast focus on helping clients achieve their long-term goal and the dedication of our incredible people. We generated net inflows of $391 billion in 2020, representing 5% organic asset growth and 7% organic base fee growth meeting our organic growth target for the sixth time in the last 8 years. Importantly, we finished the year with increased momentum, generating $127 billion of total net inflows in the fourth quarter, reflecting record quarterly organic base fee growth of 13%. Strong performance from our entire active franchise along with near record iShares flows, which benefited from client de-risking and year-end tax planning contributed to this quarters robust organic base fee growth. We continued to play offense in 2020 as the strength and stability of our operating model allowed us to invest through volatile markets, both organically and inorganically, expand…

Thank you, Gary. Good morning, everyone. And thank you for joining the call. I hope you and all your loved ones are staying healthy and safe. For decades, BlackRock has built our strategy, platform and culture around staying in front of our client needs. We've deliberately invested in our business so that we are prepared to help clients navigate the most complex challenges of the investment landscape, and the world changes all around them. And that is showing up in results today. The hardships experienced by people globally in 2020, and inequalities further exasperated by the pandemic have only strengthened BlackRock’s sense of responsibility to help millions of people build savings, to make savings easier and more affordable, advanced sustainable investing and contribute to a more resilient, global economy. The pandemic has taken a dramatic toll on all our lives, disrupting the way we work the way we live. At the same time, it has led to a profound shift in how economies and how societies even operate, creating opportunities to redesign our society for the future. Investors around the world, most of whom are saving for long term goals like retirement are experiencing the economic impact of the pandemic, which is leading to rising inequalities within and across nations continued low interest rates, even in the face of rising inflation expectations, and it's a tonic shift towards sustainable business practices. These trends will require investors to rethink portfolio allocation, and they are increasingly turning to BlackRock for insights and solutions, so they can fulfill their purpose on behalf of their stakeholders. Our diverse global investment platform with active and index strategies across all asset classes, integrated technology, data, and risk management, and global scale and connectivity enables us to deliver strong and consistent investment performance and for more stable…

[Operator Instructions] Your first question comes from Alex Blostein with Goldman Sachs. You may now ask your question.

Good morning, Alex.

Great. Good morning, Larry, good morning everyone, Happy New Year to you all. First question, I wanted to ask you guys around scale at BlackRock in relation to the margin guidance that you guys provided for 2021. I guess given the strong exit on the revenue front, this implies a pretty healthy pickup in spending. I know you talked about some specific areas like technology and market data, but can we maybe get a little more specificity on kind of what are the key areas where you expect to add into 2021? And again beyond that, how should we think about the ability of BlackRock to deliver positive operating leverage beyond 2021?

Thanks, Alex. It's Gary. Happy New Year. I'll take the first swag at that and then let others chime in. So, look, our performance in 2020 clearly reflects, as we've talked about at length a strategic commitment to investing responsibly in our business across market cycles and our margin of the year of 120 basis points improvement over last year benefited from a number of what I would call, items that we saw in 2020 that will be potentially a little different next year. And of course, we're trying to stare into a crystal ball like everybody else, but margin last year benefited from record performance fees. We had securities lending revenue that was also a record. And I think as we've talked about, we did have a lower level of core G&A expense than anticipated. So, if you think about it from my perspective, the margin pop we saw this year was probably a little bit higher than we would normally have expected. And as we stated previously, we've never been better positioned to take advantage of the opportunities in front of us. And we are passionate as you know about investing responsibly and aggressively. So many have asked and in fact we were asked to your -- at your conference about our plans for next year, and whether we would drop some of those reduced core spending levels to the bottom line, and our view at this point is when we look out at the opportunities in front of us and what's happening in the industry that we see a very unique opportunity to continue playing offense maybe even a little harder and to invest that money back into the business to support incremental investments in technology, market data, and a variety of other areas to support those…

Your next question comes from Glenn Schorr with Evercore. You may now ask your question.

Hi, Glenn.

Hello there. How are you? Okay. So, if I look back on 2020, it's interesting, right? Because rates go to zero, and there's a lot of things at play, but you had really good fixed income flows, both active and passive, and that's continuing. I'm sure it is a big picture that goes into Larry's opening remarks. As people start thinking about higher rates and potential inflation on the outlook, how do you think asset allocations are going to change, particularly on the fixed income front?

Well, I don't have a crystal ball. So, right now the forward curve does show interest rates going up quite significantly as high as 180. Last time I looked for the ten-year. I -- we are saying -- we believe that because even at that rate, that is not going to change the allocation that remarkably because I do believe at that rate, liability rates are still going to be longer, and as a result the demand for equities will persist. But in terms of fixed income, we have not really seen much change in client preferences, they are consistently looking at products like SIO, which is a specialized fixed income product that is not targeted to is not targeted to -- is not targeted normally to duration. We expect to see more global demand in global bonds as a mechanism away from the potential lowering of the U.S. dollar. We will -- we are continuing to see emerging markets beginning to show interest as a macro trade. And we continue to see more and more interest in private markets, in private credit. So I -- and in which we are strong in all of these. So, I don't think you're going to see a persistent large scale rebalancing out of core fixed income assets. The positive side, I would say if rates go up for the yield curve, it's going to make obviously the banking system to be much stronger. It's going to make lending even easier to be had. I think a rising yield curve is a positive sign for the economy. And so all of that, in my mind leads to probably better equity valuations. Rob, do you have anything you wanted to add to that?

Yes. I think that demand is still going to outstrip supply. But I think, Glenn, the way we look at it is as people allocate to fixed income, they're going to allocate differently. And the fixed income iShares flows are going to benefit from the low-rate environment, as we've already started to see. And as people start to do this reallocation, this is why we've seen as Larry mentioned in his opening remarks, over 100 new asset managers and asset owner clients come into fixed income but come in through iShares. And a good statistic is 80% of the top asset managers are now using fixed income ETFs. So we think there's still demand, but the demand is going to be shown differently as they come in, and we're very well positioned in our iShare business to take that money in fixed income.

Your next question comes from Craig Siegenthaler with Credit Suisse. You now ask your question.

Hey, Craig, Happy New Year. Year.

Hey, good morning, Larry. Happy New Year, and hope you guys are all doing well. Actually is on scale. We've all witnessed the pickup in M&A activity in the asset management industry. And many CEOs have discussed the need for distribution scale. And since BlackRock is the largest asset manager in the world with the largest distribution platform globally, I just wanted to hear your perspective on BlackRock unique distribution scale advantage. And also, do you think firms that have a trillion or 500 billion of AUM really need to buy their firms to improve their scale? And also hoping Gary can chime into just given his deep background in M&A?

So why don't you start on that one part and I'll finished last part?

Sorry, I'm not on. So as we think about -- I guess it was a two-part question. Your first question was on scale and how do we think about that in the context of M&A, Craig? Or is it what are the unique scale?

First question is on, talk about BlackRock's unique distribution scale advantage? And then, as you look at the industry do you think other firms that are fairly large, but not the same size as BlackRock. Do they really need to buy other firms to improve their scale? And is that a real advantage for them?

I'm going to try to avoid commenting on what other firms should do. But obviously, as you know, our competitive advantage in terms of what we believe drives a lot of our value proposition is global reach, is best-in-class technology, risk management, diverse investment capabilities across the spectrum of active and passive. And then, obviously, to be able to bring all of that -- all of that together. We've been at that now for well over a decade, in terms of not only trying to identify the pieces that we need, but also integrating those pieces into a distinct and unique one BlackRock culture. We think that's really critical to our success today, both in terms of being able to reach clients with boots on the ground, as Larry mentioned, 16,000 plus people, over half of those people are outside of the Americas these days, having capabilities to have thoughtful investment discussions by virtue of the fact that we are local in our local markets. And Larry talks about that a lot. And obviously, I don't think that there's really a great opportunity for a number of our competitors to just recreate Aladdin overnight in terms of those capabilities. So, I think, again, breadth of product, breadth of reach, breath of insight, all brought together with technology and risk management creates this unique franchise that frankly seems to be humming on multiple cylinders today. And I think, we -- do we view that as unique? Yes. Do we view it as something that other people could create, potentially, but I'll leave that to the challenge. But as I said, we've been doing this for a decade, and it's going to take quite a long time for people to try to replicate I think what we have right now.

Let me try to respond to the first part of the question. I believe our distribution platform has been buttress quite a bit over the last five years has been a long term commitment. We are providing a uniqueness as Gary suggested across the world in terms of providing that conversation that intersects both active and passive and risk analytics. No firm can do this at this moment. I believe the elevation of content by the wealth manager has been one of the giant changes too. As the wealth management industry has moved away from fee base to an advisory base, they've really elevated their ability to have deeper, broader conversations. And they're looking for a few partners who could work with them and build that out. And we are certainly kind of one of the go-to firms. We're helping that. And we're able to help them deliver that global insight and advice, and more importantly, the solutions that helping them. So it is the combinations of having iShares interactive strategy. But now with the overlay of technology to customize portfolios. And today, the customization of portfolios and personalizing a portfolio is becoming more and more in need in the wealth management space. It is not about selling a bond fund or a stock fund anymore. It is not about buying a stock or a bond. It is about a holistic whole solution portfolio. And so, our uniqueness is about that and how we deliver it. Just as a response to the industry, the industry has been always designed around a specific product, a specific fund. And for the firms who only have a product or in one asset category, they have a difficult time to really respond to whole portfolio solutions. And I believe this customization, the personalization of whole portfolio solutions is becoming the driver, the driver in terms of most of the wealth management conversations. Do we need to do more acquisitions for distribution? Not in the United States, not in the Europe. Could we do somewhere in another part of the world where we don't have a strong footprint? Sure. That is consistent what I've said over the last three to five years. And importantly, what we are going to do like we announced today they Clarity AI minority interest. What we are trying to do is provide in this portfolio customization, also uniqueness and data and analytics to drive better decision making, which will ultimately drive better performance. And I think that is also the uniqueness of BlackRock. And why we are so constructive on the opportunities we have working with wealth managers worldwide.

Your next question comes from Robert Lee with KBW. You may now ask your question.

Hey, Rob, Happy New Year.

Hey. Everyone, Happy New Year. Hope everyone is doing well. Thanks. Larry, I guess a regulatory question. It does feel like after being pretty quiet and dormant for bunch of years, starting to see more talk about relooking at asset managers for their systemic risk and everything. So just kind of maybe your take on where you see -- if you see, where you see that kind of chatter picking up? Is it more in Europe or here? I mean, your perspective, I think would be helpful?

Great question. We've built BlackRock around the whole foundations of strong global capital markets. I think we have been a big beneficiary over the years by we believed in global capital markets, and the expansion of global capital markets over the last 20 years. And I think the size of our footprint and the size of the AUM that we managed is because of our commitment to building broad scale capital markets. One of the interesting points I said this at the end of the -- my speech today. Our size, relative to the global capital markets, is almost virtually unchanged to what it was in 2009. So in 2009, we were under 2% of the global capital markets. And today, we're a little bit over 2% of the global capital markets. So as much as we've grown the world, capital markets have grown. The use of government debt as a mechanism finance deficit has grown. The use of the equity markets for IPOs and new companies and the expansion of other countries expanding their capital markets, whether the capital markets expansion in the Middle East or parts of Asia have been really quite extraordinary. So we are benefiting that. What we need in that. And we've always welcomed that. We need to make sure that regulators focus on a well functioning capital markets to build a more resilient economy. So we have encouraged regulation worldwide to ensure well functioning capital markets. And that is the key criteria, how we look at it. I would say the one myth about asset managers. The asset manager industry is highly regulated already. At BlackRock, we are regulated by the SEC. Because we have a Trust Bank. We're regulated by the OCC. We're regulated by the CFTC by FINRA, overseas, we're regulated across…

Your next question comes from Ken Worthington with JPMorgan. You may now ask your question.

Hi, good morning. I'm curious your views on the outlook for tax managed investing in the aftermath of COVID. And the outlook for higher personal income and investment taxes in the U.S. and abroad. To what extent might demand here provide another catalyst for ETFs and direct indexing growth inside and outside the U.S. into the outlook for tax managed investing contributes your interest in Aperio?

Well, the answer is yes. But it comes under a broader picture and that is, we're seeing increased demand for what is called personalization and customization. And that includes tax managed, it also includes ESG, and includes factor preferences. And as mentioned before, wealth managers are looking to do more with fewer partners. So they want partners who can offer whole portfolio solutions. And that's why we are positioning ourselves to be the partner of choice. With our acquisition of Aperio, we are further enhancing our value proposition for whole portfolio SMAs [ph] across equity, fixed income, alpha factors, and index solutions. Because ultimately, we want to make it easy for wealth managers to access our investment strategies across funds, ETFs SMAs, even models, and be able to construct more resilient risk aware portfolios using our technology. So we're seeing as a result of our investment in serving more and more wealth managers, we saw 185 billion of iShare close. We're seeing strong active flows, including inflows across active mutual funds, even as the industry saw outflows. And we're reaching out to more advisors with our advisor center and our partnership with investment. Now, on the self-indexing part of your question. Look, self-indexing. indexing certainly has some advantages. And the advantages are cost and flexibility. So we're exploring constantly self-indexing in areas where there aren't well defined indices. And that would be in smart beta, in fixed income, factors, in ESG. And currently, we have six self-index ETFs. So we also continue to have great relationships with our index providers. And we believe this often significant value in having a third party provider. And clients especially institutions, often value that brands and are benchmarked to those particular indices, as well the major index providers, they provide services more than just the brand. They provide research, IP tracking, corporate events. So, we're also seeing better price competition among the index providers and the sharing of IP. And I think you've also seen our recently announced collaboration with Morningstar focused on enhancing style investing for clients to better represent the size and style mandates in the U.S. equity market. So, a lot set, but a lot of that has to do with this customization, this personalization. And as you rightfully say, a lot of that is going to be focused on tax going forward, and we want to be positioned well for that.

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

Thank you, operator. Thank you all for joining this morning for your continued interest in BlackRock. BlackRock's 2020 results are a direct result of a steadfast commitment to serve our clients and putting their needs at the center of everything we do. We will continue to invest and innovate in the years to come so we can be better helping millions of people to build up savings, to make investments easier, more affordable. We're going to continue to advance sustainability investment and contribute to a more resilient economy. All of that in my mind will be continuing to drive the success of BlackRock in 2021 and beyond. Everyone have a good start. Everyone, please feel safe. Everyone, please stay healthy. And everyone please get a vaccination. Thank you. Bye-bye now.