Good morning. My name is Sigie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Incorporated First Quarter 2019 Earnings Teleconference. Our host for today’s call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Gary S. Shedlin; President, Robert S. Kapito; and General Counsel, Christopher J. Meade. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions] Thank you. Mr. Meade, you may begin your conference.

Good morning, everyone. I am Chris Meade, the General Counsel of BlackRock. Before we begin, I’d like to remind you that during the course of this call we may make a number of forward-looking statements. We call your attention to the fact that BlackRock’s actual results may of course differ from these statements. As you know, BlackRock has filed reports with the SEC, which lists some of the factors that may cause the results of BlackRock to differ materially from what we say today. BlackRock assumes no duty and does not undertake to update any forward-looking statements. So, with that, I will turn it over to Gary.

Thanks, Chris, and good morning, everyone. It’s my pleasure to present results for the first quarter of 2019. Before I turn it over to Larry to offer his comments, I will review our financial performance and business results. While our earnings release discloses both GAAP and as-adjusted financial results, I will be focusing primarily on our as-adjusted results. BlackRock generated $65 billion of total net inflows in the first quarter or 4% annualized organic asset growth, reflecting our differentiated solutions-based approach to addressing client needs. Our first quarter results reflect the benefits of our integrated business model and the investments we have made to diversify our investment platform, enhance our risk management and technology capabilities, and build local expertise at global scale. First quarter revenue of $3.3 billion was 7% lower than a year ago, reflecting the impact of fourth quarter equity market declines on our 2019 base fee entry rate. Operating income of $1.2 billion was down 11% compared to a year ago, while earnings per share of $6.61 was down 1%, as lower operating income and a higher effective tax rate were partially offset by higher non-operating income and a lower share count in the current quarter. Non-operating results for the quarter reflected $135 million of net investment income, driven by higher marks on our unhedged seed capital investments and the revaluation of certain strategic minority investments. Our as-adjusted tax rate for the first quarter was approximately 22% and included a $22 million discrete tax benefit related to stock-based compensation awards that vested during the quarter. We continue to estimate that 24% is a reasonable projected tax run rate for the remainder of 2019 though the actual effective tax rate may differ as a consequence of non-recurring or discrete items and issuance of additional guidance on tax legislation.…

Thank you, Gary, and good morning, everyone. And thank you for joining BlackRock’s first quarter call. BlackRock’s broad investment platform generated $65 billion of total net inflows in the first quarter, representing 4% organic asset growth and 3% organic base fee growth. The breadth of our investment capabilities, spanning index, alpha-seeking, alternatives and cash, coupled with our industry leading technology and portfolio construction capabilities, allowed us to generate strong flows, and importantly, meeting the evolving needs of our global clients. BlackRock’s commitment to staying ahead of our client needs continues to resonate and we are deepening those relationships with our clients throughout the world more than ever before. Following significant declines in equity markets in the fourth quarter of last year, investors reverse their risk tolerance at the start of 2019. U.S. markets have regained their losses and both developed an emerging market equities, although not fully recovering from about 10% year-to-date. High yield fixed income the most challenged category last year is now seeing inflows. Improved investor sentiment has been driven in part by easing concerns around the global monetary policy and trade. The Federal Reserve and other central banks are emphasizing a more patient approach to monetary policy, quieting investments -- investors’ fears of tightening monetary policy and conditions late in our cycle. And investors’ focus on trade tensions have declined relative to last year, as negotiations between the United States and China progresses. Despite strong market performance year-to-date, average market levels are still lower than they are a year ago and investor optimism remains fragile as geopolitical risk and global growth concerns persist. While recent development in China should increase global capital investment spending notably weak Eurozone PMI data, it signals further slowdown in Europe, and the U.K. although a hard Brexit has been avoided in the…

[Operator Instructions] Your first question comes from Craig Siegenthaler from Credit Suisse. Your line is now open.

Hey, Craig.

Hey. Good morning, Larry. So we continue to see BlackRock expand further in that tax sector here. We saw this again in the first quarter the acquisition of eFront. My question is how will BlackRock clients use this software technology? And also more importantly, how do you plan on monetizing this technology, including potentially supporting your alternative fundraising effort?

So we look at technology in five business brands across BlackRock and we are focused on every business. Actually we had a leadership retreat last week this past weekend. And we spoke about how we have to work on technology in every business. It’s not the business that BlackRock that should be untouched with technology. Technology has to be the component of shaping how we do business. So we look at technology in five different areas. We look at technology to deliver better alpha using more data sources. We are using technology now, as I spoke about in my prepared remarks, creating technology for more convenient portfolio construction. Obviously, we are using technology with more operational efficiencies, Aladdin provider is a good example. Throughout our history, we are using more and more technology for risk management. And now we are using technology to create more convenience with our clients by delivering better tools for distribution and so we are framing technology across all these businesses. eFront really is a great example of us using a technology to really help us in delivering two out of the three major long-term strategies that we spoke about in my shareholder letter. We speak about why technology has to be driving BlackRock and why alternatives have to continue to drive the future of BlackRock. And eFront still helps us deliver in those two key categories, the third one is China. If I have to say a fourth one is retirement, but those are two of the key characteristics of our forward growth strategy. Related to eFront in itself it is going to be provided as a new revenue component of Aladdin and it’s going to be an add-on cost to our Aladdin platform. It is -- and so it will be integrated on top of the Aladdin platform over time, but it will be another sleeve and we are actually there were some overlaps with the clients and there were many new clients that are part of eFront, so it allows us to have broader depth globally worldwide. And so we look at this acquisition as another milestone of us really trying to build technology across all asset categories and we did cite that we had some weaknesses in alternative technology in Aladdin and this really helps us accelerate the added sleeves of alternative technology on Aladdin. So this will be another revenue center for BlackRock as a part of the Aladdin platform.

Thank you, Larry.

Thank you. Our next question is from Robert Lee from KBW. Your line is now open.

Hi, Robert.

Great. Good morning. Good morning, Larry. Good morning, everyone. Thanks for taking my question. Maybe just flush out a little bit on the alternatives platform. Obviously, you spent in addition to the eFront, you have spent a lot of time and energy with some acquisition, the organic growth. Can you may be -- where do you feel like you stand with your old platform in terms of do you feel like at this point you have the most of the strategies covered or -- and it’s more about kind of scaling with subsequent funds or are there still places you feel like there’s maybe whole of…

Sure.

… you are looking to fill?

Let me have Gary start it off and I will try to answer if I need too.

Yeah. Rob, I think, we feel that we are very well situated on the illiquid platform at the moment, obviously, we have got a range of products now that span kind of across the more major categories. LTPC firmly puts us in the direct private equity, obviously, we have a significant real estate business and infrastructure business, a private credit business. We have a variety of solutions-oriented businesses, whether it would be funded hedged funds, funded private equity and broader alternative solutions. So I think we feel like we have got a foot in every one of the high growth markets. I think when we add it all up today we have got about $65 billion plus in illiquid plus another $22 billion or so of committed capital to go. So that gives us a fair amount of scale. I think when you look at the individual businesses, one could argue that individually they are not big enough and so that will come obviously with successor funds and continuing to develop -- continue to deliver the returns that our investors expect, and so obviously, as we do that I think successor funds will get bigger. And we will continue to opportunistically look for tactical opportunities to create more scale in those businesses. But as I think we have been very, very clear culture is incredibly important to us. We are not really looking to buy out anybody. We are really looking to buy in people who want to be a part of our very differentiated platform and we see those opportunities as we have seen in the past with our new partners from Tennenbaum or First Reserve and others. We will do things that basically make sense not only for clients but also for our shareholders. So bottomline is, we will continue to see what’s out there and be opportunistic, but we feel like we have got a pretty good growth platform right now.

As you know, Rob, we have been very systematic in how we have been approaching this. It has not been what I would call it metamorphic by any means. If you think about just our infrastructure platform, we started really infrastructure in 2012 by lifting out a team of people. We are over $20 billion now in infrastructure growing quite nicely. We are raising a couple more funds. So it’s been very systematic and I think the same thing will be done over LTPC. Over time that’s going to be continue to grow. We actually have opportunities that continue to build that out. We have real estate and so over time this is a growth area. Our first quarter was up $6 billion in growth. That was a record quarter for us as Gary suggested. We have $20 billion or $22 billion of the drag of committed capital right now and that they will be put to work. We look at this as a real opportunity and our clients are looking to us to be really focused on these types of opportunities. So I am pretty constructive on where we are at this point in time.

Can I add one thing? The other part that we are excited about is that we have done some institutional surveys and it shows that the largest reallocation is going to be to the alternative space. So we do need to have a wide product base to be able to satisfy our current clients’ needs. But also you know that we are very important to the retail base and they want exposure to the alternatives area. So we are also working very closely with our retail distribution partners to create the appropriate wrappers, to put the alternatives that have the appropriate risk and reward for those clients that are looking for it. So it’s not just institutional investors, it’s also retail investors that are looking to us for some exposure in the alternative space.

Okay. Thank you. Can I ask may be a tactical follow-up question, Larry, you mentioned there being some kind of reversal of the fourth quarter ETF equity flows that were driven by tax reasons. But broadly across the industry despite this big rebound in the market to kind of feels like demand for equities in general both index and active have been pretty muted. Is there -- is this really more just symptomatic of the people bifurcating the portfolios more going to alternatives than, obviously, better fixed income demand or is there something else going on underneath that business?

So the question we saw strong rerisking for those were in cash and allocated back into fixed income. We saw that predominantly -- a lot of investors were believing that interest rates are going to go higher, Central Banks really continue to tighten and obviously the change in Central Bank forward forecast and their behaviors many investors were underinvested and put duration to work across the Board. As we have seen as Rob Kapito just mentioned we are seeing investors continue to barbell, I think, going more and more heavy into alternative spaces. What the first quarter showed also that investors are still selling equity exposures. As an industry there were major outflows again in overall global equities as an industry. This is one of the reasons why I actually believe we are at a pivot point now where equivalent markets despite the rally can have much more upside because the amount of under investments investors have in equities they have not rerisk in equities in the first quarter. And so to me -- we believed as you are starting to see renewed economic activity in the United States from the slow pace of the first quarter and we are moving closer to about 2.5% economy in the second quarter, we are seeing a stronger economic signal out of China from all the fears we have in the third and fourth quarter. So I would argue there is a high probability going forward that investors are going to begin to rerisk across the equity platforms. And what we hear from investors and we see, investors coming in every day seeing our leaders, seeing Rob, seeing me and the biggest question is we are being asked continuously, where should we put our money? There is huge pools of money sitting in the sideline and many people how we are going to have the continued downdraft in the fourth quarter. They thought interest rates are going to go higher. A lot of -- as I said the biggest risk is that clients are under invested not over invested. So we see more upside here, especially, in equities.

So one thing on the tactical comment, if you started last year with a 60-40 stock mix, which is what most people have, by the time you got to somewhere in October, that number would have been 80-20, which is really too much risk. So you saw a lot of tactical asset allocation changes to get their portfolios back to 60-40, which means you have to sell stocks and buy bonds. And at the same time, the risk free rate during the year went from zero to 3% so bonds look pretty good coming out of cash. So I think we saw that in November and December. That added to the fuel to -- for the first time being able to take a tax loss for a very long time. But now in the first quarter that people are getting back to where they wanted to be, I think, the risk on trade is coming back into the marketplace and you see that reflected in where they are allocating their money tactically now.

Thank you. Your next question comes from Patrick Davitt from Autonomous Research. Your line is now open.

Hey. Good morning, guys.

Hi. How are you?

I am well. Thanks. You mentioned that the nine live Aladdin for Wealth clients. Could you update us where you think we are on the ramp-up of noticeable incremental flow from those nine go lives, update us on the pipeline of new go lives this year and are there any meaningful milestones you are just looking to see a more noticeable uptick inflows from that channel?

So we are very optimistic on the Aladdin for Wealth, because for the first time it gives a lot of the financial advisors the ability to look and test their clients portfolios to make sure that they are taking the right risk in them. And so as they come on, we are building it together. They are asking can we do this, can we do this, what can we show our clients and of course within each system, the things that these firms are able to send out to their clients have to be approved they sent out that takes a little time. So there’s a little bit of a lag. So there was a lag in implementation, and now we are in process with many of them on getting them on to the systems and to understand how it works and what they can actually use for their clients. So it is been an eye opening experience for many of their clients. What we didn’t realize was that Aladdin for Wealth can be used as an asset gathering tool and most clients in the retail area have accounts at more than one firm. And if you are one of the firms that can show your client the risk and reward of their portfolios and then improve it that is a great advantage, and we are seeing a lot of money move for those who have Aladdin to with from people that don’t have it. Also the business has moved from individual stock and bond picking to asset allocation and portfolio construction and that’s what the financial advisors are expected to be able to do. By using Aladdin for Wealth, they are able to take not only one portfolio but hundreds of portfolios and organize them in an appropriate way…

But Patrick, just to be clear, so I just some of the terminology, I just want to make sure we are clear on. I mean the most significant, immediate impact from a P&L standpoint is obviously to see the revenue show up in our technology services line which is where the Aladdin Wealth line will hit. There’s two components to Aladdin Wealth, there’s kind of that what I would call more of the top-down kind of home office view, which is really driving the technology revenue and then there will be that bottoms up impact that basically will happen at the individual adviser level which will generate approach which I think was your initial question. Keep in mind, a lot of this is happening real-time we are rolling it out right now at many places. There is an element of training and getting all of these advisers up to speed on all the new tools that they will have at their disposal. So the flow, the flow deltas, which will then drive our base fees is going to take a little bit longer than the immediate impact of that technology revenue that you are going to see much more immediately. In other situations like, Envestnet, where we that is not an Aladdin Wealth but basically putting our portfolio construction technology on the desktop of the IRAs that have, again I think there you will see basically more impact in base fees because there’s no specific technology revenue associated with that type of partnership.

But early indications before the Aladdin Wealth users who have been on the longest there is evidence of increased…

Yes.

… flows to BlackRock. We don’t have enough statistics to really identify where it is. We don’t have enough data with all the different users. As we said nine clients worldwide and we are in conversations with many more clients. So our objective is to have as Rob just suggested the architecture or risk in the wealth management channel using Aladdin for Wealth.

Thank you. Your next question comes from Michael Cyprys from Morgan Stanley. Your line is now open.

Hi, Michael.

Hey. Good morning. Hey. Thanks for taking the question. Just on another question on Aladdin here with eFront that now brings you into alternatives. Just curious as you look across the Aladdin platform what other adjacencies could make sense or capabilities that you would like to see strengthened with Aladdin particularly as you look across the competitive landscape today?

I think we are committed to being an end-to-end provider for risk management and analytics across from the front to the back. So I think we have been building out a lot of that in particular ourselves. I think the decision to do eFront was a conscious decision frankly that it was going to take us a lot longer to build that. Our belief is that the eFront transaction accelerates our development in the private asset classes conservatively by five-plus years. So I think we felt we needed to attack there when we can. Otherwise, I think, we will continue to add on all the obvious adjacencies when we think about an end-to-end provider and we continue again to continue to be tactical and opportunistic to basically balance where we think it makes sense to buy versus where we think it makes sense to build.

But it’s clear that we are -- if you look at our strategy in terms of inorganic opportunities, we are scrubbing, we are reviewing, we are really trying to understand the whole technology environment. That’s where we are focused on. I have been saying this over quarters-and-quarters. We are not focused on asset management M&A in the developed markets. We are focused on if there is an inorganic opportunity in technology that adds more opportunities to be, as Gary said end-to-end provider, whether that’s a data provider or a new technology or AI, we will continue to be either building it or using it -- using opportunities to acquire and that’s what we are very much focused on and we have a whole team continuously looking at the whole ecosystem worldwide.

Thank you. Your next question is from Alex Blostein from Goldman Sachs. Your line is now open.

Hi, Alex.

Hi. Good morning, guys. Thanks for taking the question. So, Gary, maybe just a refresher on some of the guidance that you guys provided in the beginning of the year, given the fact that markets move pretty considerably over the course of Q1, maybe how you guys thinking about outlook for G&A for the rest of the year. I think your original guide implies something a $1.6 billion kind of annual number, does that still hold and then any other comments around expenses would be helpful? Thanks.

Thanks, Alex. I would say really short answer is no change in guidance. I think that, as we said at the beginning of the year, we are very focused on managing the entire discretionary expense base. We continue to see our 2019 kind of core level of G&A expense to be essentially flat to our core level for last year and we are continuing to invest. I mean, as always there are things that come up that are effectively kind of not manageable, so we saw another, let’s call it, I would say, roughly $15 million to $20 million of kind of like non-core G&A in this quarter between paying some fees to get eFront done and some more purchase price contingency, fair market value adjustments and some FX implications. But in terms of what we are managing, we are continuing to stick to the plan that we laid out for our Board in January. I think that we try to anticipate. We saw some volatility. And as I said in my prepared remarks, I mean, we are very much focused on the long-term not trying to manage doing margin on a quarter-to-quarter basis, obviously, we saw a lot of that beta back, which obviously better positioned us and I think we feel a little bit better with the markets where they are right now, when we went into our budgeting season back in the fall. But we are not going to continue to keep an eye down the field and play offense, and continue trying to optimize growth in the most efficient way possible.

Thank you. Your next question comes from Jeremy Campbell from Barclays. Your line is now open.

Hi. Thanks guys. Just wanted to ask a quick one on the advisory and other line, I know you guys had mentioned some items that moved it on a year-over-year and sequential basis, but it was a pretty big step down. And so, I guess, just what’s the outlook and how should we think about that line going forward from this lower 1Q type level?

So our other revenue line item is really made up of three main components. The biggest component frankly is an equity method investment that we have had for a number of years, which is, obviously, where we are getting our attributable share of somebody else’s earnings and that one is a little more complicated because we don’t control that. And that frankly on a quarter-over-quarter basis, I am sorry, year-over-year basis was the most significant change there. The other two businesses that are effectively in that is our FMA business, our Financial Markets Advisory business, as well as our transition investment management business. I would say those are both smaller revenue line items, where there is significantly more consistency and those are both businesses that are important to BlackRock that we continue to look to grow and annuitize as much as we can. Albeit both of those tend to have some what I would call more capital market centric elements to them. So they are a little bit really the biggest piece of that year-over-year change was the equity method now. I think everybody knows who that is and you guys can track that as well as we can.

Thank you. Your last question comes from Ken Worthington from JP Morgan. Your line is now open.

Hi, Ken.

Hi. Thank you for -- hi. Thank you for squeezing me in. Can you help us frame how iShares’ operating margins and iShares’ margins on incremental revenue have evolved over the last say two years or three years, clearly core is much bigger, fee rates are down, but assets are way up. So given the various cross-current, I was hoping to frame how margins might look in iShares and to what extent the significant growth in core and iShares overall have impacted the margins on incremental revenue there?

So, Ken, as you know we tend -- we don’t talk margins of our individual businesses. We are very focused on a one BlackRock model to avoid all of our businesses operating at silos. It’s very important to our culture and it’s how we manage the business day-in and day-out. So we don’t have those types of fully allocated P&Ls for our businesses, because we don’t think of it in general is the right behavior day-to-day. I can help you on the revenue line item. I think back in December, we were at Goldman and we talked about what we see as effectively the long-term growth potential for iShares and ETFs. I think we outlined a 12% to 15% kind of topline asset growth rate. I think we do anticipate certain sectors growing faster than others, which is why we have tried to point people to an organic base fee rate that will be less than that. Historically, I think we have seen an organic base fee rate somewhere around 6 points to 7 points, less than that, which is part of the slide we put out at Goldman. Don’t hold me exactly for those numbers you will have to go see it, but I think that’s about what it was. And that takes into account both mix change in terms of faster growth in the core, but also as well as some of the strategic pricing investments we have made and we will likely continue to make that make sense for both clients and for our shareholders alike. This quarter in particular, we actually saw organic base fee growth equal to organic asset growth. It was right in the 7% area, and again, I think, that is a function again of about 40% of the flows being outside of the core and that’s an area whether it be fixed income, strategic beta factors, ESG or other precision exposures frankly that tend to be more capital markets centric and the importance of that obviously is that those are higher fee than the core itself and I think we do continue to believe very strongly that as we see growth in the core, we also see growth outside of the core as people are tactically allocating portfolios around the core ETFs. So that’s what I would tell you about the revenue. I think we feel very comfortable that that iShares business will be growing in excess of our 5% longer term growth target. But as it relates to specific margins, I will leave that to you guys to try and sort through, we don’t manage the business that way.

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

I do. I want to just thank everybody for joining this morning and your continued interest in BlackRock. I believe our first quarter results are directly linked to the investments we have made over time and our deep partnerships we built with our clients globally. I think we differentiated ourselves by continuing to leverage our scale. We continue to invest broad investment and technology platform to deliver value to our clients and shareholders. We are continuing to drive technology as a leading -- in the transformation of who BlackRock is and the transformation of how BlackRock works with our clients and we will continue to do that. With that everyone have a very nice spring and we will be talking to you sometime in July. Thanks.

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