Good morning. My name is Jennifer, and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the BlackRock Incorporated Second Quarter 2024 Earnings Teleconference. Our host for today's call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Martin S. Small; President, Robert S. Kapito; and General Counsel, Christopher J. Meade. All lines have been made 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, operator. 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 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 Larry.

Thank you, Chris. I'd like to begin by addressing what occurred over the weekend. The assassination attempt on former President Trump is abhorrent. I was very relieved he wasn't seriously injured, and I'm thinking about the victims of this shooting, especially the innocent person who was killed. As I wrote to my BlackRock colleagues in the hours immediately following the horrific event Saturday evening, we must condemn political violence of any kind, period. And as Americans, we must stand united to do our part to promote civility and unity for our country and provide hope for all Americans. I'll turn it over to Martin now.

Thanks, Larry, and good morning, everyone. Before I turn it back to Larry, I'll review our financial performance and business results for the second quarter of 2024. Our earnings release discloses both GAAP and as-adjusted financial results. I'll be focusing primarily on our as-adjusted results. The first half and second quarter of 2024 saw some of BlackRock's strongest performance and highest growth rates of the post-pandemic period. We're growing faster than last year. We delivered double-digit operating income growth and expanded our margin by 160 basis points year-over-year. Clients entrusted us with over $80 billion of net new assets. It was $150 billion of flows excluding episodic client activity. We generated 3% annualized organic base fee growth, our highest second quarter in three years. We ended the second quarter with record AUM of over $10.6 trillion. Our business tends to be seasonally stronger in the back half of the year and we have line of sight into a broad global opportunity set of new asset management and technology mandates that should fuel premium organic growth. We're executing on the strongest opportunities we've ever seen in our core business and building for the future. We're moving swiftly and aggressively to position our firm to achieve or exceed our 5% organic base fee growth target over the long term. At the same time, we're putting the future building blocks of accelerated all-weather organic growth, that's private markets and technology. We're putting them into place with our planned acquisitions of Global Infrastructure Partners and Preqin. We're building our mix towards higher secular growth areas like private markets, technology, whole portfolio mandates, and model portfolios powered by both ETFs and active. We believe this will deliver greater diversification and resilience in revenue and earnings through market cycles. Through strong organic growth and scaling of…

Thank you, Martin. BlackRock's core business growth is the strongest we've seen in nearly three years, with a significant upward shift ever since our last earnings call in April. Second quarter core net inflows were approximately $150 billion, excluding lower fee episodic M&A and institutional index activities. Our structural growers areas, like ETFs, models, Aladdin and private markets, are powering steadily higher organic base fee growth. Organic base fee growth represented the best second quarter since 2021. 2024 has been our ETF strongest start in a year on record with $150 billion of net inflows and iShares' June flows were the strongest month in our history and for any other issuer. We are executing on landmark mandates across our platform and on closing our planned acquisitions of GIP and Preqin. Client and stakeholder feedback on both GIP and Preqin has been increasingly enthusiastic. We are on a differentiated path to transform our capabilities and infrastructure and to meet the growing need for private market technology, data and benchmarking. We believe this will deepen our relationships with our clients and deliver value to you, our shareholders. Our growth in private markets provides a whole new engine for premium diversified organic growth and less beta-sensitive revenues, both of which should drive future earnings and multiple expansion. We have strong conviction we are on pace to reach our 5% organic base fee growth target. And the expected third quarter closing of GIP will add on to our organic base fee growth potential, doubling our private markets base fees and adding approximately $100 billion of AUM focused on infrastructure. At BlackRock, we always intensely push ourselves to anticipate where markets are going, what clients will need and how we can deliver better outcomes in better ways to each and every client. We set the…

Thank you. [Operator Instructions] Your first question comes from Alex Blostein of Goldman Sachs.

Good morning, Alex.

Hey, good morning, Larry. Hello, everybody. So, lots of optimism on the firm's trajectory for organic growth, and I heard you guys, obviously, echoing maybe some of the comments from last quarter around the strong pipeline and Martin's comments around premium organic growth. So, maybe help contextualize this a little bit more. What did the pipelines look like today? What kind of the timing of some of these conversions that you anticipate? What asset classes? And ultimately, what that means for the firm's organic base fee growth for the back half of '24? Thanks.

Thanks, Alex. I'll start and I think Larry will add some color. But Q2 organic base fee growth, as I mentioned, was 3%. We had that typically seasonally slow start of the year in Q1. So, 3%, it's just about at our target for where we thought we'd be in May and June. We really see excellent momentum, and I think you got that in Larry's comments. But I'd say on the measures we look at for fee growth velocity sort of last three months, last six months, last 12 months, organic base fee growth, Alex, keeps grinding up by 1 percentage point; it's 1% to 2% and now 3%. And we really feel that markets are on this precipice of a reset. Rate cuts should normalize bond markets, they should normalize fixed-income allocations, they should fuel equities, they should really drive flows. We've been a really meaningful outperformer in these re-risking periods. If I look at sort of previous election cycles, rate reductions, BlackRock had huge upside capture. In '17, '18, '21, we were well above our through-the-cycle targets for organic growth in those periods. And I think when we look at growth, it's going to come from these strong structural growers, and those things grow even faster in supportive markets, ETFs, models, Aladdin, our expanding private markets business. We're closing in and growing our AUM by over $100 billion in private markets with our planned GIP acquisition, and we see that as a huge growth opportunity. So, we'd expect those engines to really capture additional growth that hits our targets, and even on the most modest growth assumptions, I think, for beta end markets to really drive significant differentiated durable earnings and multiple expansion. We look at this all the time as a team. We've achieved our premium organic base fee growth target of 5% on average over the last five years, and BlackRock has a lot of positive leverage to re-risking periods in the market that gives us a great deal of conviction about the path to 5% in the back half of '24 and also our longer-term ambition, I think, to be at 5% or better as we grow private markets and technology.

Alex, let me just add a little more holistic texture. We have never had more dynamic conversations than we ever had now across the world, across products. I truly believe our positioning in iShares today has never been more robust. Our delivery now of active ETFs, our innovation in crypto, having more precision-type products when there is, I would say, more fragmentation going on in the world allows us to have more conversations with differentiated products for our clients. But the feedback now close -- over six months of feedback of our planned acquisition of GIP and the conversations we're having with some of the most sophisticated investors worldwide has never been more robust about how we could partner, how we could be trying to develop more things. And in my prepared remarks, I talked about the confluence of power and AI and data centers. And I believe this is going to be one of the world's biggest growth engines as we start trying to develop AI for everyone, AI not just for the big powerful organizations, but AI utilization for everybody, for every country in the world, and it's going to require just -- we're talking trillions of dollars of investments. And our conversations with the hyperscalers, our conversations with governments, our conversations with the chiller suppliers, the cogeneration suppliers, the opportunities we have in infrastructure is way beyond I've ever imagined even just seven months ago when we were contemplating the transaction and formalizing it. Our conversations with investors from the most sophisticated sovereign wealth funds to our conversations with the RIA channels, the need for data and analytics across the private sector is only going to be growing, and no firm right now has the position that we have with Aladdin, eFront and now with Preqin that we could assist more and more investors. So, we are taking a differentiated approach that obviously we have done that in the past. And I would just like to just say that, and I said in my prepared remarks, we do these things pretty boldly. When we bought eFront, everybody thought there was a big price and yet we've doubled ACV. Martin talked about Aperio where we crossed over $100 billion in AUM. I do believe -- we've talked about AI at BlackRock AI for Investments. One of the big opportunities I see is going to be systematic equities, where we've had now a 10-year track record of approximately 90% outperformance. And I do believe that we saw now close to about $5 billion of flows. I believe this is only going to be accelerating now. As more and more investors are looking at how can you use AI for investments, and we have one of the finest platforms utilizing AI, utilizing big data. So, I'm very excited about the high-growth potential we have in more and more high-fee products, but I'm just as excited about how we can provide better product across the board utilizing our ETF platform.

Your next question comes from Craig Siegenthaler with Bank of America.

Good morning, Craig.

Hey, good morning, Larry. So, our question is on the outlook for technology services revenue growth. With tech ACV growth at 10%, which is the low-end of your long-term target range, we want to see if you have visibility into the future trajectory given the timing of larger contract wins within your existing pipeline, in conversations with clients. And now that you have Preqin, how will that also impact the 10% to 15% target in 2025 after the deal closes?

Thanks, Craig. I'll start and I know Larry will add. Technology, it's just the main engine for investment performance, right? It's the main engine to drive operating leverage. It's what great firms, I think, are using to have great client experiences that fuel growth. And we see a very consistent growth rate in how clients are investing in more technology. I can tell you as a CFO, if I could invest in tech spend, I would. Generally in the marketplace, there's just an acceleration in tech spend across the board. But I think importantly, clients are trying to retire this kind of spaghetti patchwork of legacy systems they have. They want to leverage fewer providers. They want to do deep integrations across the fintech and data ecosystems. They want to have a whole portfolio view across public and private markets. That's always been the thesis of the Aladdin platform. It's how we use it at BlackRock and with our external clients. It was what drove the integration of eFront and Aladdin. And now with Aladdin, eFront and Preqin, we think we have even more opportunities to benefit new clients and the pipeline is very strong. Tech services revenue was up 10% year-on-year, 5% sequentially. As we continue to get the big assignments and new sales from the prior years going live, we expect those revenue numbers to stay strong. Our ACV target, Craig, it's over the long-term. We've achieved it on average since we first started disclosing ACV in 2020. And we think we have a real opportunity to apply and drive indexing principles using Preqin, Aladdin, eFront together across tech data and investments. Preqin is expected to accelerate our planned technology services ACV within our target range. It's going to increase current ACV dollars by about 15%. So, we'll continue to target low- to mid-teens growth in tech services ACV, and we'd expect bringing together Aladdin, eFront and Preqin to be the way that we can get there over the next few years.

Craig, but our line of sight, we are in conversations right now with probably the broadest and largest potential Aladdin assignments ever had. So, the conversations we're having are with broad deep conversations than we've ever had and much of it has to do -- the serious big giant conversation we're having right now are based on the ability that Aladdin can provide both public and private data analytics. And two, we deliver. There are many examples where people made big, broad promises, and there were years, I want to underline years, delayed in the implementation. We have a deep history of delivering on time. That doesn't mean it doesn't take long time to do it, but we are -- we have a huge reputation because of our expertise in delivering the technology platform on time. These are very big and complex, and we do it very well. And now with the combination of Preqin alongside eFront and Aladdin, we have probably the biggest opportunity we've had in 10 years or more in delivery even a more differentiated technology and analytical platform. And by doing so, it could really then expand our entire platform in towards the benchmarking and indexing. As you know, that's been a province of other organizations. Historically, asset managers were precluded the SEC to be into this business. This is why we were never in this business. Asset management firms can now be in it, as you know, and we create some type of customized index, but we look at this as a unique opportunity now for BlackRock. With our position, with our role, we are going to do this with the same, I would say, industrial fortitude as we did in the early years when we were just an asset manager needing risk analytics, so we did it ourselves and then we are so proud of what we did ourselves, we offered it in the '90s to our clients. We are going to do this in the private markets. And we're going to -- this is going to take time, but I think we have a real ability to provide a very differentiated platform in this and this is something of sheer excitement. And if we succeed, this will add a whole new revenue line on BlackRock's revenue side. Thanks.

Your next question comes from Michael Cyprys with Morgan Stanley.

Hey, good morning, Larry.

Hi, Mike.

Hey. Just a question on the alts business and GIP with the deal expected to close in the third quarter. Can you just talk about your expectations for flows there in the infrastructure space? What strategies are you in the market raising or could be in the market raising over the next 12 months? And maybe talk about some of the steps that you may be able to take to bring some new products to the marketplace, including extending into the private wealth channel?

Great question. Thank you. Well, obviously, we are doing whatever we legally can in terms of making sure that we are making sure that there are two operating entities until we get legal approvals and we close. But that being said, BlackRock is having incredible conversations. GIP is having incredible conversations. We have business integration meetings, which were allowed to do. And the enthusiasm between our team and their teams have -- are way beyond our imagination. This feels so fantastic right now between our organizations and the opportunity we have. As we said, we expect this to be announced in the third quarter. Hopefully, later in the third quarter, we have other announcements of things that we could be talking about, but I'm not really permitted to talk about what are the deals, what are the things we're doing. What I need to be just showing you is our incredible enthusiasm that what we have and the opportunities we have and I do believe we will have post-closing some amazing opportunities and then therefore some amazing announcements.

Your next question comes from Bill Katz with TD Cowen.

Okay. Thanks very much for taking the question.

Good morning, Bill.

Good morning, everybody. Thank you for opening comments. Just coming back to the opportunity for Preqin and you sort of think through the evolution of the private markets, how do you sort of see the product evolution? And is there a pathway here for ETFs given the underlying illiquid nature of the investments? Thank you.

Thanks, Bill. So, we're extremely excited about this Preqin transaction. We think it really unlocks a whole new segment of growth for our clients, and we think it unlocks a whole new data services segment for BlackRock. And we see really the opportunity to grow Preqin by connecting it with our complementary Aladdin and eFront capabilities, as well as obviously we have a lot of client relationships and significant distribution reach. We'll continue to offer Preqin Pro in the data products as standalones. I think there's really three things that we're focused on here in driving a successful Preqin transaction. The first is simply driving more sales, building out comprehensive fund deal level databases and really integrating data and workflow into a unified platform that better serves clients. The second is, by innovating and launching new data products. I think it's fairly remarkable when you think about the public markets, you think about this symbiotic relationship that risk models and indexes and data have done to create public market indexing, benchmarking, asset allocation, all of those opportunities are ahead of us in the private markets by bringing together risk models, benchmarks and investable indices. We think this opportunity to index the private markets is really one of the most attractive that we've had in the history of BlackRock. And last, we have the ability to drive a lot of scale. We have data factories. Preqin has data factories, not the primary rationale for the transaction, but we really think that we can drive profitable growth, increased scale and efficiency by making this a seamless operating organization. We've had a really good reaction to the transaction from GPs, from LPs, from service providers, all of which who are strong enthusiastic Preqin clients. They're excited about the opportunity to bring together the eFront and Preqin data sets. And so, we think there's a lot of great opportunities here to continue to grow and we're looking forward to closing the Preqin transaction before the end of the year.

I would just add one more point to that. The inquiries that we've had from big vendors, from exchanges, from different organizations about how can we take what Aladdin, Preqin and eFront has, how can we make that -- how can we -- and how are we going to be able to distribute that and utilize that is a great sign that the ecosystem sees the opportunity that we have. And I don't -- I think it was very clear that because of -- we have eFront and Aladdin, we were just in a very unique position to take this and add it to it. And I think this is one of the real strengths of BlackRock. And now we got to -- obviously, we got to close it and we got to execute upon it, but I'm -- as I said earlier, this is something that we can really be transformational and really change the whole foundation of public and private markets. And if we do what we did for public markets with Aladdin and data, what we did for public markets with ETFs and iShares, if we do that and transform more and more private products into more retail products using our data and analytics, we'll transform the capital markets and that's something that BlackRock has been proud of how we've moved the capital markets and this is just another step for us how we could be additive to the global capital markets.

Your next question comes from Dan Fannon with Jefferies.

Good morning, Dan.

Thanks. Good morning. Wanted to follow-up, you talked a lot -- about a lot of momentum across the business. Fixed income has been a topic for some time, flows have been a bit more mixed here year-to-date. I guess in the conversations you're having, do you still see that as one of the big areas of incremental growth as the interest rate environment evolves?

Well, I think, as I said in my prepared remarks, sitting in 5% yield makes a lot of sense unless you put in the -- if your liabilities are long dated, you lost money actually because with equity markets up 24% and 17% this year alone. But that being said, we are beginning to see other clients starting to re-risk and they're re-risking other. And let's be clear, if you look at iShares fixed-income flows, the market was basically flat. If you look at the -- so all the AUM growth in iShares fixed income was really re-risking. And what -- I think this is a good statement saying, one, we're going to see more and more ownership in fixed income through ETFs. That's evolution that's going on. Obviously, you're seeing growth in private markets and private credit that continues on. We are widely bullish as more and more clients are going to be using infrastructure debt. And so, I think you're going to start seeing as all this plays out, like we've seen in equities. We used to talk about equities more of a barbelling effect, I think we're starting to see that here in the bond market where more and more people are in their core fixed-income portfolios, they may continue to just use ETFs as a foundation. And our growth in bond ETFs this year in a flat market is a great example that more and more people are getting fixed-income exposure as a core element they are using ETS more and more. And if they are starting to try to get more beta -- excuse me, more alpha in their fixed income side, excuse me, they're going to do it and they're going to do that in more the illiquid space of private credit, they're going to do that in mortgage-backed securities and they're going to do that in infrastructure debt. So, I believe we're very well positioned for that moment when people are recalibrating out of cash. And it's going to be heavily into fixed income, bond funds, it's going to be also more of the alternative ETFs -- alternative income-oriented products.

Your next question comes from Ken Worthington with JPMorgan.

Good morning, Ken.

Hi. Good morning. Thanks for taking the question. Cash management had a strong quarter. To what extent are you seeing or still seeing different and additional institutional clients migrating out of banks to money market funds to get higher yield? And where would you say the global markets are in terms of this transition to higher-yielding forms of cash management? And then to the last question, you called out re-risking a couple of times. Are you seeing re-risking coming out of cash, or is re-risking really a migration within other asset classes either extending duration or going out the risk curve in equities? What are you sort of seeing in terms of that re-risking?

Thanks, Ken. It's Martin. So, cash flows, $30 billion, as I mentioned, largely driven by government and international prime funds. We had that dynamic at the end of March and the Good Friday dynamic where clients have come out and then we saw a significant kind of return and an increase in balances in early April. We had multiple large new client mandates. I flagged that the cash platform today is about $780 billion. It's grown more than 50% over the last five years. And investors, they are earning a real return in cash. We expect that investors will re-risk. But I'd say a couple of dynamics we've definitely seen in the platform. Post Silicon Valley Bank, we saw through sort of Cachematrix, we saw in our institutional business, I think clients just being more mindful, tactical and kind of operationally flexible in how they manage cash. We think that largely for an institutional manager like BlackRock that's been a good trend of being able to put together technology and customized liquidity accounts in a way that we can grow. And then, ultimately, we have seen this business grow, but I'd also flag that bond ETFs have been a real surrogate, I think for kind of how clients are managing cash. And as Larry mentioned, over the last year we've seen $100 billion basically of organic growth in bond ETFs, which I think have been used as cash or cash proxies along the way as clients manage their liquidity dynamically across money funds, separate accounts and traded instruments like ETFs.

But let me add a little more towards the asset allocation into more re-risking. I think it's a mixed bag, Ken, as we said in our prepared remarks. We're seeing a lot of pension funds who are saying, "I'm at my liability. My assets reached my liability level. I don't need to own as much equities." That's going to be persistent if we continue to have rising equity markets. And on top of that, if -- with rates staying higher longer, that gave those pension funds the liability rate that's set, but obviously if interest rates go back down, the liabilities will go out a little bit. And so, we're seeing some clients actually derisking because they can, but where are they derisking? A lot of clients are not just derisking going from out of equities into cash, they're going into equities into other fixed-income instruments. This is where I believe you're going to see more and more investments into infrastructure where you have less volatility in the investments, higher probable returns, high fixed coupon. So, we're seeing clients around the world recalibrate their risk. There are some clients who were sitting in way excess -- too much cash, and they're obviously paying for that, and we'll see how they re-risk. But overall, I think probably if I had to say the headlines for the first six months, the clients that are overweighted in illiquid strategies like private equity where they had liquidity issues, you saw them keeping more cash balances. If and when the private equity markets unlock itself and there's a little more distribution, maybe you could see some of that cash going out and re-risking. So, you're seeing a whole mixed bag. But I do believe the macro trends towards more bond allocation because of the extensive equity rally over the last 10 years, deeper allocation towards private, especially private credit and infrastructure is going to continue. And I do believe the tools of using ETFs as a core component of portfolios is going to become a larger and larger component of how investors invest. They're going to use more core fixed-income ETFs, more equity ETFs and then barbell against using more -- I would say, more diversified, maybe more illiquid strategies across the board. And I do believe BlackRock is as well positioned for that as any firm in the world.

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

I do, operator. Thank you. And thank you for all joining us this morning and for your continued interest in BlackRock. Our second quarter results are possible because of our deep partnerships with our clients around the world and our One BlackRock approach in everything we do. We are well-positioned to execute on our landmark mandates across our platform and we're closing in on our planned acquisitions of GIP and Preqin. We see unbelievable growth opportunities for our clients and our shareholders for the rest of 2024 and beyond. Everyone, please stay safe, stay cool, have a lovely summer as best you can. Enjoy our political conversations over the next few weeks. Be active, and have a great quarter.

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