BlackRock CEO Larry Fink: It’s time for investors to rethink long-held principles about stocks and bonds

Clients at the world’s largest money manager benefitted from the U.S. stock market rally following Donald Trump’s election victory. 

Executives shared insights on Blackrock’s outlook and strategy in an earnings call with analysts on Wednesday. 

Some key takeaways: 

• BlackRock made $25 billion of investments to strengthen its position in private markets, acquiring investment fund Global Infrastructure Partners and private credit-focused HPS Investment Partners.
• Clients invested heavily in exchange-traded funds (ETFs), and fixed-income products. 
• The Aladdin platform, which helps investors manage their own portfolios, brought in $428 million in revenue. 
• CEO Larry Fink said it’s time to revisit long-held principles of investing in stocks and bonds, emphasizing the growing opportunity of private markets. 

Martin Small, Chief Financial Officer: Good morning, and Happy New Year to everyone. It’s my pleasure to present results for the fourth quarter and full year 2024. 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.

With over $600 billion in net new assets entrusted to BlackRock, 2024 was a milestone year of programmatic, organic and inorganic actions rooted in client needs, investment capability expansion, technology and scale. We executed breakthrough investment offerings and industry-leading partnerships. 2024 marked a quantum leap forward for BlackRock against our long-term value creation objectives and an invigoration of the future of asset management and technology services for our clients.

We’ve spoken all year about how organic growth momentum and overall client sentiment has been improving. BlackRock saw record net inflows in 2024, powered by two back-to-back record flows quarters in the second half. Our annual revenue, operating income and earnings per share each grew double digits. We made disciplined investments for profitable growth, delivering 280 basis points of margin expansion as our AUM grew to a new high of nearly $11.6 trillion. We enter 2025 from a position of strength, having generated 7% annualized organic base fee growth in the fourth quarter, our highest in 3 years.

Our record client activity and the accelerating organic revenue growth we saw in 2024, they’re independent of the lift that we believe will come from GIP, HPS and Preqin. Our structural growth businesses, ETFs, Aladdin outsourcing fixed income, they’re the strong foundations to serve clients and deliver on our through-the-cycle 5% organic growth objectives. We didn’t need M&A to achieve and rise above our organic base fee growth target. Our expansions are about more deeply serving clients in high-growth segments that can exceed our 5% goals.

We enter 2025 on a new trajectory, with record AUM and operating income and having increased our effective fee rate by 0.7 to 1 basis point. Over the course of 2025, we’ll be integrating and adding the high growth and earnings power of GIP, HPS and Preqin. Clients have embraced our strategy. Our track record of successful acquisitions and integrations is bringing clients into deeper relationships with BlackRock. We finished 2024 with sequential quarters of at or above target organic growth. More importantly, that organic growth is broad-based across institutional, wealth and technology and across regions. Clients want to consolidate more of their portfolios with a partner that’s with them for the long term. They want portfolios that are seamlessly integrated across public and private markets that are dynamic and that are underpinned by data, risk management and technology.

BlackRock is now truly in a category of one. We’ve built a unique asset management and fintech platform that’s integrated across public and private markets. With the close of the GIP transaction this past October and our planned acquisition of HPS, BlackRock’s private markets and alternative platform is expected to be $600 billion in client assets, a top 5 provider and over $3 billion in revenues or about 15% of 2024 revenues.

BlackRock houses whole portfolio solutions for clients, the world’s #1 ETF franchise by assets, flows and breadth of exposures. A $3 trillion fixed income platform across active and index, $700 billion managed for insurance companies, over $350 billion in models, direct indexing and SMAs for wealth managers, over $900 billion in cash management AUM, leading advisory services and our proven Aladdin technology with $1.6 billion in revenues.

Aladdin is powering a whole portfolio ecosystem across public and private markets with eFront and our planned acquisition of Preqin. On a pro forma basis for HPS and Preqin, private markets and technology are expected to make up over 20% of BlackRock’s overall revenue. That’s an ecosystem we feel wins with client needs and results in over 20% of our revenue base in long-dated, less market sensitive products and services.

Our mix continues to evolve towards higher secular growth areas with clients. We believe this will translate to higher and more durable organic growth, greater resilience through market cycles and multiple expansion. In 2024, BlackRock generated a record $641 billion of total net inflows and delivered 4% organic base fee growth. We finished the year strong in the fourth quarter with $281 billion of total net inflows and 7% annualized organic base fee growth.

Full year revenue of $20.4 billion was up 14% year-over-year. Operating income of $8.1 billion was up 23% and earnings per share of $43.61, increased 15%. Fourth quarter revenue of $5.7 billion was 23% higher year-over-year, driven by the impact of higher markets on average AUM and higher performance fees.

Quarterly operating income of $2.3 billion was up 36%, while earnings per share of $11.93 was 23% higher versus a year ago. EPS also reflected a lower tax rate partially offset by lower nonoperating income and a higher share count in the current quarter. The higher share count included 6.9 million shares issued and delivered at the closing of the GIP transaction.

Nonoperating results for the quarter included $7 million of net investment losses, primarily due to changes in co-investment valuations. Lower interest income in the current quarter reflected the delivery of cash at the closing of the GIP transaction, which was raised through our debt offering in March 2024.

Our as-adjusted tax rate for the fourth quarter was approximately 21% and benefited from discrete items. We currently estimate that 25% is a reasonable projected tax run rate for 2025. The actual effective tax rate may differ because of nonrecurring or discrete items or potential changes in tax legislation.

Fourth quarter base fees and securities lending revenue of $4.4 billion was up 23% year-over-year and up 10% sequentially, driven by the positive impact of market beta on average AUM, organic base fee growth and approximately $230 million of base fees from GIP. Our annualized effective fee rate was approximately 0.7 to 1 basis point higher compared to the third quarter. Over time and with continued growth in infrastructure strategies and the successful closing of the HPS acquisition, we would expect to see positive leverage to base fee revenue, average fee rates and organic growth as we grow private markets with clients. This is evidenced by this quarter’s fee rate increase primarily reflecting the onboarding of higher fee rate private market assets following the GIP closing.

Fourth quarter and full year performance fees of $451 million and $1.2 billion, respectively, increased from a year ago, led by higher revenue from alternatives. We saw strong broad-based performance across hedge funds. Quarterly technology services revenue increased 13% year-over-year, and full year revenue of $1.6 billion increased 8%, reflecting the successful onboarding of a number of new clients and expanding relationships with existing clients.

Full year Technology Services revenue growth also reflects the prior year revenue impact of several clients renewals of eFront on premises licenses. Annual contract value, or ACV, increased 12% year-over-year. On a constant currency basis, we estimate ACV would have increased 13% from a year ago. The need for integrated risk analytics and whole portfolio of views across public and private markets is driving strong demand for Aladdin. We signed some of our largest clients ever in 2024. We remain committed to low to mid-teens ACV growth over the long term.

Total expense increased 9% in 2024 primarily due to higher incentive compensation, G&A and sales, asset and account expense. Full year employee compensation and benefit expense was up 11% reflecting higher incentive compensation as a result of higher performance fees and operating income. Recall that year-over-year and sequential comparisons of fourth quarter compensation expense are less relevant because we finalize full year compensation in the fourth quarter.

Full year G&A expense was up 5% primarily from planned technology investment spend, higher professional fees and GIP’s G&A expense. During the year, we made disciplined investments in business to drive operating leverage and profitable growth. Our fourth quarter as-adjusted operating margin of 45.5% increased 390 basis points year-over-year and our full year as-adjusted operating margin of 44.5% was up 280 basis points.

Looking ahead, we aim to maintain our systematic approach to investing for profitable growth on the budgeting principles we’ve consistently articulated for the last 12 to 18 months. We’ll continue to be disciplined in prioritizing our hiring and overall investments with the ambition of delivering market-leading organic growth and operating margin.

At present, subject to regulatory approvals and other customary closing conditions, we expect our planned acquisitions of Preqin and HPS to close in the first quarter of 2025 and in mid-2025, respectively. Based on these closing time lines, we’d expect BlackRock’s head count to be higher in 2025. HPS is expected to bring approximately 2,300 new colleagues to BlackRock.

Additionally, excluding HPS, we would expect a mid- to high single-digit percentage increase in 2025 core G&A expense. Most of the core G&A expense growth should come from consolidating the G&A expense of GIP and Preqin and continued investment in technology as we look to operate more efficiently and better serve our clients.

Our capital management strategy remains consistent. We invest first both organically and inorganically, either to scale strategic growth initiatives or drive operational efficiency. We then return cash to our shareholders through a combination of dividends and share repurchases. After investing for growth, we returned over $4.7 billion to our shareholders through a combination of dividends and share repurchases in 2024. This includes open market repurchases of approximately $375 million and $1.6 billion for fourth quarter and full year, respectively.

Share repurchases have been a consistent element of our capital management strategy. In the last 10 years, we’ve repurchased 28 million shares at an average price of $510 per share. Today, we’re trading at almost double that. This represents a more than 15% annualized return for our shareholders. For both the GIP and HPS transactions, BlackRock equity improved a valuable currency in consummating these transactions and structuring them for alignment with our shareholders.

At present, based on capital spending plans for the year, and subject to market and other conditions, we’re targeting the purchase of 1.5 billion shares during 2025. In addition and also subject to market and other conditions, we expect to seek Board approval later this month for an increase to our first quarter 2025 dividend, consistent with our track record of continued dividend growth.

Record full year total net inflows of $641 billion were diversified across active, index in cash as well as by region, led by $385 billion of net inflows from clients in the United States. BlackRock generated industry-leading ETF net inflows of $390 billion in 2024, representing 11% organic asset and 7% organic base fee growth.

Record annual net inflows into our ETFs included $41 billion into our digital assets ETPs that were just launched in 2024. Fourth quarter ETF net inflows of $143 billion reflected significant momentum into year-end helped by seasonal portfolio reallocations.

As U.S. equity indices and spot bitcoin prices reached new highs in the quarter, clients use iShares products to re-risk and add these investment exposures to their portfolios. BlackRock’s institutional platform generated net inflows of $74 billion in 2024, led by active net inflows of $64 billion, including the funding of several large outsourcing mandates from a variety of client types.

Index net inflows of $9 billion were driven by $43 billion into fixed income. This was partially offset by $31 billion of net redemptions from low-fee index equity strategies. Several large clients, mostly outside the United States, rebalance their portfolios amid record equity market levels.

Full year retail net inflows of $24 billion were led by continued strength in Aperio and inflows into active fixed income mutual funds. Aperio had another record year in 2024 with net inflows of $14 billion and active fixed income added $12 billion in net inflows.

Demand for private markets remains strong, with $9 billion of net inflows during the year driven by infrastructure and private credit. BlackRock’s full year net inflows also included the impact of successful realizations of $13 billion, primarily from private equity, private credit and infrastructure strategies.

Distributions are a key metric for measuring performance in the private markets. GIP has a strong track record of operating portfolio companies and ultimately returning capital to investors through exits with strong uplift. At present, we expect to recognize approximately $5 billion of realizations in the first quarter from older GIP fund vintages executing on successful exits.

Starting this quarter, we’ve updated our earnings supplement to provide additional transparency into organic growth drivers and realizations activity for our private market assets. We expect to make disclosure enhancements, particularly around private markets, beginning in the first quarter of 2025.

Finally, BlackRock cash management saw $81 billion of net inflows in the fourth quarter and $153 billion in 2024. Flows were driven by both U.S. government and international prime funds and included multiple large new client mandates. We continue to see strong growth in our cash and liquidity platform built on our scale and integrated offerings with AUM up 20% year-over-year.

BlackRock’s platform delivered record results in 2024 and the consistency of our results stands out even more over the long term, with over $2 trillion of client net inflows over the last 5 years. While 2024 was a watershed year for BlackRock, it’s just the start of our next growth story. We’re better positioned than ever to build with clients and create value for our shareholders.

BlackRock is a meaningful outperformer when assets are in motion and investors are re-risking. We’re optimistic about market opportunities for our clients into 2025.

I’m going to pass to Larry in a minute. But for those of you keeping score at home, this is Larry’s 100th earnings call. We did a little research and counted only 15 current CEOs in the S&P 500 that have celebrated 100 earnings calls as the CEO. Larry, congratulations on a century of earnings calls. How is it feel?

Larry Fink, CEO: I can’t say any older. I can’t complain at all. It’s been a fun journey, and I think the journey going forward is going to be better. There’s a lot of change in the world in the last 25 years, and the lot that stays the same. My meal and night before earnings remains the same and a bowl of cereal last night with blueberry. So I guess everything is the same. But thank you, Martin. And also Happy New Year to everybody. And thank you for joining the call. And yes, it is our 100th. We haven’t done it alone. We have a number of shareholders that have been with us since the IPO 25 years ago. I remember that original roadshow when we tried to convince many of our shareholders about the opportunities to invest in BlackRock.

And we’re also grateful for the analyst community in helping the markets understand our business. I think 2 of our equity analysts on the line are with us for the IPO. So I want to thank — thanks to Bill Katz and Brian Bedell for your coverage over all these years. And the best is still in front of us.

When we IPO-ed, we were a company of 650 employees, and we managed $165 billion in assets. That same year, we began selling our Aladdin technology to our clients for the first time. Today, clients trust us with nearly $11.6 trillion of AUM. And Aladdin has more than 130,000 users. Since our IPO, we’ve delivered an annualized total return for our shareholders of about 21% compared to about 8% for the S&P 500. And as I said, this is just the beginning.

As Martin said, 2024 was a milestone year for BlackRock. Clients entrusted us with a record $641 billion of net inflows, including $281 billion in the fourth quarter. We now have had two consecutive record flow quarters. We entered 2025 at our strongest inflection point. We added $1.5 trillion of AUM, delivered record revenues and record operating income, and increased our effective fee rate by 5%. Historic client activity took place as we executed on the most significant acquisitions we’ve done since BGI over 15 years ago. It’s not uncommon for companies to see clients pausing. As I weigh out the M&A results, as they determine whether BlackRock is focusing on their needs, at BlackRock, clients are instead embracing and rewarding our strategy. Client activity accelerated into the fourth quarter, resulting in a 7% organic base fee growth and 12% Technology Services ACV growth. Our operating model delivered exceptional performance in a year of meaningful change. We crossed $20 billion of annual revenues, up 14% from 2023. Adjusted operating income grew by 23%. And our industry margins of 44.5% were up 280 basis points.We’ve raised the bar for ourselves and know our clients and shareholders do the same. 

Our results consistently beat even our high expectations, and we surpassed Street estimates for flows, fee rate, base rate, in addition to total revenues, margins and EPS. Our record organic growth and financial results do not yet reflect the full integration or pending acquisitions of GIP, HPS and Preqin. All three of these businesses have a track record of delivering strong revenue growth, profitability and margin expansion.

We’re steadily making organic investments ahead of the structural trends that we believe will drive outsized growth in the years ahead. We’ve had strong momentum across our entire franchise including our newly enhanced private market platform. We are positioned ahead of market opportunities that we believe will drive outsized growth for BlackRock in the years to come. We invested in our talent, which is fundamentally the most important thing that we invest in each and every year.

A key driver of BlackRock’s success has been our focus on developing leaders with a broad range of experiences and connectivity across all of BlackRock. What I’ve called horizontal leadership. We look to identify people ready for the next challenge and then move them into roles that both advance their professional journeys and drive our business forward.

Today, we are excited to announce that many leaders across the firm are taking on new and expanded roles and responsibilities that will help drive our next phase of growth. Part of the leadership changes reflect on Mark Wiedman’s desire to pursue his next chapter, after nearly 20 years with BlackRock. We’ve discussed this transition over a number of months, and he will be with us through spring, and I want to take a moment to recognize and thank Mark.

Mark is a great friend of mine, a great friend of the firm and has helped drive strong growth for BlackRock, for our clients and for our shareholders. He’s also built a powerful team of leaders prepared to take on new responsibilities and drive our business forward. This includes a number of the senior leaders taking on expanded roles. Mark will work with our leadership team over the next few months to ensure a smooth transition. We thank him for his many contributions, his partnership and his vision in shaping the successful evolution of BlackRock.

Rob and I are proud of the deep leadership team at BlackRock. It reflects a breadth of experience and sustained excellence. Strategic acquisitions have also historically strengthened our firm, strengthened our culture and brought top talent, new skills and experience into our organization.

Our culture has consistently evolved as we welcome new teams and colleagues to BlackRock. And today, it represents a blending of the best parts of the cultures that have come together across the years, across all the firms that became part of BlackRock. A few months ago, we welcomed the influx of talent with the close of GIP. We’ve already enjoyed great connectivity and our teams are energized.

BlackRock’s world-class leadership alongside the top talent from GIP, HPS and Preqin position us to serve our clients with excellence and seize the opportunities ahead for us.

Cash on the sidelines missed out on a 25% total return in equities last year. We expect 2025 to be a dynamic investing environment. As policies and economic questions play out, the most important factor will be the growth backdrop. Mega forces like AI, an ongoing evolution in debt financing and the low carbon transition are transforming economies with long-term growth trajectories. 

Capital markets will play a key role in this transformation. Private market assets are an increasingly vital part of capital markets and blending both public and private markets will be critical to fully capturing growth opportunities. Long-held investing principles need to evolve, including the traditional 60-40 portfolio mix of stocks and bonds. 

The diversifying nature of the stock and bond relationship is under increasingly strong pressure, making resilient portfolio construction more critical than ever. Clients are coming to BlackRock for advice on how to build portfolios, how to broaden out where they invest. For many, this will increasingly include private markets, especially private credit and infrastructure. We also think active strategies can provide an advantage in an environment that requires a more dynamic approach.

BlackRock is well positioned to capitalize on structural growth opportunities against a backdrop of economic and capital market evolution. We made coordinated investments to build the premier long-term capital partner and technology provider across public and private markets. 2025 is a new launch point for significant growth for BlackRock, our clients and our shareholders. Our recent acquisition of GIP, the planned acquisitions of Preqin and HPS, each position our platform ahead of evolving client needs and structural industry trends.

Fifteen years ago, we acquired BGI and were the first scale provider to integrate both active and index investments. In 2024, we made bold moves to connect public and private markets through portfolio management and technology. The reaction to our recent announcement to acquire HPS has been extremely positive, and we see great opportunities to partner more closely with clients and borrowers. The capabilities we’re adding through these transactions allow us to serve clients even more comprehensively and position us to raise significant private capital.

For our shareholders, we believe the increased contribution from private markets and technology will drive higher and more resilient organic growth, differentiating financial performance and multiple re-rating. In addition to private markets, we are executing on the strongest opportunity set we’ve seen across multiple growth engines. These include technology, ETFs, multi-asset solutions like outsourcing and models. We invested for years to develop leading franchises and capabilities that our clients need most, and that are our long-term growth channels. Importantly, they’re scaled and integrated onto one platform with a culture that is client-led, not product-led.

We’re able to serve our clients in a way that no other asset manager can. Aladdin has always been the operating system uniting all of BlackRock. It’s grown and evolved as BlackRock the industry’s most comprehensive operating system, supporting scale and commercial priorities for clients. We’re growing our capability set in Aladdin, all with the aim of serving our clients through sophisticated risk management, scaled portfolio analytics across both public and private markets and soon private market data through Preqin.

Fourth quarter ACV growth of 12% reflects several significant mandates with large financial and corporate partners. The Aladdin technology stack is resonating with over half the Aladdin sales involving multiple products, this includes clients using Aladdin. 

William R. Katz, TD Cowen, Research Division: Good morning. Thank you for taking my questions. I was hoping you could unpack the fourth quarter organic growth a little bit. Maybe talk about the institutional versus retail dynamics. And then as you look into 2025, how do you see those two channels sort of playing out? And then just as a quick follow-up, could you talk a little bit about the pricing dynamics you’re seeing in the marketplace right now?

Small: Thanks, Bill. Happy New Year. So let me start with the organic growth dynamics. We had 7% organic base fee growth in the fourth quarter. That was driven by ETFs, which contributed about 5 percentage points to that growth. Private markets and alternatives contributed about 1 percentage point. Fixed income and cash contributed about 1 percentage point as well.

In terms of the channel dynamics, we saw strength in both retail and institutional. On the retail side, we saw continued strong demand for our ETF franchise, particularly in higher fee categories like active ETFs and digital assets. We also saw good momentum in our models business and in our active mutual funds.

On the institutional side, we saw strong inflows into our fixed income strategies, particularly from insurance clients. We also saw good demand for our alternatives and private markets offerings, including infrastructure and private credit.

Looking ahead to 2025, we expect these trends to continue. We see strong growth potential in both retail and institutional channels. In retail, we expect continued demand for ETFs, particularly in higher fee categories. We also see opportunities to expand our alternatives offerings in the wealth channel, leveraging our recent acquisitions.

In institutional, we see opportunities in fixed income, particularly as clients look to increase their allocations to longer-duration assets. We also see strong demand for private markets strategies, including infrastructure and private credit.

In terms of pricing dynamics, we continue to see a competitive environment. However, our scale and diversified platform allow us to compete effectively. We’re seeing strong demand for our higher fee products, including active ETFs and alternatives, which is helping to support our overall fee rate.

Fink: Let me add to that, Bill. One of the things we’re seeing is a real appetite for customization, especially among our larger institutional clients. They’re looking for tailored solutions that blend public and private markets, that incorporate their specific ESG preferences, and that are designed to meet their unique risk and return objectives.

This trend towards customization plays to our strengths. It allows us to leverage our full platform – from ETFs to active strategies to alternatives – and to bring together our investment expertise with our technology capabilities. This is driving some of our highest fee opportunities and deepening our relationships with key clients.

We’re also seeing increased demand for our outsourced chief investment officer (OCIO) services, where we take on more of a strategic partner role with clients. This is another area where we can really differentiate ourselves and capture higher fees.

So while the overall market remains competitive, we’re finding ways to add value for clients that support our pricing power.

Alexander Blostein, Goldman Sachs, Research Division: Good morning, everybody. Happy New Year. I wanted to start with the discussion on Money Motion. That’s something we talked about last year as well. As you think about 2025 and taking into account maybe the rates move we had recently, to what extent does that change the backdrop you’re seeing in the marketplace today? And when it comes to more money in motion, what asset class do you guys expect to benefit most in 2025?

Small: Thanks, Alex. Happy New Year. Listen, all starts with — we had back-to-back quarters of above or at target organic base fee growth, 5% in Q3, now 7% in Q4. It’s definitely putting the lift in the trailing 12-month trend for our long-term through-the-cycle target. Full year organic base fee growth was 4%. And so we’re really entering 2025 with continued momentum in a real position of strength. .

Larry talked a bit about continued ETF exceptionalism, very strong contribution to the 7% organic base fee growth in Q4, rounded out by private markets and alternatives, fixed income and cash. Even in ETFs, like higher fee rate segments like active ETFs gathered over $20 billion in new assets, digital assets, ETFs are driving higher organic base fee growth. We see those trends continuing into 2025.
I would note that GIP’s organic growth contributed to about 1/2 of a percentage point to the overall 7% organic base fee growth. So it didn’t have an outsized impact on this quarter’s above-target outcome, I do think it’s a good indication that a growing infrastructure business, a growing private markets business can support, obviously, above trend, above target long-term targets.

But looking into ‘25, we’ve built the business around structural growers, ETFs, models, Aladdin, fixed income target date funds they all drive sustainable organic base fee growth through market cycles. And in positive markets, our lived experience has been that these areas capture substantial upside, generate substantial earnings just like they did here in 2024, which where we hit records.

Looking into ‘25, we continue to see strength in structural growers, a bigger private markets business and BlackRock as a meaningful outperforming performer in rerisking periods. goin back to previous election cycles, periods of central bank action Alex, we had outsized upside capture, look at ’17, ’18, ’21, we were well above 5% in those cycle targets. And I’d offer that I think we’re even better diversified now even with higher for longer rates, we see short duration active fixed income, yield strategies like our active ETF managed by Rick Reader, PINK, the INC is the ticker and our cash management platform as growth engines.

And I think that recent macro events are also going to lead to some interesting opportunities in secondaries in private credit in a more supportive market. We’ve achieved our organic base fee growth target of 5% on average over the last 5 years. We had 5% in Q3, 7% in Q4. We did it without the benefit of M&A. So we believe that HPS, Preqin, GIP can help lift our business beyond those targets. It gives us a lot of conviction about our 5% or better goal going forward, Alex. So we look forward to updating everybody on progress.

Fink: Alex, so let me just talk about the rate market. we’ve been living in a world of an inverted yield curve. And you had the ability to earn the highest return on keeping your money in cash. You missed that on some great equity market movements. But as you noticed, the yield curve is steepening. And so you’re going to — over the time, you’re going to be benefiting by going out the curve. That being said, there’s close to $10 trillion of money in money market funds as that money will be put to work.

And as I said, with the steepening of the yield curve, and with higher rates, it’s going to lead to some great opportunities in the fixed income area. As Martin just said, I think more and more income-oriented products like private credit and infrastructure are going to play a larger role with our investors over the course of the next 5 to 10 years. And if we can’t underestimate the role of the capital markets as that is going to be developed more robustly even in Europe and other parts of the world where there’s going to present even better opportunities. There’s no place like the United States. With the U.S. exceptionalism. that you have, if you’re a small startup, a medium company that you have access to so much capital. That is one of the principal drivers of the U.S. economy. And I do believe that is hope to be replicated in other economies right now. And that development, having a strong banking system with a strong capital market system really plays well into our future growth.

Craig William Siegenthale, BofA Securities, Research Division: Happy New Year, Larry. I hope everyone is doing well. My question is on retirement. So BlackRock is the largest DCIO manager and one of the largest managers of AUM and foreign plans and target date funds, and currently, these strategies have a 0% allocation to alts, but the red sweep in November has many of us debating if alts will break in the retirement channel. So especially given your recent acquisitions of GIP and HPS I don’t know if any firm is better positioned for this team. So we wanted to get your updated prospects on alts finally breaking to the U.S. retirement channel.

Small: Thanks, Greg. Happy New Year. I’ll give it a go and then see if Larry has anything to add. But listen, we think of ourselves as a retirement company. More than half of the $11.6 trillion of assets that BlackRock manages are related to retirement. We’ve been at the forefront, I think of product innovation. We’ve been at the forefront of advocacy for retirement solutions through our whole history. It was, in fact, Barclays Global Investors that pioneered the first target date fund back in 1993. It was a revolutionary concept, eliminating, I think, some of the guest work for retirement savers by automatically adjusting their investment mix over time.

We now today, as you mentioned, have over $0.5 trillion of assets in LifePath and target date funds. We’re the #1 DCIO provider. As Larry went through in detail, we’ve been innovating the target date structure to include guaranteed income with LifePath Paycheck. So we see real potential benefits that retirees could have with greater diversification, better retirement outcomes by blending public and private. I mean people have won Nobel Prizes talking about the market portfolio. It wasn’t just about public markets. It’s also about private markets.

And so we’ve been doing work. We’ve been doing work. We’re always doing work on product innovation. We’ve been thinking about how to bring private markets potentially into target date structures. We think the same innovations that powered LifePath Paycheck could ultimately power a target date structure with private markets and alternatives as part of the glide path. We’d also think about things like managed accounts and models where we’ve been working on, including public-private models, as we announced with the Partners Group model portfolios, which we think can make their way into retirement counts as well.

And so we do think this is a real opportunity. With our leading presence in these channels, we’ve got the relationships, the distribution, the investment expertise to capitalize on these opportunities to create better retirement. We do think we’re watching the space closely. For more tangible opportunities, we do think there’ll have to be some reforms potentially safe harbors litigation or advice reform  in the U.S. to add private markets to DC plans. So we’re watching the space closely, keeping in touch with the trade associations. We’re doing a lot of work in keeping connected with Washington, but for years, we’ve tried to innovate. We’ve advocated on behalf of workers to improve retirement solutions. We think there’s a real opportunity here. And if there is an opportunity to bring private markets to the retirement channel, we’ll aim to be at the forefront, Craig.

Fink: Craig, let me add one more point that I think is essential. And that is having better analytics and data. That will be fueling. I think regulatory opportunities to expand offerings in this space. As you know, the retirement system is heavily related with a lot of regulation, fiduciary standard is very high. And so as a result of that, the need for better market analytics and data are essential. And this is one of the primary reasons why we sought out and acquired Preqin.

Having the analytics that we have with eFront and Aladdin and the data that we will have will allow the entire market to have access to better information and is — and we believe more and more asset managers will then take on Aladdin with Preqin data and eFront to help them navigate this. And so to me, dovetailing relaxed regulatory oversight can only happen if we have better systematic analytics and data to work with the investors under our Arista laws. And I think this is essential, and this is one of the key reasons why we made the acquisition of Preqin.

Michael J. Cyprys, Morgan Stanley, Research Division: Happy New Year. It’s been a — it’s been a little bit over a month since you announced the HPS acquisition. Just curious here, in terms of the conversations you’re having with clients, how that dialogue has evolved given the expanded private credit capabilities that you have, I believe, insurance and private wealth or some of the areas that you were most excited about. Just curious what steps you might take to best maximize that opportunity here as you’re thinking about ’25. What sort of growth might translate into? And which of the opportunities do you see as more near term versus more medium to longer term?

Fink: Well, obviously, we need to close and we expect to close sometime in the second quarter. That would be our objective. And we’re very excited about the client feedback related to HPS. It has been extraordinarily positive across all the channels, HPS has incredible relationships with clients worldwide, and that dovetails with our relationships across all the insurance companies.

And so I do believe insurance will be one of the primary areas of growth for us. But as we were talking about earlier, if we could really expand in the wealth channels, HPS right now has about $20 billion in wealth channels already. And we believe with the BlackRock connectivity with all the wealth management organizations that we have an opportunity to really increase that size by a dramatic amount.

And our conversations that we’ve had globally worldwide from Japan to the Middle East and throughout Europe, probably one of the great surprises to me was the conversations we’re having about expanding private credit as a part of these portfolios. And as I said earlier, when we — we did not do the HPS acquisition as a singular expansion, you have to overlay the design around buying Preqin and having eFront and bringing that together and having the ability to provide better data and analytics to these markets to — and that will then provide much more expansion of the market.

And we’ve seen that over the last 40-odd years we’ve been in business, and throughout my career, when you have better data and analytics as you’re expanding new frontier markets, they become large scale markets through data and analytics. And so we believe we will be the best suited organization to take advantage of that expansion of the private credit markets in the future.

Michael C. Brown, Wells Fargo Securities, Research Division: Happy New Year. I wanted to follow up on the expense guidance for the year. So thank you for the core G&A guide. I guess as we think about the contribution from HPS, assuming that mid-2025 closed, how should we think about the guide, including that? And then as we think about the margin, I appreciate that markets and FX are really going to impact the outcome. But could you just give us some thoughts on maybe the puts and takes that we should consider for the margin in ’25 relative to ’24?

Small: Sure. Thanks for the question. So let me just put some context around it. I think our approach to shareholder value creation is to generate consistently market-leading organic growth, it’s to drive operating leverage and industry-leading margins and to execute on a consistent capital management strategy. We have a strong track record of investing in our business for growth and scale while expanding capability. It’s not just about growth. It’s about profitable growth over the long term.

Our growth comes from being disciplined in making and managing continued investments in the business. We’re keeping the rules- based budgeting principles that I’ve outlined over the last 12 to 18 months, that’s sizing our operating investments in line with the prudent lens on organic growth potential. It’s aiming to put flexibility in our cost base and variabilizing more expenses where we can. And most importantly, it’s looking to generate fixed cost scale, especially through investments in technology.

We’ve got a consistent track record in delivering industry-leading margins and improving them. I think you see in 2024, the scale indicators came through in the results. We grew operating income by over 20%, generated close to 3 percentage points of margin improvement versus ’23. We improved margin by 390 basis points year-on-year in Q4, while operating income was up 30%.

And since the end of 2022, a more rope metric is BlackRock AUM is up $3 trillion while headcount is up by a more modest — 1,300 employees, about 7% headcount growth. So we really see ourselves as continuing on that strategy of driving scale and productivity, which shows up in margin expansion.

On the outlook for ’25, the guidance is mid- to high single digits, excluding HPS, as I mentioned. In terms of the major influences, we think our budgeting approach in a positive market environment should drop more profitability into operating income. Market movements are our highest margin item, Mike, both on the way up and on the way down. We see the conditions for reasonably positive growth in markets over the near to intermediate term. So we believe we can continue to invest to accelerate growth and deliver margin expansion through this rules-based budgeting that I’ve outlined, and we expected the impact of positive markets on AUM and revenue through this budgeting approach would drive further margin expansion into 2025.

Kenneth Brooks Worthington, JPMorgan Chase & Co, Research Division: I wanted to piggyback a little bit on Alex’s question. What are your thoughts on the outlook for fixed income flows as we look out to the next 12 months? I guess maybe starting, where do you see investors position in fixed income as we begin 2025? And do you get the sense generally that investors are under or over allocated to fixed income broadly? And how do you see those allocations evolving this year? I think you’ve successfully made the case that the allocation also be increasing. You made the case for a while that the allocations to cash are probably too high. How do we think about this sort of flowing into fixed income allocations for the next 12 months?

Small: So I’ll take that one. Last time I mentioned I thought it would rain fixed income. I’m going to continue that for 2025, but I won’t go as far as a Nobel Prize Martin than fixed income. But a more balanced term structure of interest rates is an indicator that we’re going to watch to indicate the potential demand for intermediate and longer duration fixed income. And you know this has been negative for years, and now the U.S. term premium has reached its highest level in a decade.

Now we see that people are under allocated to fixed income, and we see that through our models business, and we see that they’re looking to increase their weightings in longer duration fixed income and whether there’s a bull market steepener or a bear market steepener, I do believe some of that large allocation the cash that Larry mentioned being around $10 trillion is going to look for opportunities to increase their income. And with countries around the globe at deficits, there is going to be a lot of issuance and you’ll see the premium over treasuries be significant enough to move that money from cash into intermediate and longer-term duration fixed income. So last year, we saw a strong demand our fixed income flows were $164 billion in 2024. That’s driven 6% organic asset growth. And that included $24 billion in the fourth quarter alone.

Now one of the other reasons for this demand is better wrappers to express your interest in fixed income. So we saw demand across iShares, non-ETF index and active fixed income and active fixed income continue to include scaled institutional assignments as well, not just retail, and this came primarily from insurance partners. So I think spread income presents a great opportunity even if duration is not as reliable a diversifier as it used to be, and we see a lot of clients that want to clip solid deals at the front end of the curve, and now we expect that to continue into the longer end of the curve.

So — the other part is the run-up in equities last year, actually, over — made them over allocated to equity, so they need to catch up in fixed income. So I think it continues to roll into cash and then cash as rates change, move into intermediate and longer duration fixed income paper, and that will not only be in the public markets, but it will be in the private markets as well, which describes part of the acquisition.

Brian Bertram Bedell, Deutsche Bank AG, Research Division: Happy New Year. Certainly — yes. No, I was just thinking, I certainly couldn’t imagine you’ve become what you’ve become sitting back in 1999 as you leading fixed income manager. I always knew the strategy was great, but the firm has certainly evolved, I think, well beyond anyone’s expectations. So congrats on that journey.

Fink: So have you turned 35 yet?

Bedell: Yes exactly. It’s been a long time for sure. Yes. So maybe just thinking about this evolution of the strategy in alternative and particularly the retail end of that. So — maybe just talk a little bit about your confidence. Clearly, you have a lot of ways to go into the — into retail on the alt side. But your confidence on that building up because, obviously, there’s still a lot of roadblocks into growth in those channels. And I know you talked about the 401(k) channel earlier, maybe within that answer, you can comment on your view of the likelihood of safe harbor provisioning in the 401(k) market and the demand from 401(k) plan sponsors to actually adopt alts within their portfolio because clearly it would obviously benefit the the planned participants substantially. So just, I guess, overall, just your confidence on the retail market for alts building in — even in ’25 and it’s ‘26% for you include potentially 401(k).

Small: So we — this is one of the — I’m most — one of the businesses or most fond of here at BlackRock. We have strong relationships in wealth and retail markets across the globe. As Larry mentioned in his remarks, our aims to health wealth managers build long-term portfolios that blend public and private markets exposures. The market is still early. As you said, wealth manager and retail allocations to private markets still in the low single digits on most of the Cerulli dinner data. We are focused on innovating to provide better access to private markets for wealth managers and retail investors, and that’s across taxable and nontaxable accounts, retirement accounts.

Let me tell you about a couple of things we’re working on and what I think are some of the bigger opportunities. As we had previously announced, we’re working on a first-of-its-kind managed model solution with the partners group. We think this will simplify wealth access, offering a single subscription model product with varied allocations based on risk tolerance, but moving the private markets to a model portfolio with different risk tolerances that blends public-private that manages the cash flows that’s on a single subscription document. We think that’s a huge unlock. One of the barriers to adoption with wealth managers is just the operational burden and tax of managing multiple subscription documents and cash flows and distributions for private markets products. We think a managed account can do that better and increase access.

In Europe and Asia, those markets are in a different place in the United States when it comes to private markets in retirement accounts. We recently launched our new evergreen fund offerings under the LTIF 2.0 structure. Those initial offerings are in private equity solutions and multi-alternatives, those evergreen funds we’re planning to also have infrastructure and private credit offerings into the future. We’re looking at bringing similar structures in terms of evergreen products for the United States as well.

The planned acquisition of HPS is going to bring real scale and expertise in the wealth channel for us, including more than $20 billion of wealth-focused assets in HLEND, one of the high performing BDCs in the market. We think there’s a great opportunity to continue to scale that in the channels where HPS is, but also bring that to the RIA market where BlackRock has a particularly large footprint.

We have really excellent momentum in many of the strategies that we have in debt. Our nontraded BDC has about $600-plus million and growing. Our credit interval fund CREDX, same deal has had a lot of growing. I do think that the biggest opportunity ahead of us is to integrate semiliquid products and to integrate private markets into our over 300 billion managed models and SMA franchise. That would be the biggest unlock, and I really do think it’s our competitive advantage. It’s at the heart of the models venture we have with Partners Group. It’s at the heart of many of the previously announced partnerships we have with Envestnet, Go Wealth Capital case and Vestmark.

So we think the 2 best execution channels for us here to help clients our target date funds and retirement accounts, assuming that we can have favorable conditions to do so and manage models in wealth and retail channels and the LTIP structures in U.K. and Europe.

William Raymond Katz, TD Cowen, Research Division: Yes, indeed, it goes quick. It goes quick. I remember that IPO conversation. Anyway, thank you for the shout out. It’s been a pleasure. Just maybe I don’t either one gentlemen, — just think about the evolution of the platform than your guidance around buyback. As your earnings power continues to scale and become more diversified and more durable, how are you thinking about maybe the payout relative to the earnings power? And then how about the allocation underneath that between dividend growth and repurchase?

Small: Thanks a lot, Bill. Our capital allocation strategy is consistent. As I mentioned earlier, like first, to invest in the business, that’s our main focus is investing in the business to drive organic growth. We preference the dividend and then the size of our share repurchases, they’re an output after those allocations of capital. We don’t manage the company to hoard excess cash on BlackRock’s balance sheet. So we have a very strong track record of returning that excess cash through share repurchases that are systematic.

I think the size of future repurchases would result from a whole variety of factors. The levels of cash flow generation in organic growth and market beta and FX, the sizing of organic and inorganic investments, the leverage ratio of the company, the reasonableness of debt financing versus equity financing. So all of these things would ultimately influence the sizing of the share repurchase program. But the share repurchase is an output, not an input into our capital management strategy. But this year, we had $4.7 billion return to share — to shareholders. We know that BlackRock has become an attractive compounder between dividends and buybacks, and we want to keep that track record up for our clients and shareholders.

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

Fink: Yes, I do. Thank you, operator. I want to thank everybody for joining us this morning and your continued interest in our firm BlackRock. Our record results in 2024 are just the beginning of our next phase of growth. We invested ahead of our structural growth trends and drivers that we believe will define the future of the capital markets and asset management. We have a lot of exciting work ahead of us, including the planned addition and integration of Preqin and HPS. And we enter 2025 better positioned than ever to deliver differentiating performance to our clients and value creation for our shareholders. Everyone, have a really wonderful quarter and enjoy. Talk to you in the next quarter. Thank you. .