Larry Fink
Chairman and Chief Executive Officer at BlackRock
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.
