BlackRock, Inc.: Form 10-Q for the period ended Sep 30, 2024

FORWARD-LOOKING STATEMENTS

This report, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions.

BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time and may contain information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

BlackRock has previously disclosed risk factors in its Securities and Exchange Commission reports. These risk factors and those identified elsewhere in this report, among others, could cause actual results to differ materially from forward-looking statements or historical performance and include: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management ("AUM"); (3) the relative and absolute investment performance of BlackRock’s investment products; (4) BlackRock’s ability to develop new products and services that address client preferences; (5) the impact of increased competition; (6) the impact of recent or future acquisitions or divestitures, including the acquisitions of Global Infrastructure Management, LLC ("GIP" or the "GIP Transaction") and Preqin Holding Limited (“Preqin” or the "Preqin Transaction" and together with the GIP Transaction, the “Transactions”); (7) BlackRock’s ability to integrate acquired businesses successfully, including the Transactions; (8) risks related to the Transactions, including the possibility that the Preqin Transaction does not close, the possibility that closing conditions related to the Preqin Transaction are not satisfied, the possibility that expected synergies and value creation from either of the Transactions will not be realized, or will not be realized within the expected time period, and impacts to business and operational relationships related to disruptions from the Transactions; (9) the unfavorable resolution of legal proceedings; (10) the extent and timing of any share repurchases; (11) the impact, extent and timing of technological changes and the adequacy of intellectual property, data, information and cybersecurity protection; (12) the failure to effectively manage the development and use of artificial intelligence; (13) attempts to circumvent BlackRock’s operational control environment or the potential for human error in connection with BlackRock’s operational systems; (14) the impact of legislative and regulatory actions and reforms, regulatory, supervisory or enforcement actions of government agencies and governmental scrutiny relating to BlackRock; (15) changes in law and policy and uncertainty pending any such changes; (16) any failure to effectively manage conflicts of interest; (17) damage to BlackRock’s reputation; (18) increasing focus from stakeholders regarding environmental, social and governance matters; (19) geopolitical unrest, terrorist activities, civil or international hostilities, and other events outside BlackRock’s control, including wars, natural disasters and health crises, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (20) climate-related risks to BlackRock’s business, products, operations and clients; (21) the ability to attract, train and retain highly qualified and diverse professionals; (22) fluctuations in the carrying value of BlackRock’s economic investments; (23) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products, which could affect the value proposition to clients and, generally, the tax position of BlackRock; (24) BlackRock’s success in negotiating distribution arrangements and maintaining distribution channels for its products; (25) the failure by key third-party providers of BlackRock to fulfill their obligations to BlackRock; (26) operational, technological and regulatory risks associated with BlackRock’s major technology partnerships; (27) any disruption to the operations of third parties whose functions are integral to BlackRock’s exchange-traded funds ("ETFs") platform; (28) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (29) the impact of problems, instability or failure of other financial institutions or the failure or negative performance of products offered by other financial institutions.

OVERVIEW

BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, “BlackRock” or the “Company”) is a leading publicly traded investment management firm with $11.5 trillion of AUM at September 30, 2024. With approximately 20,400 employees in more than 30 countries, BlackRock provides a broad range of investment management and technology services to institutional and retail clients in more than 100 countries across the globe.

BlackRock’s diverse platform of alpha-seeking active, index and cash management investment strategies across asset classes enables the Company to offer choice and tailor investment and asset allocation solutions for clients. Product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares® ETFs, separate accounts, collective trust funds and other pooled investment vehicles. BlackRock also offers technology services, including the investment and risk management technology platform, Aladdin®, Aladdin WealthTM, eFront®, and Cachematrix®, as well as advisory services and solutions to a broad base of institutional and wealth management clients. The Company is highly regulated and manages its clients’ assets as a fiduciary. The Company does not engage in proprietary trading activities that could conflict with the interests of its clients.

BlackRock serves a diverse mix of institutional and retail clients across the globe. Clients include tax-exempt institutions, such as defined benefit and defined contribution pension plans, charities, foundations and endowments; official institutions, such as central banks, sovereign wealth funds, supranationals and other government entities; taxable institutions, including insurance companies, financial institutions, corporations and third-party fund sponsors, and retail intermediaries.

BlackRock maintains a significant global sales and marketing presence that is focused on establishing and maintaining retail and institutional investment management and technology service relationships by marketing its services to investors directly and through third-party distribution relationships, including financial professionals and pension consultants.

Certain prior period presentations were reclassified to ensure comparability with current period classifications.

Acquisitions

In May 2024, BlackRock completed the acquisition of the remaining equity interest in SpiderRock Advisors (“SRA”), a leading provider of customized option overlay strategies in the United States (“US”) wealth market (the "SpiderRock Transaction"). This transaction expands on BlackRock’s minority investment in SRA made in 2021 and reinforces BlackRock’s commitment to personalized separately managed accounts.

In June 2024, BlackRock announced that it had entered into a definitive agreement to acquire Preqin, a leading independent provider of private markets data, for £2.55 billion (or approximately $3.4 billion based on the GBP/USD foreign exchange rate at September 30, 2024) in cash. The Company believes bringing together Preqin's data and research tools with the complementary workflows of Aladdin and eFront in a unified platform will create a preeminent private markets technology and data provider. The Preqin Transaction is anticipated to close in the first quarter of 2025, subject to regulatory approvals and other customary closing conditions.

In October 2024, BlackRock completed the acquisition of 100% of the issued and outstanding limited liability company interests of GIP for a total consideration of approximately $3 billion in cash and approximately 12 million shares of BlackRock common stock. At close, 6.9 million shares were issued, and the remaining deferred consideration, all in stock, will be issued subject to the satisfaction of certain post-closing events. The Company believes the combination of GIP with BlackRock’s complementary infrastructure offerings creates a broad global infrastructure franchise with differentiated origination and asset management capabilities. The initial accounting for the business combination is incomplete as a result of the timing of the acquisition. Therefore, it is impractical for the Company to provide the full disclosure of required financial information at the filing date.

As a result of the closing of the GIP Transaction, on October 1, 2024, (1) BlackRock, Inc. (formerly known as BlackRock Funding, Inc. ("BlackRock Funding")) (“New BlackRock”) became the ultimate parent company of BlackRock Finance, Inc. (formerly known as BlackRock, Inc.) (“Old BlackRock”), GIP and their respective subsidiaries and (2) each share of common stock, $0.01 par value, of Old BlackRock issued and outstanding immediately prior to the closing of the GIP Transaction was converted automatically into one share of common stock, $0.01 par value, of New BlackRock. New BlackRock also changed its name from “BlackRock Funding, Inc.” to “BlackRock, Inc.” and Old BlackRock changed its name from “BlackRock, Inc.” to “BlackRock Finance, Inc.” In addition, New BlackRock became the publicly listed company and retained the ticker symbol “BLK”. References herein to BlackRock or the Company for any period (1) prior to the closing of the GIP Transaction on October 1, 2024 refer to Old BlackRock and (2) thereafter refer to New BlackRock.

EXECUTIVE SUMMARY

(in millions, except per share data)

(1) Accounting principles generally accepted in the US (“GAAP”).

(2) As adjusted items are described in more detail in Non-GAAP Financial Measures.

(3) Total BlackRock stockholders’ equity divided by total shares outstanding at September 30 of the respective period-end.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

GAAP. Operating income of $2.0 billion increased $369 million and operating margin of 38.6% increased 240 bps from the three months ended September 30, 2023. Increases in operating income and operating margin reflected higher investment advisory and administration fees (collectively "base fees"), driven by the positive impact of markets on average AUM and organic base fee growth, and higher performance fees, partially offset by higher expenses, reflecting higher employee compensation and benefits expense, sales, asset and account expense and general and administration expense. Operating income and operating margin also included the impact of a $50 million noncash impairment charge related to certain indefinite-lived open-end management contracts recorded in the three months ended September 30, 2024. This noncash impairment charge has been excluded from the Company's as adjusted results due to its infrequent nature and to increase comparability with other companies.

Nonoperating income (expense) less net income (loss) attributable to noncontrolling interests (“NCI”) increased $19 million from the three months ended September 30, 2023, driven primarily by a pre-tax gain of approximately $66 million in connection with a transaction related to a minority investment in EquiLend Holdings, LLC (the "EquiLend Transaction") and higher interest and dividend income, partially offset by lower mark-to-market gains on the revaluation of private equity co-investments and un-hedged seed capital investments and higher interest expense.

Earnings per diluted common share increased $0.24, or 2%, from the three months ended September 30, 2023, primarily driven by higher operating income, partially offset by the impact of a higher effective tax rate in the current quarter. The prior year quarter included approximately $223 million of discrete tax benefits related to the resolution of certain outstanding tax matters.

As Adjusted. Operating income of $2.1 billion increased $437 million and operating margin of 45.8% increased 350 bps from the three months ended September 30, 2023. The noncash impairment charge of $50 million described above has been excluded from as adjusted results for the three months ended September 30, 2024. Earnings per diluted common share increased $0.55, or 5%, from the three months ended September 30, 2023, primarily reflecting higher operating income, partially offset by a higher effective tax rate in the current quarter.

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

GAAP. Operating income of $5.5 billion increased $809 million and operating margin of 37.3% increased 180 bps from the nine months ended September 30, 2023. Increases in operating income and operating margin reflected higher base fees, driven by the positive impact of markets on average AUM and organic base fee growth, higher performance fees and technology services revenue, partially offset by higher expenses, reflecting higher employee compensation and benefits expense, sales, asset and account expense, and general and administration expense. Operating income and operating margin for the nine months ended September 30, 2024 also included the impact of a $50 million noncash impairment charge previously described.

Nonoperating income (expense) less net income (loss) attributable to NCI increased $63 million from the nine months ended September 30, 2023, driven primarily by higher interest and dividend income, pre-tax gains of approximately $66 million and $19 million in connection with the EquiLend Transaction and SpiderRock Transaction, respectively, higher mark-to-market revaluation gains of the Company's un-hedged seed capital investments, and higher mark-to-market gains on certain minority investments, partially offset by lower mark-to-market gains on the revaluation of private equity co-investments and higher interest expense.

Income tax expense for the nine months ended September 30, 2024 included a discrete tax benefit of $137 million recognized in connection with the reorganization and establishment of a more efficient global intellectual property and technology platform and corporate structure. This discrete tax benefit has been excluded from the Company's as adjusted results due to the nonrecurring nature of the intellectual property reorganization. Income tax expense for the nine months ended September 30, 2023 included $226 million discrete tax net benefits primarily related to the resolution of certain outstanding tax matters.

Earnings per diluted common share increased $4.01 or 15%, from the nine months ended September 30, 2023, primarily reflecting higher operating and nonoperating income, partially offset by a higher effective tax rate.

As Adjusted. Operating income of $5.8 billion increased $907 million and operating margin of 44.1% increased 230 bps from the nine months ended September 30, 2023. Earnings per diluted common share increased $3.52, or 13%, from the nine months ended September 30, 2023, reflecting higher operating and nonoperating income, partially offset by a higher effective tax rate. The noncash impairment charge of $50 million previously described has been excluded from as adjusted results for the nine months ended September 30, 2024. Income tax expense, as adjusted, for the nine months ended September 30, 2024 excluded the $137 million of benefit described above.

See Non-GAAP Financial Measures for further information on as adjusted items and the reconciliation to GAAP.

For further discussion of BlackRock’s revenue, expense, nonoperating results and income tax expense, see Discussion of Financial Results herein.

NON-GAAP FINANCIAL MEASURES

BlackRock reports its financial results in accordance with GAAP; however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Adjustments to GAAP financial measures (“non-GAAP adjustments”) include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow. Management reviews non-GAAP financial measures, in addition to GAAP financial measures, to assess ongoing operations and considers them to be helpful, for both management and investors, in evaluating BlackRock’s financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance comparability for the reporting periods presented. Non-GAAP financial measures may pose limitations because they do not include all of BlackRock’s revenue and expense. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.

Computations and reconciliations for all periods are derived from the condensed consolidated statements of income as follows:

(1) Operating income, as adjusted, and operating margin, as adjusted:

(in millions)

(1) Amount included within general and administration expense.

(2) Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted:

(in millions)

(3) Net income attributable to BlackRock, Inc., as adjusted:

(in millions, except per share data)

(1) Non-GAAP adjustments, excluding income tax matters, are net of tax.

(1) Operating income, as adjusted, and operating margin, as adjusted: Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock’s financial performance over time, and, therefore, provide useful disclosure to investors. Management believes that operating margin, as adjusted, reflects the Company’s long-term ability to manage ongoing costs in relation to its revenues. The Company uses operating margin, as adjusted, to assess the Company’s financial performance, to determine the long-term and annual compensation of the Company’s senior-level employees and to evaluate the Company’s relative performance against industry peers. Furthermore, this metric eliminates margin variability arising from the accounting of revenues and expenses related to distributing different product structures in multiple distribution channels utilized by asset managers.

• Operating income, as adjusted, includes the following non-GAAP expense adjustments:

(a) Compensation expense related to appreciation (depreciation) on deferred cash compensation plans. The Company excludes compensation expense related to the market valuation changes on certain deferred cash compensation plans, which the Company hedges economically. For these deferred cash compensation plans, the final value of the deferred amount to be distributed to employees in cash upon vesting is determined based on the returns on specified investment funds. The Company recognizes compensation expense for the appreciation (depreciation) of the deferred cash compensation liability in proportion to the vested amount of the award during a respective period, while the net gain (loss) to economically hedge these plans is immediately recognized in nonoperating income (expense), which creates a timing difference impacting net income. This timing difference will reverse and offset to zero over the life of the award at the end of the multi-year vesting period. Management believes excluding market valuation changes related to the deferred cash compensation plans in the calculation of operating income, as adjusted, provides useful disclosure to both management and investors of the Company’s financial performance over time as these amounts are economically hedged, while also increasing comparability with other companies.

(b) Acquisition-related costs. Acquisition related costs include adjustments related to amortization and noncash impairment of intangible assets, other acquisition-related costs, including professional services expense and compensation costs for nonrecurring retention-related deferred compensation, and contingent consideration fair value adjustments incurred in connection with certain acquisitions. Management believes excluding the impact of these expenses when calculating operating income, as adjusted, provides a helpful indication of the Company’s financial performance over time, thereby providing helpful information for both management and investors while also increasing comparability with other companies.

(c) Lease costs – New York. In 2023, the Company continued to recognize lease expense within general and administration expense for both its current headquarters located at 50 Hudson Yards in New York and prior headquarters until the Company's lease on its prior headquarters expired in April 2023. The Company began lease payments related to its current headquarters in May 2023, but began recording lease expense in August 2021 when it obtained access to the building to begin its tenant improvements. Prior to the Company’s move to its current headquarters in February 2023, the impact of lease costs related to 50 Hudson Yards was excluded from operating income, as adjusted. In February 2023, the Company completed the majority of its move to 50 Hudson Yards and no longer excluded the impact of these lease costs. Subsequently, from February 2023 through April 2023, the Company excluded the impact of lease costs related to the Company's prior headquarters. Management believes excluding the impact of these respective New York lease costs (“Lease costs – New York”) when calculating operating income, as adjusted, is useful to assess the Company’s financial performance and ongoing operations, and enhances comparability among periods presented.

(d) Reduction of indemnification asset. In connection with a previous acquisition, BlackRock recorded an $8 million indemnification asset. Due to the resolution of certain tax matters in the third quarter of 2023, BlackRock recorded $8 million of general and administration expense to reflect the reduction of the indemnification asset and an offsetting $8 million tax benefit. The $8 million general and administrative expense and $8 million tax benefit have been excluded from as adjusted results as there was no impact on BlackRock’s book value.

• Revenue used for calculating operating margin, as adjusted, is reduced to exclude all of the Company’s distribution fees, which are recorded as a separate line item on the condensed consolidated statements of income, as well as a portion of investment advisory fees received that is used to pay distribution and servicing costs. For certain products, based on distinct arrangements, distribution fees are collected by the Company and then passed-through to third-party client intermediaries. For other products, investment advisory fees are collected by the Company and a portion is passed-through to third-party client intermediaries. However, in both structures, the third-party client intermediary similarly owns the relationship with the retail client and is responsible for distributing the product and servicing the client. The amount of distribution and investment advisory fees fluctuates each period primarily based on a predetermined percentage of the value of AUM during the period. These fees also vary based on the type of investment product sold and the geographic location where it is sold. In addition, the Company may waive fees on certain products that could result in the reduction of payments to the third-party intermediaries.

(2) Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted: Management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, is an effective measure for reviewing BlackRock’s nonoperating contribution to its results and provides comparability of this information among reporting periods. Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, excludes the gain (loss) on the economic hedge of certain deferred cash compensation plans. As the gain (loss) on investments and derivatives used to hedge these compensation plans over time substantially offsets the compensation expense related to the market valuation changes on these deferred cash compensation plans, which is included in operating income, GAAP basis, management believes excluding the gain (loss) on the economic hedge of the deferred cash compensation plans when calculating nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, provides a useful measure for both management and investors of BlackRock’s nonoperating results that impact book value.

(3) Net income attributable to BlackRock, Inc., as adjusted: Management believes net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock’s profitability and financial performance. Net income attributable to BlackRock, Inc., as adjusted, equals net income attributable to BlackRock, Inc., GAAP basis, adjusted for certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

For each period presented, the non-GAAP adjustments were tax effected at the respective blended rates applicable to the adjustments. Amount for income tax matters in 2024 includes a discrete tax benefit of $137 million recognized in connection with the reorganization and establishment of a more efficient global intellectual property and technology platform and corporate structure. This discrete tax benefit has been excluded from as adjusted results due to the nonrecurring nature of the intellectual property reorganization.

Per share amounts reflect net income attributable to BlackRock, Inc., as adjusted, divided by diluted weighted-average common shares outstanding.

ASSETS UNDER MANAGEMENT

AUM for reporting purposes generally is based upon how investment advisory and administration fees are calculated for each portfolio. Net asset values, total assets, committed assets or other measures may be used to determine portfolio AUM.

AUM and Net Inflows (Outflows) by Client Type and Product Type

(in millions)

(1) Amounts include commodity ETFs and exchange-traded products ("ETPs").

Component Changes in AUM for the Three Months Ended September 30, 2024

The following table presents the component changes in AUM by client type and product type for the three months ended September 30, 2024.

(in millions)

(1) Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(2) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.

The following table presents the component changes in AUM by investment style and product type for the three months ended September 30, 2024.

(in millions)

The following table presents the component changes in AUM by product type for the three months ended September 30, 2024.

(in millions)

(1) Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(2) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.

(3) Amounts include commodity ETFs and ETPs.

AUM increased $830 billion to $11.5 trillion at September 30, 2024 from $10.6 trillion at June 30, 2024, driven by net market appreciation, net inflows and the positive impact of foreign exchange movements.

Long-term net inflows of $160 billion were comprised of net inflows of $97 billion, $56 billion, and $7 billion from ETFs, institutional and retail clients, respectively. Net flows in long-term products are described below.

• ETFs net inflows of $97 billion were led by fixed income and equity ETFs net inflows of $48 billion and $45 billion, respectively. BlackRock’s cryptocurrency ETPs continue to grow and added $5 billion of net inflows in the third quarter, included within alternatives ETFs.
• Institutional index net inflows of $29 billion primarily reflected $21 billion and $9 billion of equity and fixed income net inflows, respectively, driven by outsourcing mandates, client asset-allocation activity and rebalancing decisions.
• Institutional active net inflows of $27 billion were led by $19 billion of multi-asset net inflows, which reflected the funding of pension outsourcing mandates and net inflows into LifePath® target-date offerings.
• Retail net inflows of $7 billion were driven by net inflows into equity and fixed income, reflecting net inflows into BlackRock's Aperio customized index equity solution and into US active fixed income mutual funds.

Cash management AUM increased to $849 billion, driven by net inflows into US government and international prime funds.

Net market appreciation of $464 billion was primarily driven by global equity and fixed income market appreciation.

AUM increased $144 billion due to the impact of foreign exchange movements, primarily due to the weakening of the US dollar, largely against the Japanese yen, the British pound and the euro.

Component Changes in AUM for the Nine Months Ended September 30, 2024

The following table presents the component changes in AUM by client type and product type for the nine months ended September 30, 2024.

(in millions)

(1) Amounts include AUM attributable to the SpiderRock Transaction.

(2) Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing ten months.

The following table presents the component changes in AUM by investment style and product type for the nine months ended September 30, 2024.

(in millions)

The following table presents the component changes in AUM by product type for the nine months ended September 30, 2024.

(in millions)

(1) Amounts include AUM attributable to the SpiderRock Transaction.

(2) Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing ten months.

(4) Amounts include commodity ETFs and ETPs.

AUM increased $1.5 trillion to $11.5 trillion at September 30, 2024 from $10.0 trillion at December 31, 2023, driven by net market appreciation, net inflows and the positive impact of foreign exchange movements.

Long-term net inflows of $288 billion were comprised of net inflows of $248 billion from ETFs, and $20 billion each from institutional and retail clients, respectively. Net flows in long-term products are described below.

• ETFs net inflows of $248 billion were led by equity and fixed income ETFs net inflows of $126 billion and $101 billion, respectively. Alternatives ETFs net inflows of $22 billion were driven largely by flows into the Company's Bitcoin ETP.
• Institutional active net inflows of $39 billion were led by LifePath target-date strategies and several large outsourcing mandates, partially offset by a redemption of approximately $20 billion from a single fixed income client in the second quarter of 2024.
• Institutional index net outflows of $19 billion were concentrated in low-fee index equities, partially offset by fixed income net inflows driven by client asset-allocation activity and re-balancing decisions.
• Retail net inflows of $20 billion primarily reflected net inflows into equity and fixed income.

Cash management AUM increased to $849 billion, driven by net inflows into US government and international money market funds.

Net market appreciation of $1.1 trillion was primarily driven by global equity market appreciation.

AUM increased $39 billion due to the impact of foreign exchange movements, primarily due to the weakening of the US dollar, largely against the British pound and the euro.

Component Changes in AUM for the Twelve Months Ended September 30, 2024

The following table presents the component changes in AUM by client type and product type for the twelve months ended September 30, 2024.

(in millions)

(1) Amounts include AUM attributable to the SpiderRock Transaction.

(2) Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.

The following table presents the component changes in AUM by investment style and product type for the twelve months ended September 30, 2024.

(in millions)

The following table presents the component changes in AUM by product type for the twelve months ended September 30, 2024.

(in millions)

(1) Amounts include AUM attributable to the SpiderRock Transaction.

(2) Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.

(4) Amounts include commodity ETFs and ETPs.

AUM increased $2.4 trillion to $11.5 trillion at September 30, 2024 from $9.1 trillion at September 30, 2023, driven by net market appreciation, net inflows and the positive impact of foreign exchange movements.

Long-term net inflows of $351 billion were comprised primarily of net inflows of $336 billion, $11 billion and $4 billion from ETFs, retail and institutional clients, respectively. Net flows in long-term products are described below.

• ETFs net inflows of $336 billion were led by equity and fixed income ETFs, which saw $184 billion and $132 billion of net inflows, respectively, and $19 billion into alternatives ETFs. Alternatives ETFs net inflows were driven by flows into the Company's Bitcoin ETP.
• Institutional active net inflows of $47 billion were led by multi-asset net inflows and included the impact of several large outsourcing mandates and continued growth of the Company's LifePath target-date strategies, partially offset by the impact of the previously mentioned single client fixed income redemption.
• Institutional index net outflows of $42 billion primarily reflected $74 billion of low-fee index equity net outflows, partially offset by $35 billion of fixed income net inflows, as some clients sought to de-risk or rebalance.
• Retail net inflows of $11 billion were led by net inflows into equity strategies.

Cash management AUM increased to $849 billion, primarily due to net inflows into US government and international money market funds.

Net market appreciation of $1.8 trillion was driven by global equity market appreciation.

AUM increased $139 billion due to the impact of foreign exchange movements, primarily resulting from the weakening of the US dollar, largely against the British pound, the euro and the Japanese yen.

DISCUSSION OF FINANCIAL RESULTS

The Company’s results of operations for the three and nine months ended September 30, 2024 and 2023 are discussed below. For a further description of the Company’s revenue and expense, see the Company's Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission on February 23, 2024 ("2023 Form 10-K").

Revenue

The table below presents detail of revenue for the three and nine months ended September 30, 2024 and 2023 and includes the product type mix of base fees and securities lending revenue and performance fees.

(in millions)

(1) Amounts include commodity ETFs and ETPs.

The table below lists a percentage breakdown of base fees and securities lending revenue and average AUM by product type:

(1) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.

(2) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing ten months.

(3) Amounts include commodity ETFs and ETPs.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Revenue increased $675 million, or 15%, from the three months ended September 30, 2023, primarily driven by the positive impact of market beta on average AUM and organic base fee growth, and higher performance fees.

Investment advisory, administration fees and securities lending revenue of $4.0 billion increased $349 million from $3.7 billion for the three months ended September 30, 2023, primarily driven by positive organic base fee growth and the impact of market beta on average AUM, partially offset by lower securities lending revenue. Securities lending revenue of $149 million decreased from $167 million for the three months ended September 30, 2023, primarily reflecting lower spreads, partially offset by higher average balances of securities on loan.

Investment advisory performance fees of $388 million increased $318 million from $70 million for the three months ended September 30, 2023, primarily driven by strong performance in the third quarter of 2024 from a single hedge fund with an annual performance measurement period that ends in the third quarter, partially offset by lower revenue from illiquid alternatives.

Technology services revenue of $403 million decreased $4 million from $407 million for the three months ended September 30, 2023, due to the revenue impact linked to several large client renewals of their eFront “on-premises” licenses during the third quarter of 2023.

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Revenue increased $1.5 billion, or 11%, from the nine months ended September 30, 2023, primarily driven by the positive impact of market beta on average AUM and organic base fee growth, and higher performance fees and technology services revenue.

Investment advisory, administration fees and securities lending revenue of $11.7 billion increased $889 million from $10.8 billion for the nine months ended September 30, 2023, primarily driven by the impact of market beta on average AUM and organic base fee growth, partially offset by lower securities lending revenue. Securities lending revenue of $454 million decreased from $518 million for the nine months ended September 30, 2023, primarily reflecting lower spreads, partially offset by higher average balances of securities on loan.

Investment advisory performance fees of $756 million increased $513 million from $243 million for the nine months ended September 30, 2023, primarily driven by higher revenue from liquid alternative products, including strong performance from a single hedge fund in 2024, and higher revenue from illiquid alternative products.

Technology services revenue of $1.2 billion increased $69 million from $1.1 billion for the nine months ended September 30, 2023, reflecting sustained demand for Aladdin technology offerings.

Advisory and other revenue of $165 million increased $39 million from $126 million for the nine months ended September 30, 2023, reflecting higher transition management assignments and the impact of presenting earnings (losses) from certain equity method minority investments within nonoperating income (expense) beginning in the first quarter of 2024, partially offset by lower revenue from advisory assignments.

Expense

The following table presents expense for the three and nine months ended September 30, 2024 and 2023.

(in millions)

(1) Beginning in the first quarter of 2024, BlackRock updated the presentation of the Company’s expense line items within the condensed consolidated statements of income by including a new “sales, asset and account expense” income statement caption. Such expense line items have been recast for 2023 to conform to this new presentation. For a recast of 2023 expense line items, see page 12 of Exhibit 99.1 to the Current Report on Form 8-K furnished on April 12, 2024.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Expense increased $306 million, or 11%, from the three months ended September 30, 2023, reflecting higher employee compensation and benefits expense, sales, asset and account expense, and general and administration expense. Expense for the three months ended September 30, 2024 also included the previously described noncash impairment charge of $50 million.

Employee compensation and benefits expense of $1.6 billion increased $158 million from $1.4 billion for the three months ended September 30, 2023, reflecting higher incentive compensation, primarily as a result of higher performance fees and operating income.

Sales, asset and account expense of $962 million increased $54 million from $908 million for the three months ended September 30, 2023, driven by higher distribution and servicing costs and direct fund expense, primarily reflecting higher average AUM.

General and administration expense of $562 million increased $44 million from $518 million for the three months ended September 30, 2023, primarily due to higher technology expense and higher professional services expense, including higher acquisition-related transaction costs, partially offset by lower marketing and promotional expense.

Amortization and impairment of intangible assets of $89 million increased $50 million from $39 million for the three months ended September 30, 2023, primarily due to a $50 million previously described noncash impairment charge. Amortization and noncash impairment of intangible assets has been excluded from the Company’s “as adjusted” financial results.

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Expense increased $693 million, or 8%, from the nine months ended September 30, 2023, reflecting higher employee compensation and benefits expense, sales, asset and account expense and general and administration expense. Expense for the nine months ended September 30, 2024 also included the noncash impairment charge of $50 million mentioned above.

Employee compensation and benefits expense of $4.7 billion increased $385 million from $4.3 billion for the nine months ended September 30, 2023, reflecting higher incentive compensation, primarily as a result of higher operating income and performance fees.

Sales, asset and account expense of $2.8 billion increased $136 million from $2.6 billion for the nine months ended September 30, 2023, driven by higher distribution and servicing costs and direct fund expense, primarily reflecting higher average AUM.

General and administration expense of $1.6 billion increased $119 million from $1.5 billion for the nine months ended September 30, 2023, primarily due to higher technology and professional services expense, including higher acquisition-related transaction costs in the current year.

Amortization and impairment of intangible assets of $166 million increased $53 million from $113 million for the nine months ended September 30, 2023, primarily due to the previously described $50 million noncash impairment charge. Amortization and noncash impairment of intangible assets has been excluded from the Company’s “as adjusted” financial results.

See Non-GAAP Financial Measures for further information on as adjusted items. See Note 10, Intangible Assets, in the notes to the condensed consolidated financial statements and Critical Accounting Policies and Estimates for further information on the impairment charge.

Nonoperating Results

The summary of nonoperating income (expense), less net income (loss) attributable to NCI for the three and nine months ended September 30, 2024 and 2023 was as follows:

(in millions)

(in millions)

(1) Amount relates to the gain (loss) from economically hedging BlackRock's deferred cash compensation plans.

(2) Management believes nonoperating income (expense), net of NCI, as adjusted, is an effective measure for reviewing BlackRock’s nonoperating results, which ultimately impacts BlackRock’s book value. See Non-GAAP Financial Measures for further information on other non-GAAP financial measures.

(3) Amounts primarily include net gains (losses) related to credit funds, direct hedge fund strategies and hedge fund solutions.

(4) Amounts primarily include net gains (losses) related to BlackRock's seed investment portfolio, net of the impact of certain hedges.

(5) Amounts for the three and nine months ended September 30, 2024 include a pre-tax gain of approximately $66 million in connection with the EquiLend Transaction. Amount for the nine months ended September 30, 2024 includes a noncash pre-tax gain in connection with the SpiderRock Transaction of approximately $19 million. In addition, amounts for the three and nine months ended September 30, 2024, include earnings (losses) from certain equity method minority investments, which the Company recorded within nonoperating income (expense) beginning in the first quarter of 2024 and noncash pre-tax gains (losses) related to the revaluation of certain minority investments.

Income Tax Expense

(in millions)

(1) As adjusted items are described in more detail in Non-GAAP Financial Measures.

(2) Net of net income (loss) attributable to NCI.

2024. Income tax expense for the nine months ended September 30, 2024 included a discrete tax benefit of $137 million recognized in connection with the reorganization and establishment of a more efficient global intellectual property and technology platform and corporate structure. This discrete tax benefit has been excluded from as adjusted results due to the nonrecurring nature of the reorganization. In addition, for the nine months ended September 30, 2024 income tax expense included $13 million of net discrete tax benefits, including a benefit related to stock-based compensation awards that vested in 2024.

The Organisation for Economic Co-operation and Development (“OECD”) has proposed certain international tax reforms, which, among other things, would (1) shift taxing rights to the jurisdiction of the consumer and (2) establish a global minimum tax for multinational companies of 15% (namely the “Pillar One” and “Pillar Two” Framework). European Union member states adopted, or plan to adopt, laws implementing the OECD’s minimum tax rules under the Pillar Two Framework effective starting in 2024. Several other countries, including the United Kingdom ("UK"), have changed or are considering changes to their tax law to implement the OECD’s minimum tax proposal. As a result of these developments, the tax laws of certain countries in which BlackRock does business have and may continue to change, and any such changes could increase its tax liabilities. The Pillar Two Framework did not have a material impact on BlackRock’s condensed consolidated financial statements for the three and nine months ended September 30, 2024 and the Company is continuing to monitor legislative developments and evaluate the potential impact of the Pillar Two Framework on future periods.

2023. Income tax expense for the three months ended September 30, 2023 included approximately $223 million of discrete tax benefits related to the resolution of certain outstanding tax matters.

Income tax expense for the nine months ended September 30, 2023 included approximately $185 million of discrete tax net benefits primarily related to the resolution of certain outstanding tax matters and $41 million of discrete tax benefits related to stock-based compensation awards that vested in 2023.

STATEMENT OF FINANCIAL CONDITION OVERVIEW

As Adjusted Statement of Financial Condition

The following table presents a reconciliation of the condensed consolidated statement of financial condition presented on a GAAP basis to the condensed consolidated statement of financial condition, excluding the impact of separate account assets and separate account collateral held under securities lending agreements (directly related to lending separate account securities) and separate account liabilities and separate account collateral liabilities under securities lending agreements and consolidated sponsored investment products ("CIPs").

The Company presents the as adjusted statement of financial condition as additional information to enable investors to exclude certain assets that have equal and offsetting liabilities or NCI that ultimately do not have an impact on stockholders’ equity or cash flows. Management views the as adjusted statement of financial condition, which contains non-GAAP financial measures, as an economic presentation of the Company’s total assets and liabilities; however, it does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Separate Account Assets and Liabilities and Separate Account Collateral Held under Securities Lending Agreements

Separate account assets are maintained by BlackRock Life Limited, a wholly owned subsidiary of the Company that is a registered life insurance company in the UK, and represent segregated assets held for purposes of funding individual and group pension contracts. The Company records equal and offsetting separate account liabilities. The separate account assets are not available to creditors of the Company and the holders of the pension contracts have no recourse to the Company’s assets. The net investment income attributable to separate account assets accrues directly to the contract owners and is not reported on the condensed consolidated statements of income. While BlackRock has no economic interest in these assets or liabilities, BlackRock earns an investment advisory fee for the service of managing these assets on behalf of its clients.

In addition, the Company records on its condensed consolidated statements of financial condition the separate account collateral obtained under BlackRock Life Limited securities lending arrangements for which it has legal title as its own asset in addition to an equal and offsetting separate account collateral liability for the obligation to return the collateral. The collateral is not available to creditors of the Company, and the borrowers under the securities lending arrangements have no recourse to the Company’s assets.

Consolidated Sponsored Investment Products

The Company consolidates certain sponsored investment products accounted for as variable interest entities (“VIEs”) and voting rights entities (“VREs”). See Note 2, Significant Accounting Policies, in the notes to the consolidated financial statements contained in the 2023 Form 10-K for more information on the Company’s consolidation policy.

The Company cannot readily access cash and cash equivalents, or other assets held by CIPs to use in its operating activities. In addition, the Company cannot readily sell investments held by CIPs in order to obtain cash for use in the Company’s operations.

(in millions)

(1) Amounts represent segregated client assets and related liabilities, in which BlackRock has no economic interest. BlackRock earns an investment advisory fee for the service of managing these assets on behalf of its clients.

(2) Amounts represent the impact of consolidating CIPs.

(3) Amount includes property and equipment and other assets.

(4) Amount includes approximately $4.2 billion of deferred income tax liabilities related to goodwill and intangibles.

The following discussion summarizes the significant changes in assets and liabilities on a GAAP basis. Please see the condensed consolidated statements of financial condition as of September 30, 2024 and December 31, 2023 contained in Part I, Item 1 of this filing. The discussion does not include changes related to assets and liabilities that are equal and offsetting and have no impact on BlackRock’s stockholders’ equity.

Assets. Cash and cash equivalents at September 30, 2024 included $180 million of cash held by CIPs (see Liquidity and Capital Resources for details on the change in cash and cash equivalents during the nine months ended September 30, 2024). Accounts receivable at September 30, 2024 increased $469 million from December 31, 2023, primarily due to higher base fee receivables. Investments at September 30, 2024 increased $799 million from December 31, 2023 (for more information see Investments herein). Goodwill and intangible assets at September 30, 2024 increased $17 million from December 31, 2023, primarily due to the SpiderRock Transaction, partially offset by amortization of intangible assets and a $50 million noncash impairment charge related to certain indefinite-lived intangible assets. Other assets at September 30, 2024 increased $618 million from December 31, 2023, primarily related to an increase in unit trust receivables (substantially offset by an increase in unit trust payables recorded within other liabilities) and an increase in certain minority investments.

Liabilities. Accrued compensation and benefits at September 30, 2024 decreased $319 million from December 31, 2023, primarily due to 2023 incentive compensation cash payments in the first quarter of 2024, partially offset by 2024 incentive compensation accruals. Accounts payable and accrued liabilities at September 30, 2024 increased $209 million from December 31, 2023, primarily due to higher interest on borrowings and increased accruals. Other liabilities at September 30, 2024 increased $587 million from December 31, 2023, primarily due to higher unit trust payables (substantially offset by an increase in unit trust receivables recorded within other assets). Net deferred income tax liabilities at September 30, 2024 decreased $121 million from December 31, 2023, primarily due to the effects of temporary differences associated with the intellectual property reorganization and capitalized costs, partially offset by stock-based compensation.

Investments

The Company’s investments were $10.5 billion and $9.7 billion at September 30, 2024 and December 31, 2023, respectively. Investments include CIPs accounted for as VIEs and VREs. Management reviews BlackRock’s investments on an “economic” basis, which eliminates the NCI portion of investments that does not impact BlackRock’s book value or net income attributable to BlackRock. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

The Company presents investments, as adjusted, to enable investors to understand the economic portion of investments that is owned by the Company as a gauge to measure the impact of changes in net nonoperating income (expense) on investments to net income (loss) attributable to BlackRock.

The Company further presents net “economic” investment exposure, net of deferred cash compensation investments and hedged exposures, to reflect another helpful measure for investors. The economic impact of investments held pursuant to deferred cash compensation plans is substantially offset by a change in associated compensation expense, and the impact of the portfolio of seed investments is mitigated by futures entered into as part of the Company's macro hedging strategy. Carried interest capital allocations are excluded as there is no impact to BlackRock’s stockholders’ equity until such amounts are realized as performance fees. Finally, the Company’s regulatory investment in Federal Reserve Bank stock, which is not subject to market or interest rate risk, is excluded from the Company’s net economic investment exposure.

(in millions)

(1) Amounts include $1.9 billion of carried interest (VIEs) at both September 30, 2024 and December 31, 2023, which has no impact on the Company’s “economic” investment exposure.

(2) Amounts do not include investments in corporate minority investments included in other assets on the condensed consolidated statements of financial condition.

The following table represents the carrying value of the Company’s economic investment exposure, by asset type, at September 30, 2024 and December 31, 2023:

(in millions)

(1) Amounts include seed investments in equity, fixed-income, and multi-asset mutual funds/strategies.

(2) Other alternatives primarily include co-investments in credit funds, direct hedge fund strategies, and hedge fund solutions.

As adjusted investment activity for the nine months ended September 30, 2024 was as follows:

(in millions)

(1) Amount includes distributions representing return of capital and return on investments.

(2) Amount includes the impact of foreign exchange movements.

LIQUIDITY AND CAPITAL RESOURCES

BlackRock Cash Flows Excluding the Impact of CIPs

The condensed consolidated statements of cash flows include the cash flows of the CIPs. The Company uses an adjusted cash flow statement, which excludes the impact of CIPs, as a supplemental non-GAAP measure to assess liquidity and capital requirements. The Company believes that its cash flows, excluding the impact of the CIPs, provide investors with useful information on the cash flows of BlackRock relating to its ability to fund additional operating, investing and financing activities. BlackRock’s management does not advocate that investors consider such non-GAAP measures in isolation from, or as a substitute for, its cash flows presented in accordance with GAAP.

The following table presents a reconciliation of the condensed consolidated statements of cash flows presented on a GAAP basis to the condensed consolidated statements of cash flows, excluding the impact of the cash flows of CIPs:

(in millions)

Sources of BlackRock’s operating cash primarily include base fees and securities lending revenue, performance fees, technology services revenue, advisory and other revenue and distribution fees. BlackRock uses its cash to pay all operating expenses, interest and principal on borrowings, income taxes, dividends and repurchases of the Company’s stock, acquisitions, capital expenditures and purchases of co-investments and seed investments.

For details of the Company’s GAAP cash flows from operating, investing and financing activities, see the condensed consolidated statements of cash flows contained in Part I, Item 1 of this filing.

Cash flows provided by/(used in) operating activities, excluding the impact of CIPs, primarily include the receipt of base fees, securities lending revenue, performance fees and technology services revenue, offset by the payment of operating expenses incurred in the normal course of business, including year-end incentive and deferred cash compensation accrued during prior years, and income tax payments.

Cash flows provided by investing activities, excluding the impact of CIPs, for the nine months ended September 30, 2024 were $165 million, primarily reflecting $344 million of distributions of capital from equity method investees and $60 million of net proceeds from sales and maturities of investments, partially offset by $165 million of purchases of property and equipment and $74 million related to the SpiderRock Transaction.

Cash flows provided by financing activities, excluding the impact of CIPs, for the nine months ended September 30, 2024 were $876 million, primarily resulting from $5.5 billion of proceeds from long-term borrowings related to the issuance of senior notes to fund a portion of the cash consideration for the GIP Transaction and the Preqin Transaction, partially offset by $2.3 billion of cash dividend payments, $1.5 billion of share repurchases, including $1.2 billion in open market transactions and $0.3 billion of employee tax withholdings related to employee stock transactions, and $1.0 billion of repayment of borrowings.

The Company manages its financial condition and funding to maintain appropriate liquidity for the business. Management believes that the Company’s liquid assets, continuing cash flows from operations, borrowing capacity under the Company’s existing revolving credit facility and uncommitted commercial paper private placement program, provide sufficient resources to meet the Company’s short-term and long-term cash needs, including operating, debt and other obligations as they come due and anticipated future capital requirements. Liquidity resources at September 30, 2024 and December 31, 2023 were as follows:

(in millions)

(1) Amounts exclude restricted cash.

(2) The Company cannot readily access such cash and cash equivalents to use in its operating activities.

(3) The percentage of cash and cash equivalents held by the Company’s US subsidiaries was approximately 70% and 50% at September 30, 2024 and December 31, 2023, respectively. See Net Capital Requirements herein for more information on net capital requirements in certain regulated subsidiaries.

Total liquidity resources increased $5.8 billion during the nine months ended September 30, 2024, primarily reflecting $4.5 billion of net proceeds from long-term borrowings and cash flows from operating activities, partially offset by cash dividend payments of $2.3 billion, share repurchases of $1.5 billion and $74 million related to the SpiderRock Transaction.

A significant portion of the Company’s $8.1 billion of investments, as adjusted, is illiquid in nature and, as such, cannot be readily convertible to cash.

Share Repurchases. During the nine months ended September 30, 2024, the Company repurchased 1.6 million common shares under the Company’s existing share repurchase program for approximately $1.2 billion. At September 30, 2024, there were approximately 4.2 million shares still authorized to be repurchased under the program. The timing and actual number of shares repurchased will depend on a variety of factors, including legal limitations, price and market conditions.

Net Capital Requirements. The Company is required to maintain net capital in certain regulated subsidiaries within a number of jurisdictions, which is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries of the Company may be restricted in their ability to transfer cash between different jurisdictions and to their parents. Additionally, transfers of cash between international jurisdictions may have adverse tax consequences that could discourage such transfers.

BlackRock Institutional Trust Company, N.A. (“BTC”) is chartered as a national bank that does not accept deposits or make commercial loans and whose powers are limited to trust and other fiduciary activities. BTC provides investment management and other fiduciary services, including investment advisory and securities lending agency services, to institutional clients. BTC is subject to regulatory capital and liquid asset requirements administered by the US Office of the Comptroller of the Currency.

At September 30, 2024 and December 31, 2023, the Company was required to maintain approximately $2.0 billion and $1.8 billion, respectively, in net capital in certain regulated subsidiaries, including BTC, entities regulated by the Financial Conduct Authority and Prudential Regulation Authority in the UK, and the Company’s broker-dealers. The Company was in compliance with all applicable regulatory net capital requirements.

Short-Term Borrowings

2024 Revolving Credit Facility. The Company maintains an unsecured revolving credit facility, which is available for working capital and general corporate purposes (the “2024 Credit Facility”). In March 2024, the 2024 Credit Facility was amended to, among other things, (1) permit the GIP Transaction and the transactions contemplated in connection with the GIP Transaction, (2) add BlackRock Funding as a borrower under the existing credit agreement, (3) add BlackRock Funding as a guarantor of the payment and performance of the obligations, liabilities and indebtedness of BlackRock and certain of its other subsidiaries and (4) update the sustainability-linked pricing mechanics to allow metrics to be set following the consummation of the GIP Transaction. In May 2024, the 2024 Credit Facility was further amended to, among other things, (1) increase the aggregate commitment amount by $400 million to $5.4 billion and (2) extend the maturity date to March 2029 for lenders (other than one non-extending lender) pursuant to the Company’s option to request extensions of the maturity date available under the 2024 Credit Facility (with the commitment of the non-extending lender maturing in March 2028). The 2024 Credit Facility permits the Company to request up to an additional $1.0 billion of borrowing capacity, subject to lender credit approval, which could increase the overall size of the 2024 Credit Facility to an aggregate principal amount of up to $6.4 billion. Interest on outstanding borrowings accrues at an applicable benchmark rate for the denominated currency of the loan, plus a spread. The 2024 Credit Facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of less than 1 to 1 at September 30, 2024. At September 30, 2024, the Company had no amount outstanding under the 2024 Credit Facility.

Commercial Paper Program. The Company can issue unsecured commercial paper notes (the “CP Notes”) on a private-placement basis up to a maximum aggregate amount outstanding at any time of $4 billion. The commercial paper program is currently supported by the 2024 Credit Facility. At September 30, 2024, BlackRock had no CP Notes outstanding.

Subsidiary Credit Facility. In January 2024, BlackRock Investment Management (UK) Limited ("BIM UK"), a wholly owned subsidiary of the Company, entered into a revolving credit facility (the “Subsidiary Credit Facility”) in the amount of £25 million (or approximately $34 million based on the GBP/USD foreign exchange rate at September 30, 2024) with a rolling 364-day term structure. The Subsidiary Credit Facility is available for BIM UK's general corporate and working capital purposes. At September 30, 2024, there was no amount outstanding under the Subsidiary Credit Facility.

Long-Term Borrowings

March 2024 Notes. In March 2024, BlackRock Funding issued $3.0 billion in aggregate principal amount of senior unsecured and unsubordinated notes. These notes were issued as three separate series of senior debt securities including $500 million of 4.70% notes maturing on March 14, 2029 (the "2029 Notes"), $1.0 billion of 5.00% notes maturing on March 14, 2034 (the "2034 Notes") and $1.5 billion of 5.25% notes maturing on March 14, 2054 (the "2054 Notes") (collectively, the "March 2024 Notes"). Net proceeds were used to fund a portion of the cash consideration for the GIP Transaction, which closed in October 2024. Interest on the March 2024 Notes of approximately $152 million per year is payable semi-annually on March 14 and September 14 of each year, which commenced on September 14, 2024. The March 2024 Notes are fully and unconditionally guaranteed (the “March 2024 Notes Guarantee”) on a senior unsecured basis by BlackRock. The March 2024 Notes and the March 2024 Notes Guarantee rank equally in right of payment with all of BlackRock Funding and BlackRock’s other unsubordinated indebtedness, respectively. The March 2024 Notes may be redeemed prior to maturity at any time in whole or in part at the option of BlackRock Funding at the redemption prices set forth in the applicable series of March 2024 Notes.

July 2024 Notes. In July 2024, BlackRock Funding issued $2.5 billion in aggregate principal amount of senior unsecured and unsubordinated notes. These notes were issued as three separate series of senior debt securities including $800 million of 4.60% notes maturing on July 26, 2027 (the "2027 Notes"), $500 million of 4.90% notes maturing on January 8, 2035 (the "2035 Notes") and $1.2 billion of 5.35% notes maturing on January 8, 2055 (the "2055 Notes") (collectively, the "July 2024 Notes"). Net proceeds are intended to be used to fund a portion of the cash consideration for the Preqin Transaction, which is anticipated to close in the first quarter of 2025, subject to regulatory approvals and other customary closing conditions. The July 2024 Notes are fully and unconditionally guaranteed (the “July 2024 Notes Guarantee”, and together with the March 2024 Notes Guarantee, the "Notes Guarantees") on a senior unsecured basis by BlackRock. The July 2024 Notes and the July 2024 Notes Guarantee rank equally in right of payment with all of BlackRock Funding and BlackRock’s other unsubordinated indebtedness, respectively. Interest on the 2027 Notes of approximately $37 million per year is payable semi-annually on January 26 and July 26 of each year, beginning January 26, 2025. Interest on the 2035 Notes and 2055 Notes of approximately $25 million and $64 million per year, respectively, is payable semi-annually on January 8 and July 8 of each year, beginning January 8, 2025. The July 2024 Notes may be redeemed prior to maturity at any time in whole or in part at the option of BlackRock Funding at the redemption prices set forth in the applicable series of July 2024 Notes. In addition, if the Preqin Transaction is not consummated, BlackRock Funding will be required to redeem all outstanding 2027 Notes (the “Special Mandatory Redemption”) at a Special Mandatory Redemption price equal to 101% of the aggregate principal amount of the applicable series of 2027 Notes, plus accrued and unpaid interest, if any, to, but excluding, the Special Mandatory Redemption date.

References in this section to BlackRock or the Company for any period (1) prior to the closing of the GIP Transaction on October 1, 2024 refer to BlackRock Finance, Inc. (formerly BlackRock, Inc. or Old BlackRock) and (2) thereafter refer to BlackRock, Inc. (formerly BlackRock Funding, Inc. or New BlackRock).

At September 30, 2024, the principal amount of long-term notes outstanding was $12.5 billion. See Note 14, Borrowings, in the 2023 Form 10-K for more information on overall borrowings outstanding as of December 31, 2023.

During the nine months ended September 30, 2024, the Company paid approximately $228 million of interest on long-term notes. Future principal repayments and interest requirements at September 30, 2024 were as follows:

(in millions)

(1) The amounts related to the 2025 Notes are calculated using the EUR/USD foreign exchange rate as of September 30, 2024.

In March 2024, the Company fully repaid $1.0 billion of 3.50% Notes at maturity.

Supplemental Guarantor Information

BlackRock Funding was a wholly owned direct subsidiary of BlackRock formed in connection with the GIP Transaction. BlackRock Funding is the issuer of the previously described March 2024 Notes and July 2024 Notes (collectively the "2024 Notes"), which are fully and unconditionally guaranteed on a senior unsecured basis by BlackRock. The 2024 Notes and the Notes Guarantees rank equally in right of payment with all of BlackRock Funding and BlackRock’s other unsubordinated indebtedness, respectively. No other subsidiary of BlackRock or BlackRock Funding guarantees the 2024 Notes. The Notes Guarantees will be automatically and unconditionally released and discharged, and BlackRock will be released from all obligations in its capacity as guarantor, in certain circumstances as described in the indentures governing the 2024 Notes. See Note 13, Borrowings, in the notes to the condensed consolidated financial statements for further information on the 2024 Notes.

As permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, BlackRock has excluded summarized financial information for BlackRock Funding in this Quarterly Report on Form 10-Q because the combined assets, liabilities, and results of operations of BlackRock Funding for the period were not materially different than the corresponding amounts in BlackRock’s condensed consolidated financial statements for such quarter and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

On October 1, 2024, in connection with the closing of the GIP Transaction, BlackRock, Inc. (formerly known as BlackRock Funding, Inc.) ("New BlackRock") became the ultimate parent company of BlackRock Finance, Inc. (formerly known as BlackRock, Inc.) ("Old BlackRock"), GIP and their respective subsidiaries. See Overview — Acquisitions for additional information. As a result of this reorganization, the Company will present summarized financial information of New BlackRock and Old BlackRock (together with the New BlackRock, the "Obligor Group") on a combined basis as of December 31, 2024 and for the period from October 1, 2024 to December 31, 2024, beginning with Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Commitments and Contingencies

Investment Commitments. At September 30, 2024, the Company had $757 million of various capital commitments to fund sponsored investment products, including CIPs. These products include various illiquid alternative products, including private equity funds and real assets funds and opportunistic funds. This amount excludes additional commitments made by consolidated funds of funds to underlying third-party funds as third-party noncontrolling interest holders have the legal obligation to fund the respective commitments of such funds of funds. Generally, the timing of the funding of these commitments is unknown and the commitments are callable on demand at any time prior to the expiration of the commitment. These unfunded commitments are not recorded on the condensed consolidated statements of financial condition. These commitments do not include potential future commitments approved by the Company that are not yet legally binding. The Company intends to make additional capital commitments from time to time to fund additional investment products for, and with, its clients.

Critical Accounting Policies and Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ significantly from those estimates. These estimates, judgments and assumptions are affected by the Company’s application of accounting policies. Management considers the following accounting policies and estimates critical to understanding the condensed consolidated financial statements. These policies and estimates are considered critical because they had a material impact, or are reasonably likely to have a material impact on the Company’s condensed consolidated financial statements and because they require management to make significant judgments, assumptions or estimates. For a summary of these and additional accounting policies as well as recent accounting developments, see Note 2, Significant Accounting Policies, in the notes to the condensed consolidated financial statements. In addition, see Critical Accounting Policies and Estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2, Significant Accounting Policies, in the 2023 Form 10-K for further information.

Consolidation. The Company consolidates entities in which the Company has a controlling financial interest. The company has a controlling financial interest when it owns a majority of the VRE or is a primary beneficiary (“PB”) of a VIE. Assessing whether an entity is a VIE or a VRE involves judgment and analysis on a structure-by-structure basis. Factors considered in this assessment include the entity’s legal organization, the entity’s capital structure, the rights of equity investment holders, the Company’s contractual involvement with and economic interest in the entity and any related party or de facto agent implications of the Company’s involvement with the entity. Entities that are determined to be VREs are consolidated if the Company can exert absolute control over the financial and operating policies of the investee, which generally exists if there is greater than 50% voting interest. Entities that are determined to be VIEs are consolidated if the Company is the PB of the entity. BlackRock is deemed to be the PB of a VIE if it (1) has the power to direct the activities that most significantly impact the entities’ economic performance and (2) has the obligation to absorb losses or the right to receive benefits that potentially could be significant to the VIE. There is judgment involved in assessing whether the Company is the PB of a VIE. In addition, the Company’s ownership interest in VIEs is subject to variability and is impacted by actions of other investors such as on-going redemptions and contributions. The Company generally consolidates VIEs in which it holds an economic interest of 10% or greater and deconsolidates such VIEs once its economic interest falls below 10%. As of September 30, 2024, the Company was deemed to be the PB of approximately 110 VIEs, which are BlackRock sponsored investment products. See Note 5, Consolidated Sponsored Investment Products, in the notes to the condensed consolidated financial statements for more information.

Fair Value Measurements. The Company’s assessment of the significance of a particular input to the fair value measurement according to the fair value hierarchy (i.e., Level 1, 2 and 3 inputs, as defined) in its entirety requires judgment and considers factors specific to the financial instrument. See Note 2, Significant Accounting Policies, and Note 7, Fair Value Disclosures, in the notes to the condensed consolidated financial statements for more information on fair value measurements.

Intangible Assets

Indefinite-lived and finite-lived intangibles. Indefinite-lived intangible assets represent the value of advisory contracts acquired in business acquisitions to manage AUM in proprietary open-end investment funds, collective trust funds and certain other commingled products without a specified termination date. The Company performs assessments to determine if any intangible assets are impaired at least annually, as of July 31, or more frequently if events or changes in circumstances indicate that it is more likely than not that the intangible assets might be impaired.

In evaluating whether it is more likely than not that the fair value of indefinite-lived intangibles is less than its carrying value, BlackRock performs certain quantitative assessments and assessed various significant quantitative factors including AUM, revenue basis points, projected AUM growth rates, operating margins, tax rates and discount rates. In addition, the Company considered other qualitative factors including: (1) macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets; (2) industry and market considerations such as a deterioration in the environment in which the Company operates, an increased competitive environment, a decline in market-dependent multiples or metrics, a change in the market for an entity’s services, or regulatory, legal or political developments; and (3) Company-specific events, such as a change in management or key personnel, overall financial performance and litigation that could affect significant inputs used to determine the fair value of the indefinite-lived intangible asset. If an indefinite-lived intangible is determined to be more likely than not impaired, then the fair value of the asset, which is generally determined using an income approach, is compared with its carrying value and any excess of the carrying value over the fair value would be recognized as an expense in the period in which the impairment occurs.

The Company performed its annual impairment assessment, including evaluating various qualitative factors and performing certain quantitative assessments, as of July 31, 2024. Based on this assessment, the Company determined that the indefinite-lived intangible assets related to certain acquired open-end management contracts were impaired, and as a result, recorded a noncash impairment charge of $50 million, included within amortization and impairment of intangible assets expense on the condensed consolidated statements of income for the three and nine months ended September 30, 2024. The impairment was primarily the result of a decrease in certain quantitative factors, including reduced growth expectation, lower revenue basis points and net client outflows, which caused the fair value to decline below its carrying value. While the Company believes all assumptions utilized in the analysis are reasonable and appropriate, changes in these estimates could produce different fair value amounts, which could drive additional impairment in future periods. In addition, the Company determined, that no impairment charges were required for any other intangible assets, and that the classification of indefinite-lived versus finite-lived intangibles was still appropriate and no changes were required to the expected lives of the finite-lived intangibles. The Company continuously monitors various factors, including AUM, for potential indicators of impairment.

Investment Advisory Performance Fees / Carried Interest. The Company receives investment advisory performance fees, including incentive allocations (carried interest) from certain actively managed investment funds and certain separately managed accounts ("SMAs"). These performance fees are dependent upon exceeding specified relative or absolute investment return thresholds, which vary by product or account, and include monthly, quarterly, annual or longer measurement periods.

Performance fees, including carried interest, are generated on certain management contracts when performance hurdles are achieved. Such performance fees are recognized when the contractual performance criteria have been met and when it is determined that they are no longer probable of significant reversal. Given the unique nature of each fee arrangement, contracts with customers are evaluated on an individual basis to determine the timing of revenue recognition. Significant judgment is involved in making such determination. Performance fees typically arise from investment management services that began in prior reporting periods. Consequently, a portion of the fees the Company recognizes may be partially related to the services performed in prior periods that meet the recognition criteria in the current period. At each reporting date, the Company considers various factors in estimating performance fees to be recognized, including carried interest. These factors include but are not limited to whether: (1) the amounts are dependent on the financial markets and, thus, are highly susceptible to factors outside the Company’s influence; (2) the ultimate payments have a large number and a broad range of possible amounts; and (3) the funds or SMAs have the ability to (a) invest or reinvest their sales proceeds or (b) distribute their sales proceeds and determine the timing of such distributions.

The Company is allocated/distributed carried interest from certain alternative investment products upon exceeding performance thresholds. The Company may be required to reverse/return all, or part, of such carried interest allocations/distributions depending upon future performance of these products. Carried interest subject to such clawback provisions is recorded in investments or cash and cash equivalents to the extent that it is distributed, on its condensed consolidated statements of financial condition. The Company records a liability for deferred carried interest to the extent it receives cash or capital allocations related to carried interest prior to meeting the revenue recognition criteria. At September 30, 2024 and December 31, 2023, the Company had $2.0 billion and $1.8 billion, respectively, of deferred carried interest recorded in other liabilities on the condensed consolidated statements of financial condition. A portion of the deferred carried interest may also be paid to certain employees and other third parties. The ultimate timing of the recognition of performance fee revenue and related compensation expense, if any, is unknown. See Note 15*, Revenue,* in the notes to the condensed consolidated financial statements for detailed changes in the deferred carried interest liability balance for the three and nine months ended September 30, 2024 and 2023.

AUM Market Price Risk. BlackRock’s investment advisory and administration fees are primarily comprised of fees based on a percentage of the value of AUM and, in some cases, performance fees expressed as a percentage of the returns realized on AUM. At September 30, 2024, the majority of the Company’s investment advisory and administration fees were based on average or period end AUM of the applicable investment funds or separate accounts. Movements in equity market prices, interest rates/credit spreads, foreign exchange rates or all three could cause the value of AUM to decline, which would result in lower investment advisory and administration fees.

Corporate Investments Portfolio Risks. As a leading investment management firm, BlackRock devotes significant resources across all of its operations to identifying, measuring, monitoring, managing and analyzing market and operating risks, including the management and oversight of its own investment portfolio. The Board of Directors of the Company has adopted guidelines for the review of investments (or commitments to invest) to be made by the Company, requiring, among other things, that certain investments be referred to the Board of Directors, depending on the circumstances, for notification or approval.

In the normal course of its business, BlackRock is exposed to equity market price risk, interest rate/credit spread risk and foreign exchange rate risk associated with its corporate investments.

BlackRock has investments primarily in sponsored investment products that invest in a variety of asset classes, including real assets, private equity and hedge funds. Investments generally are made for co-investment purposes, to establish a performance track record, to hedge exposure to certain deferred cash compensation plans or for regulatory purposes. The Company has a seed capital hedging program in which it enters into futures to hedge market and interest rate exposure with respect to its total portfolio of seed investments in sponsored investment products. The Company had outstanding futures related to its seed capital hedging program with an aggregate notional value of approximately $1.8 billion at both September 30, 2024 and December 31, 2023.

At September 30, 2024, approximately $6.6 billion of BlackRock’s investments were held in consolidated sponsored investment products accounted for as variable interest entities or voting rights entities. Excluding the impact of the Federal Reserve Bank stock, carried interest, investments made to hedge exposure to certain deferred cash compensation plans and certain investments that are hedged via the seed capital hedging program, the Company’s economic exposure to its investment portfolio is $4.0 billion. See Statement of Financial Condition Overview-Investments in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information on the Company’s investments.

Equity Market Price Risk. At September 30, 2024, the Company’s net exposure to equity market price risk in its investment portfolio was approximately $1.9 billion of the Company’s total economic investment exposure. Investments subject to market price risk include public and private equity and real assets investments, hedge funds and funds of funds as well as mutual funds. The Company estimates that a hypothetical exposure to a 10% adverse change in market prices would result in a decrease of approximately $194 million in the carrying value of such investments.

Interest Rate/Credit Spread Risk. At September 30, 2024, the Company was exposed to interest rate risk and credit spread risk as a result of approximately $2.1 billion of investments in debt securities and sponsored investment products that invest primarily in debt securities. Management considered a hypothetical exposure to an adverse 100 basis point fluctuation in interest rates or credit spreads and estimates that the impact of such a fluctuation on these investments, in the aggregate, would result in a decrease, or increase, of approximately $53 million in the carrying value of such investments.

Foreign Exchange Rate Risk. As discussed above, the Company invests in sponsored investment products that invest in a variety of asset classes. The carrying value of the total economic investment exposure denominated in foreign currencies, primarily based in the British pound and euro, was approximately $1.2 billion at September 30, 2024. A hypothetical exposure to a 10% adverse change in the applicable foreign exchange rates would result in approximately a $115 million decline in the carrying value of such investments.

Other Market Risks. The Company executes forward foreign currency exchange contracts to mitigate the risk of certain foreign exchange risk movements. At September 30, 2024, the Company had outstanding forward foreign currency exchange contracts with an aggregate notional value of approximately $3.2 billion, with expiration dates primarily in October 2024. In addition, the Company entered into futures to hedge economically the exposure to market movements on certain deferred cash compensation plans. At September 30, 2024, the Company had outstanding exchange traded futures with aggregate notional values related to its deferred cash compensation hedging program of approximately $210 million, with expiration dates during the fourth quarter of 2024.

Disclosure Controls and Procedures. Under the direction of BlackRock’s Chief Executive Officer and Chief Financial Officer, BlackRock evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, BlackRock’s Chief Executive Officer and Chief Financial Officer have concluded that BlackRock’s disclosure controls and procedures were effective.

Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

In addition to the other information set forth in this report, the risks discussed in BlackRock's Annual Report on Form 10-K for the year ended December 31, 2023 could materially affect our business, financial condition, operating results and nonoperating results.