Good morning. My name is Jerome, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock, Incorporated First Quarter 2021 Earnings Teleconference. Our hosts 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. [Operator Instructions] Thank you. Mr. Meade, you may begin your conference.

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

Thanks, Chris and good morning everyone. I hope everyone and their families are remaining safe and healthy. It's my pleasure to present results for the first quarter of 2021. Before I turn it over to Larry to offer this comments, I'll 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's platform has been built over time to help clients meet their objectives regardless of market environment or risk appetite. We've invested for years to develop industry-leading franchises in high growth areas, such as ETFs, private markets, technology, and more recently sustainable investing, so we can help clients construct resilient, whole portfolios that leverage both active and index capabilities. While few of us could have predicted that we would still be confronting the human and economic challenges of the COVID-19 pandemic a year later, the events of the past year have only strengthened our resolve to continue to invest for future growth in order to evolve our business, live our purpose and meet the needs of all of our stakeholders, including clients, employees, shareholders, and the communities in which we operate. The investments BlackRock has consistently made to build a best-in-class investment in technology platform centered around a fiduciary mindset where clients always come first in a collaborative and unifying one BlackRock culture that encourages emotional ownership are driving incredible momentum across our entire business. BlackRock generated record net inflows of $172 billion in the first quarter, our fourth consecutive quarter with over $100 billion in quarterly inflows, representing 8% annualized organic asset growth and 14% annualized organic base fee growth. Strong performance from our entire active franchise, once again, contributed to this quarter's robust organic fee growth. Over the…

Thanks, Gary. Good morning to everyone. And I want to thank all of you for joining the call. I hope you -- excuse me -- hope you and your loved ones are continuing to stay healthy and safe. We are reporting earnings today from our headquarters in New York City, and I'm incredibly energized by being all together as a group, as a team, as partners. I'm cautiously optimistic for a return to normalcy in the coming months as vaccinations rollout. And I'm looking forward to seeing all of our stakeholders in person again. The strong results BlackRock saw this quarter or the outcome of a multiyear investments we've made in our asset management and technology platform to better serve our clients worldwide, more than ever before we are seeing the benefits of these long-term investments resonating. We have stronger results and deeper relationships with the clients across their entire portfolios. We generated $527 billion of net inflows and a record 14% organic base fee growth over the last 12 months, including a very strong 2021. Over a decade ago, we acquired iShares based on our conviction in the value proposition of ETFs. Our continuous investments in our platform since then to help more clients use ETF to build better portfolios have fueled iShares growth from $385 billion during the acquisition to more than $2.8 trillion today. We began expanding our alternative platform more than five years ago. And today, we manage nearly $200 billion in these strategies for all our clients. Our leadership in alternatives only just begun and we're seeing momentum accelerate, as we scale our offerings, as we source our capabilities and our integration of data and technology into the management of private markets assets. We've been investing in all aspects of our Aladdin Technology to better…

[Operator Instructions] Your first question comes from Brian Bedell with Deutsche Bank. Your line is open.

Great.

Hey, Brian.

Thank you. Good. Hey, good morning. Congrats on fantastic quarter again. A two-part question on sustainable investing. Just first wanted to make sure I get the numbers correct. I heard $353 billion in sustainable AUM and I also heard -- I thought I heard you say $200 billion. I just wanted to make sure those -- what those two numbers were. And then in the 1Q flows, we have $17 billion of iShares, but what additional flows would be coming into other sustainable products. And then the broader question would be on the Temasek partnership and more broadly for carbon transition. Obviously, a huge evolving field. As you thought about what the asset management TAM might be in that field and how you might tackle that through not only this partnership, but that obviously through the ETFs you launched in other products as well.

Well, first I apologize that we created any confusion. So, let's start. We do have $200 billion, sustainable long-term assets.

Okay.

The difference is we have a broad base cash management space that is becoming more and more sustainable. So, if you add the cash side or the short term cash, it comes up to that $300 billion number. I hope I answered that question properly now.

Yeah.

Two, I think, the opportunity in transition is amazing. It is estimated we need to spend $50 trillion to have a decarbonized world and to do that is investing in new technologies. And we are very pleased at having a partner in Temasek, and we have had many conversations with them related to how can we bring the world closer to a decarbonized world without a premium or without a green premium. And this is specifically so relevant, not just in the United States, but it's so relevant in the emerging world. The emerging world is still growing and still has a greater need for electricity, greater need for building. The emerging world is just at the beginning of their economic growth. And so, if we are going to get to a net zero world, the need for innovation and investing for green hydrogen to bring that premium down to zero for biofuels, for sequestering carbon at a very inexpensive price, all of these are going to require new technologies for agriculture. Agriculture produces over -- close to 15% of the carbon footprint when you -- related to that. And so, we have many areas where it is going to require new technologies, and I truly believe we are going to have many young people instead of going into data and technology related to the social side of technology. I believe many, many innovations that are going to come from young startup innovative companies. But I would also say I am very bullish on our traditional hydrocarbon and chemical companies as they pivot. And I've had conversations recently with a CEO of a very large oil and gas company. Just yesterday I had a conversation with a CEO of a very large chemical company, and we're actually talking to them about how can BlackRock invest with them side by side on technologies for decarbonization. I mean, the science and technology that are existing companies in terms of the understanding of carbon and understand the science of transforming it to a more decarbonized world is great. And so, we are very encouraged about investing in startups, and that's what Temasek BlackRock decarbonization funded. But we actually are having many conversations about investing with our infrastructure teams, with our private teams, with our debt teams to finance this. We've had numerous conversations with companies related to biofuels. And so when we -- our employees are flying around the world that we could have a footprint that is net zero. And so, all of these are great opportunities for us and the investors worldwide.

And Brian, just to -- it’s Gary. Just to -- quickly just capture what Larry was talking about in terms of long-term and total. The flow number in terms of sustainable strategies for the quarter was $24 billion long-term. That broke down into $17 billion in ETFs and $7 billion in what we would call active. And I would basically say that that was very broad-based across the platform and primarily equity, but also in fixed income multi-asset and all -- that represents in the aggregate on a long-term basis about a 50% annualized organic growth rate inflows.

Your next question comes from Dan Fannon with Jefferies. Your line is now open.

Thanks. Good morning. Larry, I was hoping that you could expand upon the institutional backdrop today in terms of risk profile. And what -- how those conversations are evolving with the rate backdrop and what's going on with fixed income and how we should think about kind of rerisking or derisking in this kind of backdrop.

Hi, Dan. Thank you. There's not one consistent conversation going on institutionally. Obviously, the question of inflation, the question of do deficits matter, are prominent conversations with our fixed income investors now. Some fixed income investors are looking to derisk, but derisking by going into low duration or unconstrained strategies. Some of them are looking to say I need more credit, or I need more coupon to take on that duration risk. And so, there's -- we still see demand in high yield evidenced by our flows. So, I don't think there's one specific trend. But I would say the narrative around the question of inflation deficits are becoming a very prominent part of our conversations. Obviously, many questions related to equity valuations. The rotation from growth to value is that overdone at this moment, especially if the vaccinations take longer and other questions on that. And so, those were probably the dominant conversations. But if anything, Dan is, we said some of the prepared remarks, there is incredible pools of cash on the sidelines. I would say overall our clients are still sitting with big pools of money. Overall, they're still under invested. Now, I would say as a 10-year treasury rises in rates, that our liabilities become less burdensome. And so -- and if there is any continuing rising of the 10-year rate, the need for extending duration is no longer as necessary. And so -- but the dialogues are very robust now. Many clients are putting and allocating more and more to privates and alternatives. Many clients now are using ETS for active exposures. That's accelerating, not decelerating. And so, I would say there's nothing that's prominent in any one conversation, except one thing, the conversation around sustainability. There is not a conversation today with an institutional client on how should they think about climate risks? How should they think about transition risk? And as I just said in my prior question, what we are trying to have our clients focus on, not the fear of transition, not the enormous need for transition, but the opportunities that transition will entail to get it right. The investment technologies to make sure that we don't have this green premium or the net zero world will not happen, especially in the emerging world. And so, this is the beauty of, I would say of, capitalism. This is the beauty of capital markets that more and more clients are looking to be more prepared for this long-term trend. And many, many clients are asking the question, what role should their portfolio play in this long-term trend.

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

Hey, good morning. Thanks for taking -- hey, good morning. Thanks for taking the question. I just wanted to circle back to some of the investment spend commentary. You guys were articulating here. I'm just hoping maybe you could elaborate a little bit on how you're thinking about investing here, where specifically. And maybe if you could -- just maybe focus a little bit more on -- how would you characterize the pace of investment spent here in 2021 versus maybe the last couple of years. And does that accelerate, just given the market uplift? How are you thinking about pacing that?

Thanks. Thanks Mike. So, we are -- I think as we indicated previously, we're definitely accelerating our pace of investment spend into 2021. I think that's a combination of a couple things. I mean, I think the first thing is that I think it's really critical to know and look back at our results, not only for this quarter, but the momentum for the last year had that effectively reflects the fact that we have consistently spent in our business to stay ahead of client -- client's needs, and across the franchise. I mean, without that consistent level of investment to try and stay ahead of those needs, we don't generate $525 billion of flows and 14% organic base fee growth with four quarters over a hundred billion dollars. We believe and you've heard Larry reaffirm it that our business has never been better positioned to take advantage of those opportunities, whether it's sustainable. There has been talking about a lot this morning, private markets, technology, China, and we are going to pursue those opportunities responsibly. That being said, we obviously remain margin aware all the time. We're focusing on managing that entire discretionary expense base as always. And we're committed to optimizing growth in the most efficient way possible. But our accelerated spend this year is really a function of what I just said, which has all the opportunities that we see before us and the reality that we just didn't spend what we thought we were going to spend in 2020. We made a strong commitment to our employees, not to reduce our headcount. And I think that was a good thing, because we saw the work units and the volumes increase throughout the year. We didn't really turn the hiring spigot back on until the second half and frankly late in the second half of last year. And so a lot of what we're doing this year is catching up to our business. We went into a year with a very specific budget in terms of our discretionary spend, whether that was in hiring, or spending on G&A. And we have made no changes to that since we last chatted. Obviously, I think between beta and our organic growth, we're ahead of where we thought in terms of the business. But our intent is to continue to spend throughout the year as to the original budget. We definitely got off to a little bit of a slower start in terms of tech, M&P spend. We are obviously anticipating some pickup in T&E towards the end of the year. And it's full speed ahead in terms of our plans for the year.

Your next question comes from Craig Siegenthaler from Credit Suisse. Your line is now open.

Hi, Craig.

Hey, good morning, Larry. My question is on Aladdin. So, if we look at the 16% year-on-year growth in annual contract revenues, can you talk about the components of the growth between the core operating system platform provider Aladdin and Aladdin for wealth? And I also wanted to hear how the portfolio analytics and risk management tools are now encompassing ESG and helping investors to build better portfolios across factors like sustainability.

So, Craig, I'll take the first and then I can -- I'll let Larry jump in and talk about our investment across the platform in terms of sustainability analytics and some of the things we're up to. We talked about the fact that we did have 12% year-over-year growth in revenue. And I think as always, the large preponderance of our technology services revenue today remains what we would call kind of the institutional Aladdin component. Obviously, we have other ports of that in terms of a variety of different, whether it's Aladdin Wealth or accounting or a bunch of other things, but the majority of that Wealth -- the majority of that growth is still year-over-year tied to the institutional business. Some of the component adds that we're basically anticipating, growth in over time are still at the early stages. And so, there's no question that as we begin to grow out things like Aladdin Climate, which is really just getting started, we think that's going to be having a much more significant impact on our year-over-year growth. There's no question that we believe that the demand for integrated and resilient investment management technology is increasing. The pandemic has increased awareness on the importance of technology. We're seeing industry consolidation, shifting product usage and regulatory requirements creating the need for more holistic and flexible solutions. And our pipeline for the remainder of the year is strong. So, again, continue to feel very good about that business. As I mentioned, the ACV at 16% is probably a little ahead of where we normally anticipate that just by virtue of the comparison to a year ago. But we are -- we feel really, really good about our positioning in that business, especially given our whole portfolio view across public and private markets.

I would just add that, if you think about the growth of Aladdin from a platform that was just analyzing bonds to where we are today, the demand from our clients in terms of having an operating system that is end-to-end an operating system that is connected to their custodial bank like Aladdin provider and operating risk management system that not only connects public markets, but private markets. And we built those platforms around that. And then with the need of more information at the financial advisors fingertips, so they could provide deeper, broader risk analytics to their clients and that's Aladdin Wealth. We have built Aladdin around the needs of our clients to offer a better experience, better outcomes. And then I can't think of a better -- and more important time when Aladdin was necessary when we were all working remotely and still I'm working remotely and having an operating system that is connected worldwide. And the -- our clients worldwide have actually become more enthusiastic about how Aladdin shapes and helps their business. We believe Aladdin actually improve their performance and there was research by third parties that suggest those who have Aladdin have better financial performance. Then when you think about climate risk and transition risk, that is going to encompass from cash to the most long dated privates across the entire portfolio, across all products, across our regions, the need for Aladdin Climate and having data and analytics to justify the investments. We have to live under the department of labor rule of remaining to be a fiduciary. And so, we have to justify as a fiduciary that climate risk is investment risk. And so, more than ever before, I believe Aladdin is as well positioned because of how we navigated it to make it end-to-end through the custodian, to the wealth manager, now publics and privates. And then importantly, now with sustainability really speaks about the resiliency of the operating system and why we continue to have deeper, broader conversations with more clients.

Your next question comes from Alex Blostein with Goldman Sachs. Your line is now open.

Good morning, Alex.

Hey, Larry. Good morning. Good morning everybody. I was hoping we could spend a minute on BlackRock initiatives in private markets specifically. And I guess looking back over the last couple of months, you guys raised a $3 billion secondary fund. And I think I saw a $5 billion renewable power fund. What else is in the fundraising pipeline over the next call it 12 to 18 months? And what areas, I guess, within private markets, do you want to lean into more, both organically and inorganically given that space continues to experience a pretty significant growth?

So, we've had a focus on our alternatives business for the last several years. And while we haven't raised $20 billion in one fund, we've raised $2 billion in 10 funds, and then those continue to grow. So, we have -- our current focus will be on credit, which is where our clients are looking to invest. As Larry mentioned in sustainable, we're looking at renewable energy, which we just raised one a very large fund. We will be following very closely the infrastructure bill and figure out how we can raise assets that we can deliver to our clients for infrastructure, which for many of our clients who would like long duration type assets, infrastructure fits very well. So, we'll probably go in that direction a bit more. And then, simply and seeing how the private equity market evolves and where our clients can earn alpha, drove our secondary and liquidations fund as some of the older vintages come due from some of the stable private equity companies that are looking to start new funds, but liquidate what is left in the older funds. So, what we're trying to do is really have a very careful eye on where we think the next value chain is and cannot be described both in a liquid form and an alternatives of funds. But what I would tell you is that our general theme is alternatives are going to become less alternative. And so, we are following that very carefully. And currently we are very focused on that -- how that compares with what our team thinks about sustainability and ESG going forward and how we combine the two.

Your next question comes from Robert Lee with KBW. Your line is now open.

Great. Thanks. Thanks. Hey, how's everyone doing? Hope everyone's doing well. I'm curious to know -- so are -- how are you thinking about or clients starting to think about -- I guess it's a popular thing now, but digital assets and I don't mean crypto per se, but now how are you starting to think about digital assets as a potential new asset class or investment class? And then I guess as part of that, maybe being a little facetious, but are we going to see Aladdin digital in two years on one of these calls?

Well -- hey, Aladdin, it is all digital. But -- in our dialogue with our clients, clients are asking questions related to what is the role of crypto or digital assets related to part of their portfolio. As you suggested, Robert, it is perceived as a possibly new asset class, similar to maybe commodities or gold. We don't believe it is a substitute for currency, but I do believe we're going to have digitization of currencies. So, it is just -- it's a conversation. We are investigating and how we can create -- how we could create different products if there's client demand related to crypto. But I -- let me just frame it. And I think one of the reasons for our success with our clients over the last 33 years has been our consistency of focusing on long-term investing. It is not about the markets and the behaviors of the markets and the ins and outs of the markets. Much of the dialogue today related to -- whether it's a game stop or what's goes out and with Reddit, it is about the TikTok and the day trading. And then, the activities around Bitcoin and other crypto, we're fascinated about it. We're excited about it as more people are enjoying looking at it, but the most of it is about trading and ins and outs of the marketplace. And so, in our dialogues with our clients worldwide, it is not a major question that is being asked. It is not a major conversation related to how does that fit into their portfolio. Summit does. Does it fit into their portfolio as a long-term investor? And I would just say overall, the actions around products that are around trading and the navigation of markets and new asset classes, it is not about -- it's just not about the whole foundation of our platform about long-term investing. And so, if somebody really wanted to build a big, deep dialogue related to this, they're probably going to go to another source. And that is just not a large foundation of the conversations we're having now. I mean, the conversations we're having with unsustainability is greater today than it was the last time we spoke to you. The conversation we're having about transition opportunities is so much greater than it was a quarter ago. And I believe the momentum there, I believe the opportunity there is so much larger than how is a crypto asset a long-term asset. And so, I don't want to diminish anything related to crypto and digital ideas. I'm fascinated about it. I think there -- it is going to be an asset class. We'll see how it performs over a long-term. And it may be a great asset class, but let's wait and see.

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

Thank you, operator. I want to thank all of you for joining us this morning and for your continued interest in BlackRock. Our first quarter results, again, are a direct result of our steadfast commitment to serving our clients. We are spending all our time trying to position our firm to staying in front of their needs, to try to anticipate their needs. So, we can be the first conversation with every client. And I believe we're fulfilling that. We're fulfilling a need in the entire financial services industry by focusing consistently on long-term, not -- we're not here to talk about the TikTOK of the market and the ups and downs. It is about focusing on items like retirement, focusing on items like sustainability and stakeholder capitalism. These are the things that we believe are building resiliency to the BlackRock business model, but also building long-term wealth for our clients and serving our clients well. Our job is to build a better future for our clients, so they could build savings and make investing easier, making investments more affordable, helping advance sustainability investing, and contributing in our communities to have a more resilient economy. And I believe our first quarter results truly illuminate our positioning with our clients, our positioning in the community. And we're winning more share of mind, more share of wallet with our clients than ever before. And we will continue to invest as Gary said for our future to stay in front of our client's needs. Have a good quarter. We'll talk to you later. Bye now.

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