BlackRock Inc (NYSE: BLK) Q1 2023 earnings call dated Apr. 14, 2023
Corporate Participants:
Christopher J. Meade — General Counsel
Martin S. Small — Chief Financial Officer
Larry Fink — Chairman and Chief Executive Officer
Rob Kapito — President
Analysts:
Michael Cyprys — Morgan Stanley — Analyst
Craig Siegenthaler — Bank of America — Analyst
Glenn Schorr — Evercore — Analyst
Alexander Blostein — Goldman Sachs — Analyst
William Katz — Credit Suisse — Analyst
Presentation:
Operator
Good morning, my name is Jess and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Incorporated First Quarter 2023 Earnings Teleconference. Our host for today’s call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Martin S. Small; President, Robert S. Kapito and General Counsel, Christopher J. Meade. [Operator Instructions] Thank you.
Mr. Meade, you may begin your conference.
Christopher J. Meade — General Counsel
Good morning, everyone. I’m Chris Meade, the General Counsel of BlackRock. Before we begin, I’d like to remind you that during the course of this call, we may make a number of forward-looking statements. We call your attention to the fact that BlackRock’s actual results may of course differ from statements. As you know, BlackRock has filed reports with the SEC, which list some of the factors that may cause the results of BlackRock to differ materially from what we see today. BlackRock assumes no duty and does not undertake to update any forward-looking statements.
So with that, I’ll turn it over to Martin.
Martin S. Small — Chief Financial Officer
Thanks, Chris and good morning, everyone. It’s my pleasure to present results for the first quarter of 2023. Before I turn it over to Larry, I’ll review our financial performance and business results. Our earnings release discloses both GAAP and as adjusted financial results. I’ll be focusing primarily on our as adjusted results.
Beginning in the first quarter of 2023, we updated our definitions of as adjusted operating income, operating margin, non-operating income and net income. They now exclude the compensation expense impact of mark-to-market volatility associated with certain deferred cash compensation plans and the non-operating impact of an economic hedge which the Company began in 2023. We believe this change provides investors and management with a more useful understanding of our core financial performance overtime and increases comparability with other asset management companies.
BlackRock regularly reviews our disclosures with the goal of providing helpful information to our investors and streamlining where appropriate. To this end, we also simplified our disclosure of distribution revenue and expense beginning in the first quarter. I’m excited to be presenting for the first time as CFO, as many of you know, most of my first 17 years at BlackRock were spent in client-facing roles. And I can tell you firsthand, BlackRock was built for clients. Financial cracks and economic damage from this rapid rate hiking cycle burst into view over the last few weeks, 20 years the easy money is definitely behind us, the world is adjusting to higher rates and tightening credit conditions.
BlackRock’s platform has been built overtime to help clients in all market environments. Market dislocations present significant opportunities for BlackRock and most importantly for our clients. Asset management firms connect investors to capital markets and we see these recent dislocations driving more economic activity and growth to markets. We’ve spent 35 years creating more access, creating more connections among long-term investors, capital markets in the real economy. We’ve unlocked new markets through iShares and personalized SMAs. We pioneered unconstrained bond strategies and we put Aladdin on the desktops of thousands of investors and advisors, leading the industry, leading our clients on this journey with World-class investment capabilities, markets insights, advice and technology, that’s the center of BlackRock’s growth strategy.
We’re a partner, we have long-term perspective, we have the ability to move quickly in times of stress. We’re a whole portfolio advisor providing end-to-end technology and investment portfolio servicing. Clients use BlackRock as a scale enabler. They use our platform as a service, they use to streamline and support the growth in commercial nimbleness of their own business. Our unique platform combination of ETFs, advisory, outsourcing technology alongside with active and private markets capabilities, that’s what’s driving BlackRock’s differentiated organic growth, whether adding or reducing risk, our continued industry-leading organic growth demonstrates the clients are consolidating more of their portfolios with BlackRock.
And in the first quarter, BlackRock generated total net inflows of $110 billion, representing 5% annualized organic asset growth and 1% organic base fee growth. First quarter revenue of $4.2 billion was 10% lower year-on-year primarily driven by the impact of significantly lower markets and dollar appreciation over the last 12 months on average AUM, as well as lower performance fees. Operating income of $1.5 billion was down 17%, while earnings per share of $7.93 was lower 17% versus a year-ago, also reflecting a higher effective tax-rate, partially offset by higher non-operating income.
Non-operating results for the quarter included $60 million of net investment gains, driven primarily by mark-to-market gains in the value of our private equity co-investment portfolio and unhedged seed capital investments. Our as adjusted tax rate for the quarter was approximately 25%. This reflects lower discrete tax benefits related to stock based compensation awards, the best in the first quarter of each year compared to the first quarter of 2022.
We continue to estimate that 25% is a reasonable projected tax run-rate for the remainder of 2023. The actual effective tax-rate may differ because of nonrecurring or discrete items or potential changes in tax legislation. First quarter base fees and securities lending revenue of $3.5 billion was down 9% year-over-year. This reflected the negative revenue impact of approximately $800 billion of market beta and foreign exchange movements on our AUM over the last 12 months and was partially offset by the elimination of discretionary money market fund fee waivers and higher securities lending revenue.
Sequentially, base fee and securities lending revenue increased 3% reflecting higher average AUM and securities lending spreads partially offset by the impact of a lower day count in the first quarter. On an equivalent day count basis, our annualized effective fee rate was modestly lower compared to the fourth quarter, mainly due to changing client risk preferences. Performance fees of $55 million decreased from a year ago, primarily reflecting lower revenue from alternatives.
In 2022, our Aladdin platform delivered record net sales and we continue to see strong client interest for our technology solutions. Quarterly technology services revenue was approximately flat compared to a year ago, reflecting this continuing strong demand, but also significant headwinds associated with the foreign exchange impact on Aladdin’s non-dollar revenue and market declines on Aladdin’s fixed income platform assets over the last 12 months. Sequential technology services revenue was impacted by one-time fees in the prior quarter and the timing of implementations.
Annual contract value or ACV increased 6% year-over-year. We remain committed to low-to mid-teens ACV growth over the long-term, especially as periods of market volatility have historically underscored the importance of Aladdin and generated increased demand. Total expense decreased 5% year-over-year, reflecting lower compensation and direct fund expense, partially offset by higher G&A expense. Employee compensation and benefit expense was down 6% primarily reflecting lower incentive compensation due to lower operating income and performance fees.
G&A expense increased 6% due to higher marketing and promotional expense including the impact of higher T&E expense and higher occupancy expense as a result of our moving to our new headquarters right here in Hudson Yards, New York. Sequentially, G&A expense decreased 10%, primarily reflecting seasonally lower marketing and promotional expense. Direct fund expense was down 4% year-over-year, primarily reflecting lower average index AUM. Sequentially, quarterly direct fund expense increased due to higher average index AUM in the current quarter and higher rebates that seasonally occur in the fourth quarter.
Our first quarter as adjusted operating margin of 40.4% was down 380 basis points from a year ago. This primarily reflects the negative impact of markets and foreign exchange movements on quarterly revenue. Although markets have improved since the end of 2022, we will continue to be disciplined in prioritizing our hiring and overall investments with the aim of delivering organic growth and a differentiated operating margin. The diversification and the resilience of our platform allow us to pursue critical investments, while maintaining focus on expenses in our margin.
BlackRock’s industry-leading organic growth is a direct result of the disciplined investments we’ve consistently made through market cycles. Our business is well-positioned to take advantage of the opportunities before us and we remain committed to optimizing organic growth in the most efficient way possible. In-line with our guidance in January, at present, we’d expect our headcount to be broadly flat in 2023 and we’d also expect a mid-to-high single-digit percentage increase in 2023 core G&A expense.
Our capital management strategy remains first to invest in our business and then to return excess cash to shareholders through a combination of dividends and share repurchases. We continue to invest through prudent use of our balance sheet to best position BlackRock for continued success. This is primarily through seed and co-investments to support organic growth. We will make inorganic investments where we see an opportunity to accelerate growth and support our strategic initiatives. BlackRock’s stable and differentiated business model enables us to invest and remain opportunistic. Our acquisition philosophy focuses on extending our product capabilities and our distribution reach.
Prior examples of this strategy are the acquisitions of eFront to expand Aladdin’s whole portfolio coverage, Aperio to scale direct indexing and First Reserve to enrich energy and infrastructure investing at BlackRock for our clients. As previously announced in January, we increased our quarterly dividend by 2.5% up to $5 per share of common stock. We also repurchased $375 million worth of common shares in the first quarter. At present, based on our capital spending plans for the year and subject to market conditions, we still anticipate repurchasing at least $375 million of shares per quarter for the balance of the year, consistent with our previous guidance in January.
BlackRock’s $110 billion of total net inflows evidence our strong ongoing connectivity with clients, which only grew as market liquidity stress events unfolded in the quarter. First quarter ETF net inflows of $22 billion were led by demand for our bond ETFs. This was partially offset by seasonal tax trading and sentiment driven outflows from US equity style box exposures in precision ETFs. As we’ve seen repeatedly in periods of market volatility, investors use iShares to implement tactical asset allocation preferences in their portfolios.
Our bond ETFs again delivered for clients and generated $34 billion of net inflows. We’ve invested for years to support the growth of bond ETFs, both to create a diversified bond ETF platform and to deliver the liquidity and price transparency our clients expect, especially during periods of market volatility. Retail net inflows reflected strength in index SMAs through Aperio and broad-based net inflows into active fixed-income.
BlackRock’s institutional franchise generated $81 billion of net inflows, as we continue to partner as a scale enabler, a platform for institutional clients seeking turnkey access to investment expertise, greater customization, industry-leading risk management technology and investment servicing, institutional active net inflows of $72 billion were led by multi-asset and fixed-income net inflows, which included fundings from several significant outsourcing mandates.
Demand for private markets also continued with $4 billion of net inflows, representing 16% annualized organic base fee growth led by private credit and infrastructure. We continue to source unique deals for our clients through our global network of relationships, they’re underpinned by data, analytics and technology, examples include our agreement to form GigaPower, a joint-venture with one of our diversified infrastructure funds and AT&T.
We have approximately $33 billion of committed capital to deploy for clients in a variety of alternative strategies and this represents a significant source of future base and performance fees. In aggregate, BlackRock generated approximately $68 billion of active net inflows during the quarter and we’ve now generated positive active flows in all but two quarters since the beginning of 2019. Finally, BlackRock’s cash management platform saw $8 billion of net inflows in the first quarter. Flows were driven by surging demand for our cash management solutions in March as clients look to diversify away from deposits and enhanced cash yields.
March net inflows offset net redemptions in the first two months of the quarter that were primarily due to client specific activity such as spack unwinds. We’re actively working with clients on their liquidity management strategies providing technology, market and operational insights and of course, delivering a full range of cash management capabilities. BlackRock’s first quarter results highlight the benefits of the investments we’ve made to build a diversified and resilient investment technology platform.
Throughout our history and in this most recent crisis, BlackRock is led by listening to clients. I’m excited about our future and the growing opportunities for BlackRock for our clients, for our employees and our shareholders. And with that, I’ll turn it over to Larry.
Larry Fink — Chairman and Chief Executive Officer
Thank you, Martin and congratulations on your first earnings call as CFO and good morning to everybody. Thank you for joining the call. BlackRock is a source of both stability and optimism for our clients. We are helping them navigate volatility and embed resiliency in their portfolios, while also providing insights on the long-term investment opportunities to be had in today’s markets.
In 2022, BlackRock generated $307 billion in net new assets and captured over one-third of long-term industry flows. Strong momentum continued into 2023 and we once again led the industry with $110 billion of net inflows in the first quarter. The consistency of our results across both good and bad markets across from our clients confidence in BlackRock’s performance, BlackRock’s guidance and our fiduciary standards. As I wrote in my Chairman’s letter last month, recent market volatility and stress in the regional banking sector are the consequences of prolonged periods of aggressive fiscal and monetary policy coming to an end.
These policies contribute to a sharp rise in inflation with the Federal Reserve responding with the fastest pace of rate hikes since 2014, excuse me, since 1980s. The cost of these hikes is now materializing including through shock to regional banks. Here’s a series of impairment and held-to-maturity portfolios on bank balance sheet and a crisis of confidence in regional banks send off a wave of shutdowns, seizures and regulatory intervention, so we haven’t seen at this scale in a long-time.
As these historic events were unfolding, we marked the 35th anniversary of the founding of BlackRock. Throughout our history, moments of dislocation and disruption have been inflection point for BlackRock. This is where opportunity arises for both BlackRock and for our clients. From times like this, we have always emerged stronger, more differentiated in the industry and much more deeply connected to each and every client.
We founded BlackRock based on our belief in the long-term growth of the capital markets and the importance of being invested in them. BlackRock has grown as a role of the capital markets has grown over the past 35 years. I believe the current crisis of confidence in the regional banking sector will ultimately fuel another round of growth in the capital markets. BlackRock will be an important player and there are going to be more opportunities for clients as people, companies and countries increasingly turn to markets to finance or retirement their businesses and the entire economies.
BlackRock operates through position of strength, while others may be consumed by near-term pressures, we are at the forefront of trends and opportunities that will shape our growth as a firm and deliver the best outcomes for our clients. The powerful simplicity of our business model is that when we deliver value for our clients, we also create more value for all our shareholders. We have stayed hyper-connected with our clients offering them the first — the firm’s best thinking on what’s happening in the markets, anticipating their questions and concerns and acting as their trusted partner and advisor in times of need.
Leading with empathy, being at the front foot, putting our collective experience at our clients disposable, moving fast, linking globally that’s BlackRock at our best. Investors are looking to BlackRock for insights and thought leadership on the economy, on markets, on geopolitics, on asset allocation. Within the first week following the SVB collapse, we reached thousands of clients, providing them with real-time information and our views on the unfolding events. The BlackRock Investment Institute has hosted dozens of calls for institutional investors and financial advisors. Senior business leaders and investors at BlackRock commit over 100 CEOs, CIOs, executives and public officials.
BlackRock’s Financial Markets Advisory group advises financial and official institutions, as well as other public and private capital markets participants. FMA recently was awarded a mandate by the FDIC to advise and support asset dispositions related to SVB at Signature Bank resolutions. We are honored to have been selected and approach this with all of our FMA assignments with a great sense of discretion and a deep, deep sense of responsibility.
BlackRock is partnering with clients to navigate immediate concerns around market volatility and liquidity, while also staying focused on their long-term goals. Through this connectivity, we’re having richer conversation with clients than ever before about their whole portfolios, in many cases deepening their relationships with them. Our Aladdin technology and integrated asset management platform enables us to help clients quickly understand their portfolio exposures to help them manage liquidity and express changing risk preferences and capture opportunities in response to market events.
The horizontal connectivity and responsibility and constant open line of communication requires of this most recent crisis continue to be exemplified across the firm. In the first quarter of 2023, clients trusted BlackRock with two — with $110 billion of total net inflows, driving positive annualized organic base fee growth.
Organic growth this quarter was led by ongoing momentum in our long-term strategic priorities including bond ETFs and outsourced CIO mandates. Clients also came to BlackRock for immediate liquidity and tactical allocation needs. While there was through our diversified cash management offerings or short-duration fixed-income products, precision ETFs or exposures in valuational tools in Aladdin, we were there for our clients providing advice options and swift execution.
BlackRock to ETFs once again prove their value as critically important tools for active management and providing liquidity, transparency and price discovery to clients during stressed markets. Across our ETF platform, BlackRock generated net inflows of $22 billion in the first quarter. Industry-leading flows into bond ETFs were particularly offset by outflows from our precision ETFs. These tactical asset allocation tools are unique to BlackRock and are used to express risk-on or risk-off use, as they were this past quarter.
In periods of weaker equity markets, we see investors leverages the ETF segment to actively reduce their exposures and for tax loss harvesting trades. As a result in markets like the first quarter, you will see outflows from our precision segment and the opposite in risk-on markets. We have seen this pattern playout following the equity sell-off in 2018 in December and in the first quarter 2020 and most recently in the third quarter 2022. In each of these prior periods, inflows fall when risk-on settlements return.
The high utilization of precision ETFs reinforce the value proposition associated with iShares strong secondary market liquidity and unique options and lending market ecosystems. BlackRock led the industry with $34 billion of bond ETF net inflows and we’re representing over 60% of total fixed income ETF trading volumes during the quarter.
Especially, the US Treasury market experienced large and historic moves. Investors turned to bond ETFs, accessed treasury markets and managed interest-rate risk. BlackRock’s US Treasury ETF range has over $180 billion of assets, providing exposures across the entire yield curve. Investors use BlackRock’s leading platform to manage their risk, to quickly shift to safe haven assets and to manage their cash.
I’ve also often talked about how ETFs have been modernizing the bond markets by contributing real-time information about pricing and market conditions. Notably, ETF liquidity remained strong even as the underlying market liquidity became more challenged. Trading costs in iShares US treasury ETFs remained low despite moving higher in the underlying bonds. For example, iShares 20 year-plus year treasury bond ETF bid-ask spread held at 1 basis-point, while the underlying bonds at many times credit far wider.
BlackRock fixed income ETFs are increasingly being used for active management. BlackRock’s own active managers pioneered the use of fixed ETFs for many years ago for liquidity management, for hedging and for efficient tactical allocation. Today, we see most of the world’s leading asset owners, wealth managers and active asset managers as clients of BlackRock fixed-income ETFs. We are evolving these client relationships from single-use cases to broader adoption, including active applications for a more holistic view of fixed-income portfolio allocations across fixed-income ETFs, actively managing strategies and for individual bonds.
IShares performance under extreme conditions continue to unlock sources of client demand and expand our opportunity set. Investors of all type are turning to iShares bond ETFs, both in normal market environment and particularly during times of market shocks. Liquidity has also become paramount for our clients. Cash is the lifeblood of individuals and organizations, especially in times of stress and our teams have been partnering with clients as they re-evaluate where they put their cash and how to balance holdings, assets in traditional bank deposits alongside other options like money market funds, our ultra-short bond strategies.
In the month of March, BlackRock saw over $40 billion of net inflows into our cash management strategies. We expect to ship in deposits to money market funds to be a longer-term trend and are actively working with clients to help them diversify and enhance the yield they’re earning on their cash. Cash often gets overlooked, now that yields are back after a decade of — lost decade of near-zero rates, we’re excited to help clients put their cash to work at BlackRock.
Through our cash matrix and Aladdin technology, our risk management and product innovation and collaboration across the $3.3 trillion fixed-income and cash platforms, we are positioning BlackRock to be a partner of choice for our clients liquidity and cash management needs. Asset owners and investment in wealth managers are increasingly looking to focus on core competencies and outsource more of their investment process. As they do this, they want a partner that can provide seamless integration solutions better faster and more efficiently.
Our notable success is on-boarding and executing outsourcing mandates over the past several years have catalyzed dialogs with more and more clients. Early in 2023, two large pension funds chose BlackRock for significant OCIO engagements. In the United Kingdom, Royal Mail announced, selected BlackRock to manage it’s over $10 billion of defined-benefit scheme, trusting BlackRock to look over the pensions of its 118,000 members.
In the United States, we are honored to have been selected by a named fiduciary for a pension covering more than 350,000 union workers and retirees. These mandates and other outsourcing assignments underpinned $81 billion of institutional net inflows in the first quarter and are yet more examples of how BlackRock’s range of resources, our experiences and our deep connectivity in local markets are resonating with more and more client and supporting more and more clients.
In the last three years, BlackRock has been entrusted to lead outsourcing mandates totaling $400 billion in AUM, including $200 billion in the last 12 months alone. And just yesterday, it was announced that we have been appointed as a primary asset manager partner to LV the U.K Mutual Insurer. During this time of historic market volatility, clients globally are increasingly interested in how we can help them with outsourcing. We are hearing with all types of clients not only pension and insurers, but also now endowments and foundations, healthcare organizations and actually larger family offices. We expect the trend towards outsourcing to continue with BlackRock driving investment management and technology transformations for our clients. Technology outsourcing is similarly on the rise as companies look to replace multiple loosely connected systems with a single strategic partner who offer a complete solution.
Aladdin enables clients to operate horizontally to share consistent data and to build and manage all portfolios. While there has been tremendous ups and downs in the broader market and operating environment, the need for digitalization and efficiency through technology remains a constant. Market volatility and the growing demand for immediate, precise information on direct and indirect exposure is only underscoring the need for robust technology operating and risk management technology offered through Aladdin.
In the week following the collapse of SVB, we saw a significant increases in usage of Aladdin’s exposure and interactive modeling tools, as our clients sought to understand their exposures to specific securities, to sectors and to their yield curve. They leverage Aladdin capabilities to manage interest-rate risk in portfolios and set enterprise-level broker and trade restrictions. Similarly, Aladdin wealth clients turn to the platform to better understand our clients exposures, they have in other significant market events like the start of COVID and the Russian invasion of Ukraine, usage following failure in the US regional banks more than doubled at many of our wealth client platforms.
Aladdin was designed, Aladdin was built for these type of times. And we are proud that our technology is enabling all our clients to act quickly and with clarity and with much greater confidence during these market shocks. Our results this quarter and amid the most recent crisis are only the latest example of BlackRock doing what it does best, stay in front of the clients needs, helping them to see challenges as opportunities and providing hope for what comes next.
In 2023, it is presenting an incredible opportunities for long-term investors. There is more yield to be earned in cash, infrastructure in private credit are offering attractive returns, bonds can be a major component in portfolios and equities are at much better valuations, BlackRock is connecting our clients to these opportunities and providing them with the confidence to continue investing for the long-term.
Especially in periods of dislocation or willingness to re-imagine our business and to be nimble and seizing emerging opportunities have bolstered our growth and generated differentiating value and returns for our shareholders. Our stable and differentiated business model enable us to remain opportunistic and we will continue to be deliberate and systematic in our investments. We’re constantly looking at opportunities as we assess possible accelerators of growth, support our strategic initiatives and test the boundaries how we think about BlackRock’s business.
And our founding 35 years ago when BlackRock was as much of a concept as it was a company, there was one thing we knew we had to get right and that was always start with a client. We’ve listened to them. We learned a lot from them. We put their needs first. Since then we have developed leading franchises in ETFs, in advisory outsourcing and in technology and we work tirelessly to integrate these capabilities into our One BlackRock business model and culture. It is this combination of capabilities that make BlackRock truly unique and we’re opening new channels for growth by scaling our alternative franchise, by expanding the market for bond ETFs, providing clients access to emerging opportunities in area like transition finance.
Our momentum is the result of many years of thoughtful investments in the infrastructure needed to support complex global mandate as a whole portfolio level. The power of BlackRock’s integrated platform enables us deliver better outcomes for our clients and differentiating growth for you, our shareholders.
Over the past five years, BlackRock has delivered an aggregate of $1.8 trillion of total net inflows or 5% average organic asset growth compared to flat or negative industry flows. Over this Five-Year time period, the market have been both have both rallied and had contractions. But BlackRock has consistently generated organic growth, reflecting the resiliency of our diversified platform and the investments we made towards that platform.
Clients are entrusting more of their portfolios with BlackRock in an endorsement of the platform performance we offered, guidance we provide and the fiduciary standards we uphold to each and every client. As we look-forward, our success in what we will achieve comes down to our people. Everything we have accomplished and will accomplish is because of how we have all worked together to put our clients first. I’m so incredibly proud of how our employees rally together in a time of crisis to support our clients, to support their fellow colleagues and the making sure we’re supporting every one of our stakeholders.
Looking back at the last 35 years, it is our people who have enabled us to achieve all that we have has as an organization and we are just getting started. BlackRock is still in the early chapters and I’m more excited than ever about the potential and the province that we have lying ahead.
Thank you, operator, let’s open it up for questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Your first question comes from Michael Cyprys with Morgan Stanley. Your line is open. Please go ahead.
Michael Cyprys — Morgan Stanley — Analyst
Great, thank you.
Larry Fink — Chairman and Chief Executive Officer
Good morning, Mike.
Michael Cyprys — Morgan Stanley — Analyst
Good morning. So question on cash management. Since COVID, the banking system has seen a massive influx of deposits, I think worth about $4 trillion of added deposits, yet the banks today aren’t offering much in terms of yield on those deposits. So the question is, how do you think about accelerating money flow — money fund flows in capturing a greater share of deposits. And might there be a structural shift if rates are going to remain higher for longer. So just curious how you’re thinking about those?
Martin S. Small — Chief Financial Officer
Thanks, Mike, appreciate it. Hope you had a good holiday? It is an incredibly dynamic time for the cash and liquidity markets. This has historically been a stable value low or no expected return asset class where people do lots of operational things. But we’ve obviously entered into this period, it started with kind of rates in inflation and has been super charged essentially by banking sector tremors. And as you correctly flagged, we’ve seen an extraordinary amount of inflow into money market funds and clients I think paying very close attention where they keep their operating cash and where they keep cash where they can earn a yield premium over deposits.
And in every single cycle, deposits obviously tend to lag or money market rates are and deposit betas are just lower. So I think there is absolutely a structural shift in the marketplace, that’s driven by two things, one, just rates, inflation, but also just clients paying a lot more attention about where they’re going to keep their cash balances for purpose of what they do.
We’re really well-positioned here, we had $40 billion plus flows in March, we had some outflows in January and February that were really resulting from stock unwinds, but we feel very good about our positioning. We have a $683 billion cash platform. We’ve grown at 50% over the last five years and I think uniquely as is with most things at BlackRock, we have a tech first distribution strategy with assets like cash matrix in Aladdin and we also have a very global business that has real diversity of offering across money funds, ETFs, separate accounts.
The last thing I’d just say about that is, I would think about the structural shift that you’ve proposed is not just being about money funds or SEG accounts, but being about all of the cash and cash surrogates. I mean, there are so many things you can, go throw a dart at the yield 5% now and I would look at a lot of what’s happening in the bond ETF world is also being about picking-up a yield premium over cash. And so we expect to be really well-positioned as clients do a lot of that work to use the ETF markets, to use money funds as well as a whole array of active fixed-income solutions.
Operator
Our next question comes from Craig Siegenthaler with Bank of America. Your line is open. Please go ahead.
Larry Fink — Chairman and Chief Executive Officer
Good morning, Craig.
Craig Siegenthaler — Bank of America — Analyst
Hey, good morning, Larry. Hope everyone is doing well?
Martin S. Small — Chief Financial Officer
Thank you, we are.
Craig Siegenthaler — Bank of America — Analyst
That’s good. Hope you are enjoying the new office as too?
Martin S. Small — Chief Financial Officer
They’re much brighter and sorry.
Craig Siegenthaler — Bank of America — Analyst
So, we’re still very focused on the potential for sizable fixed-income reallocations, rates are now looking to plateau. And it seems like the most, the largest migrations may come from retirees in the US and pension plan channel. So I wanted your updated perspective on this topic given your conversations with large institutions and wealth management platforms. And I’m also curious to see if you have any updated thoughts on the reallocation mix between passive and active because of the flow mix sounds like [Technical Issues] BlackRock, could be a real big winner on this?
Rob Kapito — President
So Craig, it’s Rob Kapito, I’ll take that one. So you know that we’re coming off of the highest inflation in 40 years, the fastest increase in rates in 40 years. The tail-end of a pandemic, a war in Europe, a lot of geopolitical tensions and last year the S&P down 19%. And of course, we’re in the midst of Fed tightening. And the result of all of this is yields are back and for the first time in years, investors can actually earn very attractive yields without taking much duration or credit risk. And this is a pretty remarkable shift. This is really a once in a generation opportunity in fixed-income and clients have been over the last many years because of low rates underweighted in fixed-income.
So at BlackRock, we are very well-positioned with our $3.3 trillion fixed-income and cash platform. But in order to capture these assets, we have to have performance. And our one year in the fixed-income is in the 70th percentile in three year and five year in the 90th percentile. And our active funds are four and five-star Morningstar rated. So we have the performance. We also offer over 450 bond ETF choices which is more than five times the next largest issuer across the entire yield curve.
We also have the most diversified client base and that is looking each quarter and have more and more allocations in ETFs and in active fixed-income, especially in this environment. We have expanding capital markets group and obviously a lot of expertise in the capital markets to be able to extract the most value for our clients in using fixed-income instruments. And now, our cash and alternative platform are also attracting clients in this environment, seeking yield and output.
So the bottom-line is, we expect the interest-rate environment to continue until the Fed see the signals it’s looking for an inflation and growth and what this means is that money will be in motion as clients build portfolios, with high-performing active investments alongside ETF and by that market strategies. And this is really important because we will be the beneficiary of the fact that clients are using both. And in fact, nine of the 10 top global asset managers use iShares for liquidity management, edging and efficient tactical allocation.
So it’s no longer active or index, it’s active and index and ETFs and even when the markets stabilized, fixed income is going to be back in demand in a significant way and I think we’re going to be one of the biggest beneficiaries of that active movement into the asset class.
Operator
Our next question comes from Glenn Schorr with Evercore. Your line is open. Please go ahead.
Larry Fink — Chairman and Chief Executive Officer
Good morning, Glenn.
Glenn Schorr — Evercore — Analyst
Hello, good morning. So, I know we’ve talked many times in the past, but if you look at the last 12 months, you have 3% organic asset growth and flat base fee growth. I mean I think that’s a function of where the flows are going, but I wonder if you could talk about index and ETF in versus active equity out and more of what’s — what your outlook is on the core underlying pricing?
Martin S. Small — Chief Financial Officer
Thank you. Hey, Glenn, it’s Martin. How are you? Thanks for the question. In 2022, we delivered positive organic base fee growth despite the most challenging market environment our industry has ever seen. As Rob mentioned, the S&P was down 19% on the year, the add was down 13% of the year and we still drove industry-leading organic growth and positive base fee growth. And I’d say the first quarter here at 2023 was no different. You had a stressed market, you had a lot of volatility and BlackRock still delivered $110 billion of total net flows and 1% organic base fee growth.
Our mission, our aim, our strategy is not to be the fastest grower in any quarter. Our aim is to deliver organic growth that’s more differentiated, more consistent through market cycles over the long-term. Glenn and we’ve done that, we’ve had 5% organic base fee growth on average over the last five years, you know, 18 to 22. We had over 5% organic base fee growth in seven of the last 10 years. And I think what’s really important to look at is in these years that have been marked by exceptional market volatility like 2016, 2018 and 2022, we still were able to deliver positive base fee growth.
And I think when you sort of look at the flows going forward, the first quarter always has the seasonal element to it, that has ETF tax trading, where we have precision exposures that are really important, growing asset bases overtime, but we tend to see inflows into precision exposures in the fourth quarter related to ETF and mutual fund dynamics and then we tend to see some reversals of those flows in the first quarter from precision exposures. Those tend to come at higher-fee rates and a lot of the flows that come from outsourcing on fixed-income, come at slightly lower-fee rates and I think that some of the impact that you saw this quarter, which is really just about changing risk preferences.
We don’t manage to a fee rate and we don’t manage to a particular set of products with the clients, it’s about obviously winning mindshare in portfolios. And so I think overtime, you’ll continue to see good solid growth there.
Operator
Our next question comes from Alex Blostein with Goldman Sachs. Your line is open. Please go ahead.
Larry Fink — Chairman and Chief Executive Officer
Hi, Alex.
Alexander Blostein — Goldman Sachs — Analyst
Hi, Larry. Good morning, everybody. So I was hoping to get a little bit deeper into how the events in the banking space over the last several weeks change the opportunity set for BlackRock. There is a number of benefits, as you mentioned, there are some obvious things like cash management, but what does it mean for Aladdin, what does it mean for advisory? What does it mean for old, just was hoping to get more perspective on what are the opportunities you look to lean into more on the back of this dislocation?
Larry Fink — Chairman and Chief Executive Officer
Well, let me start on a more holistic response to that and that is, it is our fundamental belief that more and more economic activity that flow through the capital markets and we certainly we had said in February and March and continue in April, as more and more deposits are leaving and they’re going into ETFs and into any form of cash and money market funds. And and the type of dislocation is just going to create more and more opportunities for us. And in my talk I spoke about what this means for Aladdin, the need during market uncertainty is indeed for having a single based technology platform to help you navigate instantaneous with the market is more and more necessary.
I think again our FMA advice is another good example of us working with regulators, policymakers, working with our clients and helping them in terms of advising them, so just more and more opportunities, but I would also say on a more holistic basis, over the first 35 years, we’ve used market dislocations as a mechanism to relook at our own footprint or to review how we should be positioned for the future, we will continue to be very opportunistic on that and look for opportunities in a very disciplined way.
I’ve talked about repeatedly expanding our footprint, expanding our product offerings, having better and deeper and more extensive technology utilization. So all of those things are something that we’re looking at across-the-board. But I look at the issues that we are seeing today, the market dislocations as enormous opportunities for BlackRock.
In just our relationship with our clients, the depth of the conversations we’re having and the consistency of conversations and I think it’s pretty imperative to talk about have $1.8 trillion over the last five years of asset growth. This is happening during good markets and bad markets. The consistency in which clients are looking for BlackRock to play a deeper and broader role because of our fiduciary standards, all right, advisor discipline, but I would just say that the uniqueness of our platform, Alex, resonated so loud in the first quarter. having Aladdin, having FMA, having iShares platform integrated with our active platform across the board that we can deliver a more holistic, a deeper, a broader response to our clients, to our policy makers, to our regulators, no firm can provide that.
And it’s and the conversations that we had is a firm, with our clients, with our regulators, with our policymakers worldwide what was more frequent, more resilient than ever before. All of this is a opportunity for us, an opportunity to build those deeper relationships and opportunity for more and more clients to see how their business can become more resilient if they took on Aladdin. Opportunities for us to help them redesign their portfolios using FMA or helping out a regulator during times of stress.
So I’m constantly reminded the depth of our range of products, the range of our abilities is so differentiated, which leads to these very unique and more fulsome conversation that we have with clients worldwide. Operator?
Operator
Yes, just one moment, please. We’ll go next to Bill Katz with Credit Suisse. Your line is open. Please go ahead.
William Katz — Credit Suisse — Analyst
Okay, thank you very much. Good morning.
Larry Fink — Chairman and Chief Executive Officer
Good morning, Bill.
William Katz — Credit Suisse — Analyst
Good morning, everyone and Martin congrats on the new role. Larry, just talk, maybe expand a little bit more in terms of the capital market opportunity with maybe greater specificity as it relates to the private markets. And then also as you think about your money market platform or your cash management platform, my sense has always been more institutional skewed, where are you in terms of the retail opportunity and in both the private credit and the money market side, are you scaled enough organically or could this be an opportunity to sort of expand the inorganic opportunity as well? Thank you.
Larry Fink — Chairman and Chief Executive Officer
Yes, Will, I’m going to let Rob talk about the organic and then I will talk about some of the inorganic.
Rob Kapito — President
So we have over the years, as you know, built of a huge credit effort with analyst and teams that are pursuing opportunities. Our large reach because of our ownership of many stock of our clients and other entities gives us some pretty good insight and we need to follow these credits. We think that working closely together with them as they are expanding their businesses gives us insight and opportunities to work with them on the private credit side and also it gives us opportunities to work with them as they build-out either the infrastructure that they have as they transition their businesses into new opportunities, we can be right there with them, helping them to finance that.
So we think we’re going to see and be able to source opportunities for our clients, both retail and institution role that other global asset managers are not going to sit. So that spans not only the private credit universe, the investment grade credit universe, but it also expands new asset classes that will be an infrastructure which are rate long-duration assets that have a yield score of our retail clients. And then as well as other private investment opportunities.
So we’re really well-positioned for this and we’re looking to take advantage of that with our clients. When it comes to inorganic, I’ll turn it over to Larry to comment on that.
Larry Fink — Chairman and Chief Executive Officer
Well, inorganic, I look at the things that we’ve done in the past by expanding our products in a range, whether it was eFront and transformed Aladdin into a platform that is both unique and differentiated because it’s both public and private markets. I look at what we did with Aperio in terms of wealth management and the opportunities we have in tax strategies and direct indexing.
When I look at cash matrix and how that played a role with our money market funds in the last few months. And so it is through inorganic opportunities that we look at seeing — see if we can expand our footprint. As I said in my prepared remarks, we are asking our self to re-imagine BlackRock what are the other big opportunities, should there be a big opportunity as more-and-more organizations use technology, how can we double down on what we’re doing with Aladdin and technology, how can we build out our footprint globally at this time.
And so we’re looking across-the-board as there are issues, we — I believe BlackRock can play a role in some of these opportunities and I think there was a quote sometime in the last few weeks about something I said to our team I don’t know where it came from, but indeed I did say and I said to be in the game, we must play the game. And so we’re in the game we’re across-the-board working with our clients across-the-board working with policy makers, across-the-board we are working with regulators worldwide. And we’re here to help, we’re here to advise, we’re here to navigate and if all through all that, there is a opportunity for something inorganic and transformational.
We’re going to be prepared to do something like that, but I’ll just leave it at that.
Operator
Ladies and gentlemen, we have reached the allotted time for question. Mr. Fink, do you have any closing remarks?
Larry Fink — Chairman and Chief Executive Officer
Yeah, thank you, operator. I want to thank all of you for joining us this morning. I know today is a really busy day, especially with all the other banks and financial institutions reporting today. So I’m very, very happy that you’ve taken this time and your interest in BlackRock. Hopefully, you heard from Martin and Rob and I how proud we are the way BlackRock team together in supporting our clients in the most recent quarter.
But the consistency of BlackRock now over the last 35 years, clients have been central to everything we do. And I see just a tremendous opportunity for us, probably I see more opportunities now for BlackRock that I have in the last few years, as Rob talked about opportunities in fixed-income, our investments that we’ve made, huge investments we’ve made in technology, the huge investments we made in bond ETF, huge investments we are making in alternatives and private credit, all of this is allowing us to have a differentiating opportunity.
And if you overlay that with what we’ve done with our technology in Aladdin, overlaying what we’ve done with FMA and our unique position with ETF, it just gives us a tremendous opportunity ahead of us. And I would double down on the idea that we’re going to be focused on delivering the power of our platform to our clients. And that power of working with our clients will translate totally directly to you, our shareholders. And I want to thank everybody for all the support. Being at Hudson Yards is invigorating, I must tell you the 4,000 employees we have in New York are invigorated by our new space, the light, the energy, the opportunity, hopefully that’s translating into how we do our business with our clients every day. Thank you, everyone, have a good quarter.
Operator
[Operator Closing Remarks]