Good morning. My name is Myra, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Incorporated First Quarter 2022 Earnings Teleconference. Our hosts 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.

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 lists some of the factors that may cause the results of BlackRock to differ materially from what we say 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, and good morning, everyone. It’s my pleasure to present results for the first quarter of 2022. 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’ll be focusing primarily on our as adjusted results. As many of you know, beginning in the first quarter of 2022, we updated our definitions of as adjusted operating income, operating margin, and net income to exclude the impact of intangible asset amortization, other acquisition-related costs, and contingent consideration fair value adjustments. We believe that excluding the impact of these expenses provides investors and management with a more useful understanding of our financial performance over time, while also increasing comparability with other asset management companies. BlackRock regularly reviews our disclosures with the goal of providing helpful information to our investors, and we may consider additional non-GAAP adjustments in the future. To provide consistent comparisons to historical results, we recast quarterly as-adjusted metrics to account for these changes for 2020 and 2021. This recast was posted on BlackRock’s Investor Relations website in late March and also has been included on Pages 12 and 13 of our earnings release, while year-over-year and sequential financial comparisons referenced on this call will relate current quarter results to these recast financials. BlackRock’s performance in the first quarter once again underscores the strength of our platform and our ability to serve clients in a variety of market conditions. We’ve invested for years to diversify our platform and to develop industry-leading franchises in ETFs, private markets, technology, active management, and sustainable investing. These successful multiyear investments have enabled us to deepen our solutions-oriented relationships with clients and have strengthened and diversified our organic revenue growth profile. BlackRock generated total net flows of…

Thank you, Gary, and good morning to everyone, and thank you for joining the call. As I wrote to shareholders last month, Russia’s invasion of Ukraine has created a humanitarian tragedy and is impacting not only geopolitics, but also the global economies. It’s going to fundamentally alter the path of globalization that we’ve seen over the past 30 years. The flow of goods and people across borders will still be critical to economic growth and new technologies will continue to shrink geographic distances, but countries and companies are reevaluating their interdependencies in a way that we have not seen since the end of the Cold War. As a fiduciary, BlackRock is working to understand how these structural changes will impact our client portfolios, and we will help them pursue their long-term financial goals. The breadth and scale of BlackRock’s platform enables us to serve clients in all market environments. We invested over many years to build a comprehensive investment platform, industry-leading technology and a global footprint with local expertise. By evolving ahead of the needs of our clients, we have grown as a trusted partner to all our clients. We constantly work to provide our clients with that type of insight, but close connectivity becomes even more important during periods of market volatility and uncertainty. Over the last two months, following Russia’s invasion of Ukraine, BlackRock held over 200 client engagements and hosted market update calls attended by more than 4,600 clients. I also recently visited clients in Japan and the Middle East and here in the United States, many of whom are trying to understand how geopolitical and macroeconomic shifts might impact their investment outcomes. I remember the same heightened level of connectivity with our clients during the initial weeks of the pandemic in spring 2020. I believe our…

Thank you. [Operator Instructions] Your first question comes from Craig Siegenthaler from Bank of America. Please go ahead.

Hey, Craig.

Hey. Good morning, Larry. Hope, you and the team are doing well.

We are healthy and safe. Thank you. I hope you too are feeling too.

That’s great. Larry, my first question is on fixed income demand and the inflationary backdrop. And we know there is some reaction to lower bond prices in the quarter, but iShares bond ETF flows are still positive. But given your wide product breadth in fixed income, and I’m thinking about unconstrained SIO, I wanted your perspective on future client demand trends in fixed income just given the likely fast ramp in Fed funds over the next 12 months, although we’re probably likely going to see a flatter year growth, too.

Well, as I’ve been saying, I think we’re going to have an inverted yield curve for some time, but let me get into the specifics of your question. Obviously, fixed income is a broad universe of different products, different maturities or durations. During market volatility, like we’ve witnessed, you would see outflows from retail as they move into different products, maybe in the cash, maybe in the equities. But if anything, in fixed income institutionally, you see it very stable. And if we have rising 10-year and 30-year rates , you’re going to see a huge movement in defeasing of pension fund liabilities, which is going to create a huge demand. That is why I believe we’re going to have an inverted yield curve, which I’ve been talking about for quarters. But tactically, investors can move out of longer durations to lower duration or shorter duration. Obviously, if cash and money market funds begin yielding 2%, 2.5%, you’ll see movement away from maybe longer-dated funds into shorter-dated funds. So let’s be clear, movement within fixed income is quite large. As I talked about, 40%, greater turnover in our fixed income ETFs, some of that is repositioning across a portfolio, and that’s what we’re witnessing. And I think that just highlights the resiliency of fixed income ETFs that is able to really help investors worldwide with that type of liquidity. But I think clients around the world are going to be navigating this. You mentioned SIO. SIO, obviously, with an unconstrained duration, depending on the investors’ wishes and how they think they should be positioned, is a great example of innovation within fixed income that investors can now give our investment team, under Rick Rieder in this case, the ability to navigate around that duration. They’re not stuck to the duration…

Yeah. So just to follow-up on Larry’s comments, we typically are helping clients assess their duration and maturity risk, especially in their core bond portfolios. And we help them rotate within fixed income depending upon what they’re seeking protection from, which could be rising rates in different parts of the curve. And that is why we saw $1.5 billion of net inflows into SIO and FIGO, as Larry described, that are less constrained. But more importantly, we see this in the ETF market, because it’s the ability for people to gain market exposure and tactical positioning very quickly within fixed income. A lot of times, you have to accumulate the positions over a period of time. It’s much faster, quicker diversified if you do that through ETF fixed income. So we’re seeing flows across the board. The performance has been good, but certainly clients are concerned how do we position in a rising rate environment.

Your next question comes from the line of Dan Fannon from Jefferies. Please go ahead.

Thanks. Good morning.

Hi Dan.

I was hoping you could talk about the outsourced CIO opportunity. You guys have had several large wins. Maybe discuss the dialog that you’re having with prospective clients and how you see, I don’t know the size or opportunity of that over time?

So, we are having dialog with pension funds worldwide on this, with insurance companies worldwide. Because of comprehensiveness of our investment platform, because of Aladdin, we provide a unique position with all these companies in terms of outsourcing whether it’s part of a general kind of an insurance company or the entire pension fund. We announced last year what’s our big win with British share in the UK. We’re having many conversations right now with other pension funds. We’re looking to see what -- how BlackRock can help them achieve their long-term goals and aspirations. We’re working with many insurance companies and see can we provide them with better support, better investment opportunities, and they can leverage our team with maybe their existing team and manage a part of their portfolios together. So, the conversations are probably more robust. There’s probably more opportunities across pension funds, and insurance comes at any time in our history, and we look at we’re as well-positioned as any firm in the world on it. Rob, do you have anything more to say on that?

Yes. I think the business of managing money has gotten very complicated, very expensive. Firms have not invested in the technology that they need, and the scale and size of what we can do can help them get better investment performance at a better price and certainly sourcing with the scale and size the BlackRock has can help them. So we actually can go in, have a dialogue, work together with the company and the people that they have there. And do it faster, better, cheaper and handle the operations and technology as well.

Your next question comes from the line of Bill Katz from Citigroup. Please go ahead.

Okay. Thank you very much. I appreciate the disclosure this quarter as well. Maybe a question for Gary. On one hand, I sort of heard you talk a little bit about we were willing to reevaluate the expense growth guide given the market backdrop, but I also heard sort of a high level of commitment to spending. So in that light, can you triangulate between prior guidance in terms of year-on-year expense growth, particularly for G&A and the run rate pacing for first quarter? And then was there anything unusual in the comp this quarter that would suggest some upward bias into the second quarter? Thank you.

Thanks, Bill, and good morning. So I think your question is about spend for the year, and then I’ll come back to your more detailed questions on G&A and comp. I think just echoing on what both Larry and Rob said, we’ve obviously invested for years to focus on developing industry-leading franchises in many high-growth areas that we’re doing incredibly well in. And I think as we talked about back in January, last year, we grew organically at our fastest rate ever, and we continue to expand that growth premium relative to the industry, and we were able to increase our margin. And I think, importantly, as I mentioned in my remarks, many of the areas in which we’re generating strong organic growth today, whether it’s alternatives, traditional active, ESG, were simply not significant contributors to our business just a few years ago, and we continue to see very significant opportunity. Again, as Larry and Rob just talked about, particularly as clients are optimizing their operating models, they’re looking for these deeper relationships with fewer managers, and we’ve talked about a number of those wins. So our overall goal here has not changed. We remain committed to optimizing that organic growth in the most efficient way we can. And I think as we’ve done in the past, we’ve shown in the past, we have deep conviction in the stability of our model and our ability to manage our cost structure. And we’ve done that throughout our history, whether it was in 2016 or 2018, both years where we increased our margin. We’ve been agile, but we’ve also continued to invest. And I think we are very focused for the near term on continuing to support that growth at both historically and future. And in that regard, we have made no major change to our discretionary spending plans that we laid out to you in January. But as we said, we will be prudent in reevaluating that level of spend if market conditions suggest that we do so. As it relates to comp, I don’t think there’s anything there. Obviously, there is, which is in the overall -- environment. There was some benefit attributed to mark-to-market on deferred cash comp. But if beta doesn’t go down, and we don’t get that benefit. In some respects, those are correlated. And in terms of G&A, I would just say that, as a copy out to what I just said, which is that we’ve made no major changes, we tend to spend a little slower in the first quarter than we do towards the rest of the year as it relates to our G&A spend.

Your next question comes from the line of Michael Cyprys from Morgan Stanley. Your line is open.

Great. Thanks.

Hey, Mike

Thanks for taking the question. Hi, good morning, Larry, Gary. We’ve seen a lot of money flow into the private markets over the past couple of years and a very low interest rate backdrop. And now that interest rates are rising, a lot of concerns around inflation and where the end game may be in rates. I guess how do you think about that will impact client demand for private assets? Are there certain parts of the private markets that you think will hold up better and see better growth? And how is this evolving -- how are these evolving trends influencing your strategy within the private market space? And where do you see the biggest opportunity for BlackRock?

Huge demand, Mike, from -- for private credit and loans. Those are the two areas. And as you know, a couple of years ago, we did an acquisition in the loan area because the performance of that product has been great during various cycles. And these are good mom-and-pop type companies that don’t have access necessarily to the public markets, and it’s very expensive. And due diligence is required, so you have to have the team to do that. But certainly, in the private markets, both in credit and in loans, we’re seeing increased demands. And I think that’s also a function of rates because they give you much more of a cushion for rising rates than the more obvious liquid credit products. There’s also a huge demand for real assets, and that has been an area of growth for us, as you know. And a lot of people are using that for an inflation hedge. So the textbook says when you see inflation, you sell growth, you buy value, you buy tips and you buy real estate. And all of those, including infrastructure, make for good investments. So we’re pretty well positioned. You know that we take a multi-asset approach to build portfolios that are going to be resilient. That’s what people are expecting for us. And that is why you see the unconstrained bond funds get money. And as I mentioned before, $1.5 billion into SIO and FIGO, equities, inflows into equities. And our dividend growth offerings can also be tools to help thread the needle between generating income and growth that could potentially outrun inflation. And traditionally, real assets like commodities, infrastructure, real estate will insulate a portfolio against higher inflation. So we’ve seen some clients tactically allocate to commodities. And in that area, we had about $7 billion of net inflows.

Let me just add one more point. As I said in my prepared remarks, the interconnectivity between sustainable investing and infrastructure is going to be enormous, whether it is a pipeline in Saudi Arabia, or a pipeline from Texas to Mexico, or investing in the sequestration of hydrocarbons and H2O in the Midwest of the United States. The building out of new renewable platforms of charging stations. Across the board, the conversations we’re having with new innovative companies in technology and the robustness of our conversations with the largest energy companies in the world, our connectivity in this space has never been greater. And I would say with high confidence and high conviction, the opportunities to place a lot of money in very unique investment opportunities in this interconnectivity, sustainability and infrastructure is going to be large and it’s going to be multiple years of investing.

Your next question comes from Brian Bedell from Deutsche Bank. Please go ahead.

Great. Thanks. Good morning folks.

Hi, Brian.

Hi. Good morning. Maybe just to tag on to the last part of that question to expand that and sort of put that into another question. So the -- obviously, the increasing demand for energy transition that you’ve alluded to on several conference calls now, I guess, first of all, do you see the geopolitical situation accelerating that trend on a more permanent basis, even if things do ease up? And then looping that in with the products that you’re able to come out with, which do tend to have higher fee rates in the alternatives area, if you can comment on just the confidence of continuing to generate faster organic base fee growth versus AUM, putting aside, of course, these lumpy mandates that can really influence that?

As I said, we’re in large dialogues with the traditional hydrocarbon companies, energy companies. We’ve had numerous conversations with the leaders of every energy company in the world about how they’re moving forward. I think the geopolitical issues, as you framed the question, is going to spur a huge amount of investing, huge amount of investing in the exploration and development more oil, but at the same time, elevated energy prices is going to accelerate decarbonization technology. And I think what you’re seeing, whether it’s the $1 trillion investment in infrastructure that the United States voted for last year and now the real commitment out of Europe to build LNG plants to have less dependency on one supply chain Russian gas, I believe in our conversations, even at country levels are very large and how can they create multiple supply chains for energy. And that is a combination of decarbonization technology and a combination of insurances, of having energy to meet the needs of society. So all of this is going to be -- it’s just a long-term project. It’s not going to be a straight line as my lenders wrote about. Any energy transition has to be fair and just or it doesn’t work. We are witnessing that now, the supply shocks and now excess demand and so all of this is playing out that it’s going to create an investment boom, the combination of fiscal spending on the US part, the European part. We had -- as in every country, we have conversations about decarbonization or the utilization of hydrogen. I was in Japan last week, a lot of conversations on hydrogen and what role can that play in Japan. Two trips to the Middle East, more conversations about -- as they move with a lot of sun and solar moving more towards more renewables, the movement away from oil as they utilize a lot of oil for power production in Saudi Arabia to move to gas, so moving from dark brown light brown. All of this is just going to stimulate a lot of excess demand for product and supply of product. And I would have said, for the last few years, a bigger issue is supply of product, not demand. Then I do believe the supply quotient over the next few years is going to be larger which just means more and more opportunities. And we are -- in our forecast for new growth in these areas, we’re forecasting the build-out of three large infrastructure funds to meet these needs.

Your next question comes from the line of Brennan Hawken from UBS. Please go ahead.

Good morning. Thanks for taking my question. I just had a question on ESG and maybe what you’re hearing. There’s been an emerging debate amongst investors around some of the lagging performance in ESG. We’ve seen commodities strengthen. A lot of your comments around commodity strength certainly would point to some support behind some of those commodities producers. Are you hearing any shift in dialogue early on around that component and that may be a consideration of making some shifts in defining energy as rigidly as they have in the past? And are you seeing any early signs of demand shifting in that product, albeit clearly a secular shift? But maybe we see some cyclical weakness in the near term here. Any color would be appreciated. Thank you.

Well, first of all, great question, very timely, especially with the rising energy prices and all the issues of supply shocks in hydrocarbons. In all my letters, I said an energy transition is not a straight line. It’s a 30 to 50-year time frame for us to move that forward. It’s not today. It’s not tomorrow. And the key is making sure that we have energy transition that fills the needs of all societies, and higher energy prices really crushes emerging markets and harms -- the poor in every country that is dependent, a higher percentage of their disposable income that goes to energy. And obviously, you couple that with food inflation, it has a severe impact. Does that change the long-term nature of ESG or as I think you’re framing it more or on the sustainability side? Not really, because we’re going to -- we always said we’re going to have to invest in new technologies to bring down that green premium. Well, the green premium obviously is reduced with higher energy cost today, but we still have that green premium in a lot of the technologies. A lot of this is just going to take quite a bit of flow at the time. But if you just look at the evidence of our first quarter, we had about $19 billion of sustainable flows. Obviously, that’s down from prior quarters but certainly up from two years ago. Much of it was an active strategy. So as I talked about, what we’re trying to do in the alternatives space, $8 billion was in ETFs. So, I’m not going to respond to any one quarter valuation. Of course, in quarters where you have rising energy prices, energy companies, and we would -- they’ve done fantastically well as they should be. They…

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

Thank you, operator. Once again, I want to thank everybody for your continued interest in BlackRock. I strongly believe our first quarter performance is a direct results of our commitment and our deep commitment to our clients, as I said just a minute ago, and our desire investing for them over the long-term ahead of their needs. We see tremendous opportunities ahead of us, and BlackRock has focused to be remaining and working with all our people, working with all the communities where we operate and working in a comprehensive way as we try to stay in front of the clients’ needs. If we continue to stay in front of the clients’ needs, if we continue to be a voice of long-term investors, I believe we will continue to deliver those durable returns that all of you, our shareholders, expect from us, and that is our commitment to you. Everyone, have a good quarter.

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