BlackRock Stock

Good morning. My name is Shelley, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock, Inc. Second Quarter 2026 Earnings Teleconference. Our host for today's call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer; Martin S. Small; President, Robert Kapito; and General Counsel, Christopher J. Meade.

[Operator Instructions] Thank you. And Mr. Meade, you may begin your conference.

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 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'll turn it over to Martin.

Thanks, Chris. Good morning, everyone. It's my pleasure to present results for the second quarter of 2026. 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. A reconciliation between GAAP and our as adjusted results has been included in the tables attached to today's press release. I'll be focusing primarily on our as adjusted results.

BlackRock's record net inflows and organic base fees in the first half of 2026 are vivid proof points of a firm at the center of megatrends shaping the investment landscape across public markets, private markets and technology. Wealth managers and institutions all over the world are growing with BlackRock consistently through market cycles from ETF model portfolios to personalized SMAs to systematic and income-focused strategies and in infrastructure and private credit. With $868 billion of net inflows and 10% organic base fee growth over the last 12 months, our results demonstrate that BlackRock's total portfolio all weather strategic partner that helps clients look past short-term uncertainties and towards long-term growth.

We create and we connect clients to the vast opportunities in artificial intelligence and digital and physical infrastructure. We help them position for success in generational changes to benchmarks and equity market structure. We're driving expanded investor access to capital markets and digital assets. We're a market leader and high share gainer in manufacturing hyper-personalized tax-efficient portfolios that power wealth management platforms. We're reshaping the future of retirement portfolios with access to guaranteed income in private markets. Clients are rewarding our integrated platform of asset management and technology across public and private markets. It's what clients want because they're building one portfolio. A world that's more fragmented brings clients closer to BlackRock to make sense of the pieces to put them together in one coherent strategy for a whole portfolio and to drive outcomes at scale.

BlackRock is a leader at the center of these accelerating forces and ecosystem disruption means more money in motion and more value to play for and win. We see strong momentum. Organic base fees are more than 50% higher compared to this time last year. Higher quality organic growth, discipline on our financial framework and consistent capital return create a clear path to structurally higher margins and sustain double-digit earnings growth. We have high conviction in our free cash flow growth and are increasing our planned level of share repurchases.

In the second quarter, we delivered double-digit increases in revenue, operating income and earnings per share, with all 3 measures reaching new quarterly records. Our operating margin of 45.9% expanded 260 basis points from a year ago and reached its highest level in nearly 5 years. We generated $192 billion of net inflows, representing 8% organic base fee growth, 2 full years of above-target organic base fee growth underscores that this level of performance is sustainable. It reflects the durability of our client relationships and the diversification of our growth.

Turning to financial results. Second quarter revenue of $7.1 billion was 31% higher year-over-year. The increase was driven by organic growth, the impact of higher markets on average AUM, the acquisition of HPS and higher technology services and subscription revenue. Operating income of $2.9 billion was up 39% and earnings per share of $13.91 was 15% higher versus a year ago. EPS also reflected lower nonoperating income, a higher effective tax rate and a higher share count in the current quarter linked to the closing of the HPS transaction on July 1, 2025.

Nonoperating results for the quarter included $170 million of net investment gains, primarily driven by equity method earnings and noncash valuation gains in our investment portfolio. Additionally, following securitizes public listing earlier this July, we hold 7.3 million common shares, which will continue to be marked through investment income going forward.

Our as adjusted tax rate for the second quarter was approximately 25%. We continue to estimate that 25% is a reasonable projected tax run rate for the remainder of 2026. The actual effective tax rate may differ because of nonrecurring or discrete items or potential changes in tax legislation.

Second quarter base fee and securities lending revenue of $5.7 billion was up 29% year-over-year, driven by the positive impact of market beta on average AUM, organic base fee growth and approximately $230 million in base fees from HPS. On an equivalent day count basis, our annualized effective fee rate was broadly flat compared to the first quarter. Client demand for structural growers like private markets, active ETFs and systematic continues to lift the fee rate on net flows. Performance fees of $305 million increased from a year ago, primarily reflecting higher revenue from alternatives, including $115 million of performance fees from HPS. Quarterly technology services and subscription revenue was up 13% compared to a year ago. Annual contract value, or ACV, increased 15% year-over-year. We remain committed to low to mid-teens ACV growth over the long term.

Total expense increased 25% year-over-year with higher compensation, sales, asset and account and G&A expense. Employee compensation and benefit expense was up 28%, reflecting higher incentive compensation linked to higher operating income and performance fees and higher head count associated with the onboarding of HPS employees. Sales, asset and account expense increased 26% compared to a year ago, primarily driven by higher distribution and servicing costs and direct fund expense. G&A expense increased 17%, primarily due to the impact of the HPS acquisition. After annualizing for the impact of HPS and Preqin, we continue to expect a mid-single-digit percentage increase in full year G&A.

We continue to deliver even greater margin expansion on recurring fee-related earnings. Excluding the impact of all performance fees and related compensation, our adjusted operating margin for the second quarter would have been 46.5%, up 260 basis points year-over-year. Our capital management strategy continues to be invest first and then return excess cash to shareholders through a combination of dividends and share repurchases. We repurchased $450 million worth of shares in the second quarter. At present, based on our capital spending plans for the year and subject to market and other conditions, we anticipate repurchasing at least $550 million of shares per quarter going forward, higher than our previous guidance communicated in January.

Turning to flows. In the second quarter, BlackRock generated total net inflows of $192 billion. Flows were diversified across client channels, product types, regions and active and index strategies. We saw $178 billion of net inflows in the second quarter. Core equity and index bond ETFs led the way with net inflows of $85 billion and $61 billion, respectively. Momentum in active ETFs continued with $20 billion of net inflows as clients seek performance through a liquid tax-efficient wrapper. Precision added $15 billion as clients use iShares international and sector equity ETFs to express tactical views, iShares ETF delivered a fifth consecutive quarter of double-digit organic base fee growth powered by higher-value ETF categories such as active and precision.

Retail net inflows of $19 billion were led by broad-based flows into our active fixed income offerings as well as continued inflows into Aperio and liquid alternative funds. Institutional active net inflows of $44 billion were driven by strength in private markets, fixed income, systematic strategies as well as OCIO and target date offerings. Institutional index net outflows of $41 billion were concentrated in low fee index equities. Overall, our institutional channel delivered 9% long-term organic base fee growth in the quarter, benefiting from client demand for active and alternatives.

In private markets, the BlackRock flywheel is in motion, raising capital, deploying with discipline and returning it to clients. We saw an aggregate $15 billion of net inflows, led by deployment in private credit, fundraising and infrastructure and partial onboarding of an outsourcing mandate in private equity solutions. Finally, cash net outflows of $7 billion in the quarter were due to redemptions from U.S. government funds, partially offset by the creation of bespoke liquidity solutions. Our customization capabilities and scale are driving sustained growth in cash management with AUM up 10% from a year ago.

We see the road to 2030 and beyond is presenting one of the largest expansions in capital markets growth and participation in history. The forces of demographics, growing retirement needs, generational wealth transfer, structural deficits, rapid innovation cycles. These forces are increasing demand for investment solutions built by professional asset managers, steeped in product breadth, scale, technology and the global presence. These forces are expanding the investor base, increasing assets flowing through capital markets and creating a powerful long-term growth opportunity for the breadth of global whole portfolio solutions that BlackRock's best positioned to provide.

The strong financial results we're delivering today reflect disciplined execution against our breadth of opportunity. We generated record revenue, operating income and EPS, a nearly 46% operating margin and 8% organic base fee growth. We're confident in the durability of our growth and in the opportunity ahead.

With that, I'll turn it over to Larry.

Thank you, Martin. Good morning, everyone, and thank you for joining the call. For almost 4 decades, BlackRock has been built around the conviction and the long-term growth of our global capital markets. The global capital markets are one of the most dynamic engines of opportunity for economies around the world and the companies and the people that power them. U.S. equity markets continue to climb to new highs and returns are broadening beyond the U.S. I'm very optimistic on the outlook for global markets. We see great market fundamentals with higher corporate margins and earnings momentum catalyzed by new technology.

BlackRock is a direct beneficiary of this growth. Our scale and position with clients in every region of the world enables us to capture upside to capital market expansion through organic growth. The scale and depth of our clients -- of our client relationships have never been better. Clients are turning to BlackRock for insight and opportunities, and it's evident in our results this quarter and an over the $1 trillion increase in BlackRock's AUM so far in 2026.

This time last year, we had just closed our acquisition of HPS and launched our 2030 ambitions. Only 4 quarters in, our combination of GIP, HPS and Preqin is already delivering above our plans and accelerating our 2030 growth trajectory. Clients have rewarded BlackRock $868 billion of net inflows in the last 12 months, driving 10% organic base fee growth. Our quarterly operating income is up 39% to approximately $3 billion.

We set out a strategy built around our integrated public and private market platform underpinned by the industry's most comprehensive investment technology. Now it's enabling us to serve clients more deeply and accelerating our growth. Clients entrusted BlackRock with $192 billion of net inflows in the second quarter, contributing to our strongest first half on record. Flows in the first 6 months are more than double what we saw in the first half of 2025, driving AUM to a record $15.3 trillion.

Second quarter organic base fee growth of 8% also contributed to a record first half of net new base fees. We expanded our premium operating margin by 260 basis points year-over-year to nearly 46%. And as Martin noted, our conviction in the growth ahead for BlackRock led us to add to our planned share repurchase. Through our planned dividend and share repurchases, we expect to return over $5.7 billion to shareholders this year, which is a 16% increase over 2025.

BlackRock is simultaneously a leading public markets manager, a skilled private markets platform and a global technology company. That's a model built to deliver sustained growth and is showing up at 8 consecutive quarters of organic base fee growth at or above target. And it also means expanding margins and a scaling capital return program. And I believe momentum is only building from here.

The work we've done to bring together public and private market asset managers and technology positions BlackRock as a preferred destination for our clients' capital. Clients are increasingly choosing BlackRock for large-scale customized solutions in asset management and technology. Second quarter client activity included the funding of a $7 billion pension mandate from an international client, alongside the initial funding of a multibillion-dollar private equity solution outsourcing mandate.

Retirement is where BlackRock's mission comes to life for millions of individuals around the world. And it's one of our most important growth priorities. LifePath Paycheck continues to attract new plan sponsors focused on retirement income. It has now grown to $30 billion in AUM, and we believe the retirement portfolio of the future will draw in public markets, private markets, and guaranteed income together. BlackRock is essentially positioned to provide the glide path, the investment expertise and the technology and data needed to manage these type of accounts at scale.

Technology ACV grew 15% in the second quarter as clients leverage Aladdin for multiproduct solutions and a unified operating system. We continue to build new capabilities and AI analysis tools to give our clients a comprehensive data and workflow solution across both public and private markets.

iShares is the largest and broadest ETF platform in the world with over $6 trillion in AUM. We are leading and benefiting from category innovation and broader ETF adoption globally. In Europe, iShares has raised $80 billion year-to-date, bringing our AUM to $1.5 trillion. And in Asia Pacific, locally domiciled iShares crossed $100 billion in assets in the quarter. iShares' global scale, our local reach and pace of innovation is differentiating us in every client channel.

iShares second quarter net inflows of $178 billion contributed to a record first half. We're leading the industry with 12% organic base fee growth this year. Index bond ETF has had a new record quarter with $61 billion and our active ETFs have gathered more than $70 billion of net inflows over the last year and are leading the industry in active flows in 2026. In just the last 3 years, we've gone from the seventh largest active ETF manager to the third largest, and we have ambitions to take our position even higher.

We have momentum across our broader active franchise, which saw $53 billion of net inflows, diversified across asset classes. Our strategic income opportunity in high-yield bond funds led $18 billion of active fixed income net inflows. Our systematic platform is one of the clearest examples of how BlackRock can turn scale, data and technology into outcomes for our clients. Over 90% of our systematic equity AUM is ahead of peer medium or benchmark over the 3- and 5-year periods. And the team is delivering active returns for clients.

Our systematic equity investors are leveraging decades of proprietary data, over 1,000 alpha signals and our AI-driven research engine to deliver returns. Alpha streams from systematic equities travel across wrappers like ETFs for the active funds and institutional head funds. That breadth is showing up at our systematic net inflows of $20 billion this quarter. And AUM has doubled in just the last 2 years from $200 billion to now $400 billion. Demand is accelerating as investors look for strategies that can dynamically allocate across factors and signals to generate alpha.

BlackRock's systematic ETFs delivered $6 billion of active ETF net inflows in the quarter. And our top quartile global equity market neutral fund drove a record $7 billion of net inflows into liquid alternatives. Our combination of high-performing systematic long/short strategies alongside private markets evergreen funds differentiate BlackRock as an outcomes-based alternative provider in the wealth channel. We enable clients to balance long-term private investments with liquid, dynamic sources of return and risk management.

In wealth, demand is increasing for customized solutions. Advisers are looking to tailor portfolios for the specific needs of their end clients. BlackRock is well positioned to deliver on these capabilities at scale, whether through model portfolios, option strategies or direct indexing.

Aperio continues to see double-digit organic growth as advisers leverage its tax-aware direct indexing and long/short strategies. Aperio's AUM is now approaching $200 billion, up more than 4x since we closed our acquisition of Aperio just 5 years ago.

SpiderRock is following a similar path. This year, it delivered 2 consecutive record quarters of over $1 billion of flows. Since our acquisition of SpiderRock 2 years ago, AUM has nearly tripled to $13 billion. These are just latest examples of BlackRock's successful M&A approach. We acquire capabilities our clients are in need of. We integrate them on to our and into our global platform, and we scale them faster than they could have scaled on their own. I have all the confidence that GIP, HPS and Preqin will follow the same pattern for future growth.

We're executing on significant opportunities to mobilize capital in private markets, and our momentum is already exceeding our expectations. In infrastructure, the reach of BlackRock and GIP platform has resulted in a faster pace of deployment into premier investment opportunities and in turn, then a faster pace of fundraising. The expected close of Aligned Data Centers in the coming weeks is proofpoint. We brought together AIP, GIP and MGX in the largest data center infrastructure transaction ever announced.

Institutional demand for private markets continues to grow, including from insurers looking to capture higher yields in their general accounts. We signed several scaled high-grade investment debt mandates, infrastructure debt mandates this quarter, and we're deploying capital from public to private rotation awarded to us in the last year. GIP and HPS are also coming together on the origination side. A pipeline of joint opportunities is building in ways that reinforce our conviction in the combined platform, particularly in digital infrastructure.

BlackRock is not a traditional asset manager, and we're not a pure-play private markets firm. What differentiates us is the breadth that we deliver on one common platform. Public and private markets, active and index, data and technology and a whole portfolio advice. The decades we sat at the intersection of technology investing, and AI is now accelerating our ability to bring more people into the market that will help them build long-term savings strategies.

Expanding access to the capital markets remains core to our work at BlackRock. I've said before that one of the most important things we can do is help more people grow with their country. In the United States, BlackRock is proud to support the treasury and the recent launch of the Trump Accounts program. We expect 2 iShares ETFs to be available as investment options later this year.

Helping more people benefit from the long-term growth of the capital market is our greatest source of opportunity. That is how we deliver higher, more durable organic growth. Every investor we connect to the capital markets expands the pool of capital that BlackRock is entrusted to manage, whether through retirement, through ETFs, through Trump Accounts or through private markets. Organic growth accelerates as clients entrust BlackRock with more of their portfolio, more share of their wallet. And it's our breadth, not beta, that powers organic growth, meaning we could deliver across market environments.

Our scale assets grow with widening margins. We see it in our results this quarter, 8% organic base fee growth and nearly 46% operating margins, 15% EPS growth and increasingly in capital returns to our shareholders. The more clients we help participate in the markets, the more our own growth builds to higher organic growth, higher earnings growth and more value creation for our shareholders. As I said earlier, our momentum is accelerating. And I can say, again, I've never been more optimistic about BlackRock's future growth ahead of us.

Operator, let's open it up for questions.

[Operator Instructions] We'll now take your first question coming from the line of Craig Siegenthaler with Bank of America.

Question is on Aperio. I wanted to see if you could provide us an update on both the direct indexing, but also the long/short tax aware side, which falls in your liquid alts bucket. It looks like the underlying demand there continues to strengthen in this category. But also would appreciate your perspective on if the scheme has lagged.

Let me have Martin answer that.

Craig, thanks for the question. I want to start with one macro phrasing on that, it was like what attracted BlackRock to Aperio was beyond technology, it was beyond scale, it was beyond investment excellence, it was beyond culture fit. It was a real mission at the Aperio firm and ethos to build optimized after-tax portfolios. Our clients don't pay for education, home security and well-being with asset class level returns, they pay for it with after-tax dollars. I think our industry could generally do a better job at optimizing portfolios with what clients keep after taxes. That's a structural growth theme, building after-tax portfolios that are optimized. It's good for clients. It's applicable not just to the direct indexing and long/short business. It's applicable to all the portfolio construction we do here at BlackRock across our whole managed accounts, SMAs and models business that's closing in on $800 billion.

I think Aperio is a great example of an acquisition where we anticipated and delivered on those needs. We scaled strong existing technologies and built new revenue streams for shareholders. SMAs are a real structural grower in the industry across wealth, private wealth, mass affluent, ultra-high net worth. Aperio had $7 billion of net inflows in the second quarter split about half and half between long-only and long/short strategies.

Our 2026 flows in Aperio are about $20 billion. They've already surpassed 2025 record flows of $15 billion, representing a fifth straight record year. And as Larry said in his comments, AUM is up 4x since the acquisition near $200 billion. I do think that long/short strategies, whether they're 130/30 or other variants of taking out the streams and optimizing for tax, I do think that's the next category of growth in tax-aware investing. And I do think that BlackRock has a really, really strong toolkit to solve some of the investors' biggest challenges. We can do that across ETFs, SMAs, direct indexing private markets, and long/short strategies will be complementary to offset some of the gains happening in private markets. So this is the whole portfolio phenomenon and being able to integrate long/short strategies in an after-tax optimized portfolio, we see is one of the key structural growth engines in our 2030 plan.

Next question will come from the line of Michael Cyprys with Morgan Stanley.

I wanted to ask a question on tokenization. You've articulated a vision to tokenize iShares, ETFs among other assets and have already demonstrated progress with BUIDL. So I was hoping you could talk about the steps you're planning to take over the next 12 months to drive further progress towards your vision? And what are some of the key milestones that you're tracking?

Thanks, Michael. It's Martin. I'll take that one. So we see the operating environment and digital assets becoming more and more constructive, and our strategy remains client-led. We're focused on scaled regulated access. We already have about $110 billion in AUM connected to digital assets. And as part of our 2030 plan, we're aiming to make this a $500 million revenue business at BlackRock.

Over the longer term, we want BlackRock's products to be accessible natively where many investors already hold digital assets. We're exploring ways to tokenize long-term investment products, as you mentioned, like iShares. So investors never need to leave digital wallets to allocate efficiently across crypto, stablecoins and exposure to long-term stocks and bonds. We're working with a really wide group of traditional and new players on building access to high-quality, long-term investment products that can grow and thrive in digital wallets. We have 3 things we're doing and tracking milestones against each. The first is to bridge traditional finance world and the decentralized finance markets. We're doing that through our digital assets products, IBIT, ETHA, BUIDL, all invest in digital native products and are the largest in their categories. They're driving meaningful growth in the traditional capital markets and bridging digital and traditional finance.

Second, we want to be the stablecoin reserve manager of choice in the industry. We already manage $60 billion of reserves for Circle, representing about 1/4 of the $300 billion stablecoin market. We see lots of growth ahead in stablecoin, and we want to be the reserve manager of choice.

The third, and I think the most exciting for us is tokenizing long-term investment products like treasury funds, iShares, ETFs and even private markets in the long term. So to that end, 2 actions we've taken. We've recently filed 2 registration statements with the SEC for tokenized money market funds. One is the tokenized share class on Ethereum of an existing fund, and the other is a more digitally native strategy with additional features like daily dividend reinvestment and the like. We expect it to be accessible through multiple chains and to operate in an ecosystem where third parties support stablecoin enabled subscription and redemptions so that the funding mechanism can happen all on chain in the digital wallet.

As stablecoins and digital wallets grow, clients will need high-quality reserve and liquidity products that can operate natively in that digital ecosystem. These filings that we've made recently are about bringing BlackRock's core cash management capabilities to where digital assets clients are already operating. They reinforce our broader ambition to help connect traditional capital markets and tokenize assets.

The thing I observed is that there's 5 billion digital wallets in the world. When we talk about tokenized assets, tokenized assets are the spear tip into an entirely new distribution channel, accessing an entire new class of investor. It's a pure organic growth opportunity for BlackRock. We have a whole scale ecosystem of products that could over time be tokenized. And when I think about $2 trillion plus of crypto and digital wallets, when I think about another $300 billion of stablecoins all growing, these are all potential new investors with iShares. They're all potential new users of model portfolios, SMAs and managed accounts in tokenized format. We want to build a digital wallet native asset manager. We're working with market participants, regulators in a way to do that, that creates growth and resiliency and brings more investors into the markets and more organic growth at BlackRock.

Next question will come from the line of Alex Blostein with Goldman Sachs.

Larry, I was hoping to go back to your comments around GIP and HPS performing ahead of the plan, helping you accelerate towards your 2030 objectives, but really through the length of the insurance opportunities. I think a few quarters ago, you outlined the asset base that exists within BlackRock today. They could participate in some of the conversion from liquid to a liquid fixed income market. So I was hoping to get an update on that, how that progress is unfolding, and where you see the sort of private markets insurance-related AUM kind of end up at BlackRock over the next couple of years?

So, so far, in 2026, we've closed about $10 billion in high-grade and infra debt mandates for insurance companies. Obviously, there's different complexities, different sectors, deal structure, where the insurance company, especially the interest of the long liabilities could earn 150 to 350 basis points over treasuries. So we, in our conversation with insurance companies and probably every week, we have 2 or 3 more of them with it, more and more insurance companies worldwide, underlying worldwide.

I'm looking to access more private markets to achieve those higher yields for their asset base. And so we just see this accelerating. Probably the most important thing that I kind of said also is I am really pleased in how well integrated both HPS and GIP are on these opportunities. We're working right now simultaneously and there's some very large financings together related to infrastructure that obviously, equity plays a large part of it, but the debt side of the component is even much larger. So we expect this to continue to accelerate, not just for obviously, insurance companies but throughout the world.

So the J curve for infrastructure investing is only just starting to accelerate. And accordingly, to complete these types of large-scale deals, it just is requiring large scales amount of debt. And we're at the very beginning of that. We are being asked by more and more companies and technology that how can we help them across the entire stack of need to investing. As you think about the hyperscalers, they went from a balance sheet like companies to a major balance sheet needs in building out data centers, building out the infrastructure, and they're looking for strategic partners that can provide them the totality of that relationship. And there's only a few firms that can be doing that.

And so the marriage of BlackRock, HPS and GIP across the board on the origination side is only accelerating. As we originate more and more, then we can go to our clients like insurance companies and see much more conversion. But when we first announced the HPS and GIP transaction, we talked about the $800 billion of insurance assets that we have. And if we can convert 5% or 10% of those assets, it has a tremendous lift to our average net fees, and it helps us complete that type of relationship that we have with the insurance industry. It is materially happening right now, and it's only accelerating.

So I believe we're in a great position to effectively extend the opportunities we have across all of our investors, but particularly the insurance industry that is recognized as they can take somewhat more illiquidity risk for higher returns on their balance sheet, and that is what's driving a lot of the demand today. And across our -- even our private credit mandates, we have net inflows across all the different mandates. And obviously, there's a lot of headlines related to the retail side of it.

But we could say that almost -- there isn't a week that doesn't go by where our institutional investors are asking, is there any discounts to some of the private credit? And if you could -- we had the idiosyncratic risk in some of the private credit a couple -- the last quarter of last year. But we've seen actually a stabilization in terms of credit and we're not seeing any real change in the credit quality of payments from our private investments. So overall, fundraisings closed and notified about $22 billion and we expect that to continue to drive and accelerate.

Next question will come from the line of Mike Brown with UBS.

Martin, I wanted to maybe ask about the margin here. So you reached 45.9% this quarter. So you're tracking to the 45% plus full year guide at the highest level, nearly 5 years. Maybe just unpack some of the drivers of expansion in the quarter, whether it was mix driven operating leverage, was it performance fees, any of the acquisition synergies starting to come through more meaningful? And just talk about maybe how sustainable some of those benefits are. And then as we look ahead, how much additional margin expansion is achievable over that next kind of 12- to 18-month horizon? And what would be the structural drivers in terms of revenue mix scale tech? And maybe how do you balance that with continued investments in areas like AI, technology broadly and private markets?

Thanks, Mike, for the question. So BlackRock continues to deliver industry-leading margins over the cycle. We continue to target a 45% or greater adjusted operating margin with our margin on recurring fee-related earnings running higher.

We've talked about building BlackRock around the whole portfolio around the structural growth categories of investment solutions like private markets, ETFs, especially in higher-value categories like digital assets, noncap-weighted indexing, outcomes, active ETFs, SMAs, models, target date technology. The flows and base fee growth in these categories, they're just -- they're more all weather. They're less market-sensitive, and that's an important part about driving more structural growth and driving more consistent revenue growth that can power higher earnings and higher margin. They play a key part in driving structurally higher adjusted operating margins.

The markets, of course, Mike, continue to have an impact on our margins, both up and down. But our 2030 goal of reaching over 30% of revenue from private markets and technology that we laid out at Investor Day last year, that goal of 30% of revenue from private markets and technology is aimed to dampen that effect and power more steady double-digit EPS growth and margin expansion.

We did record our highest margin in almost 5 years this quarter with both operating and recurring FRE margins expanding by over 250 basis points year-over-year. Our operating margin for the quarter was 45.9%, and the margin ex performance fees and related comp was 46.5%. So we're well on our way to those numbers that we laid out in the 2030 plan.

I'd offer -- I don't see this quarter's margin as a ceiling. We've run BlackRock at margins close to 47% back in 2021, and that was at a time when we didn't have the large-scale private markets franchises. I don't think we have the performance across our systematic equities platform or the breadth across that platform. We didn't have the scale that we have today in SMAs and tax-managed strategies in multi-assets. So we have many more engines, including GIP and HPS, both of which were north of 50% FRE margins when they joined BlackRock.

I think there's 2 main levers really to structurally engineering continued margin expansion. The first time -- the first one is, we'll see margin on the FRE side, driving higher towards the levels of the best-in-class private markets name, so north of 50%. We can do that through the acquired businesses and continuing to scale and grow them as well as with the existing highly scaled franchises we have in iShares, digital assets and systematic equities. Then with constructive markets, second, higher fee rates on flows and strong organic growth. We think we can pull the fully burdened operating margin of the company up as well. And as I've said before, we've run the company at 47% so I don't see 45% or 46% of the ceiling. We see the totality of our 2030 strategy as structurally engineering higher growth and margin through both faster revenue growth, higher fee rates on flows, efficient use of technology automation to create more scale and operating leverage. That's what we think takes us to those margin targets that we've laid out in the 2030 plan.

Next question will come from the line of Patrick Davitt with Autonomous Research.

My question is on the distribution side. There's news this week that Merrill Lynch is making some fairly dramatic increases in revenue sharing fees. This comes after Schwab announced they were increasing platform fees on ETFs. So I hear you all speak to what specific partners are doing, but could you speak to the risk that this is becoming a broader trend and that you could see some of that revenue headwind from this? Or do you think BlackRock's scale and importance could allow you to avoid these incremental platform fees in some way?

Thanks, Patrick. I'll take that one. It's Martin. I hope you're doing well. BlackRock has long-standing, very differentiated relationships with our distribution partners that look much different to those of the smaller-scale issuers or some of the niche players. Our index ETF distribution philosophy and practice does not include tolls. We've not been approached by any major U.S. distributors and we're not in any active negotiations about tolls on index ETFs.

More importantly, we have a really successful track record of creating really broad win-win distribution partnerships beyond just product that help both the distribution partners, their advisers, the clients, they help all of them grow faster and they help BlackRock grow faster and more consistently, too. Our brand and our capabilities, combined with our distribution partners create more value and more growth.

We have always partnered with our distribution partners around alpha-seeking '40 Act products across wrappers. That's all public and regulatory disclosures. As client and distributor demand for active ETF growth, our commercial arrangements are designed to support distribution while maintaining attractive economics.

To be honest, Patrick, the economics are not meaningfully different based on whether client demand is expressed through a mutual fund or an active ETF. If anything, it's better on active ETFs for both the distributors and the issuers. The continued migration that we're seeing of client assets from brokerage into fee-based advisory accounts supports long-term profitable growth for both the distribution partners and BlackRock.

We are the largest global ETF provider with the broadest highest quality lineup, but we bring so much more than product to these relationships and our distribution partners value that. We bring advice and technology-driven capabilities through models, Aladdin Wealth, portfolio construction tools like Advisor Center. We bring thought leadership through our BlackRock Investment Institute. We have a dedicated adviser insights team that works with advisers on practice consulting, and we bring access to leading portfolio managers. We also happen to have the largest sales force dedicated to providing millions of customers access to iShares solutions.

What I'd stress is that iShares and BlackRock help make wealth management platforms more attractive for their financial adviser and individual investor customers. Our clients consistently tell us and the distribution partners that the platforms they want to use have to include iShares. They have to include iShares as the biggest and most diversified provider of ETFs. That's the win-win for everybody. We grow faster, more consistently, they grow faster, more consistently, and we all grow more profitably together.

Next question will come from the line of Ben Budish with Barclays.

A couple of times throughout the call today, you guys gave a little bit of color on the makeup of private market flows in the quarter. I think, Martin, you called out credit deployment, infrastructure fundraising. Larry, you talked about some IG mandates that you've won. I was wondering if you could unpack that a little bit more. I'm curious on the credit side. What sort of deployment activity are you seeing on the infrastructure side? I think you're sort of out of the major flagship cycle. So I assume it's a lot of SMAs. You talked about this private equity outsourcing deals. So just curious if you could give a little bit more color on specifically what you're seeing that led to such a solid quarter of flows and what that sort of implies for the next couple of quarters?

So I'd start by saying there's 3 things going on around kind of fundraising and deployment. Maybe I can just give you some high levels, just progress, targets in progress, tell you a little bit about infra and private credit deployment.

So we'll start by saying we're executing on a really strong pipeline for private markets deployment as well as fundraising. We're in the market for a number of first-time and successor strategies across infrastructure and credit. We're seeing really strong engagement, as Larry said out, for high-grade and infrastructure debt SMAs, including several mandates that signed this quarter.

I'd remind you that our -- at our Investor Day in 2025, we talked about how our investment performance differentiated deal flow client relationships would support a target of $400 billion in gross fundraising from 2025 through 2030. And we're continuing to make good progress there. And part of making good progress in fundraising is raising the capital, deploying it with discipline and then returning it to clients on an appropriate time line. That's how you compound growth in private markets, and we're really compounding in all 3.

We had $15 billion of inflows in private markets in Q2, $6 billion of that was really from private credit, and we've seen incredible opportunities, I think, in the marketplace. Private credit spreads have widened. The team sees good opportunities and is deploying very well there. And on a relative value basis against sort of public market comparables and single-B, institutional investors are very enthusiastic about putting more private credit money to work in this environment.

The first half of the year in our infrastructure platform has been one of the busiest on records. We announced the planned acquisitions, the take private of AES; the ground leasing company in Europe, TCR; obviously, the Aligned Data Centers deal; and then just this week, our mid-market strategy took an acquisition stake in Summit Ridge Partners. So it's been a really active environment for both infrastructure and private credit.

The $6 billion in private credit is really deployment based. On the infrastructure side, the $5 billion was a bit of mix of fundraising and deployment. So we had fundraising in our middle market strategy, our emerging market strategy as well as in infra debt SMAs. And then we had a $3 billion funding of a partial outsourcing mandate in private equity solutions with a client in Latin America. I think that continues to be a really attractive opportunity for BlackRock. When I look at the LP community, they often have dozens, if not hundreds, of private equity managers that ultimately needs to be rationalized. They need to consolidate their buying power to become a top LP with PE and our ability to provide GP/LP solutions to manage those portfolios, optimize them, reinvest them well. That's a great opportunity. And I think that $3 billion of inflows in PE solutions is a good indicator of potential other things we can do in that space to continue growing.

Your next question will come from the line of Brian Bedell with Deutsche Bank.

If I can just ask on Europe in terms of the iShares traction there, and good to see the $80 billion of net flows year-to-date. Can you talk a little bit about how you see the democratization of retail investing in Europe shifting toward more acquisition of U.S. assets, U.S. equities, and how iShares can be -- can play a role in that? And particularly on rising demand for tokenization of U.S. equities, which are available in Europe right now, but not in the U.S. Can you just talk about like how you see iShares playing a role in that dynamic? What are you doing to catalyze that?

Well, first and foremost, the growth in ETFs in Europe is experiencing the same type of curve that the U.S. did. Obviously, maybe 5 to 8 years later with the adaptation of using ETFs, as you call it, the democratization of investing in Europe is growing. The growth of the European capital markets is growing. And so, A, we crossed the $1.5 trillion mark in Europe, as you mentioned, $80 billion of flows this year. We're seeing for the first time in years a greater movement towards investing in your country. So it's not just buying U.S. assets. But we're seeing a real nationalization going on in some of the countries where more and more people believe they need to be investing in their country or at least investing in Europe. And that is occurring through the utilization of iShares or through ETFs.

And we're continuing to lead our flows or the sum of the other -- the next 4 ETF players in Europe. And it's because of the broadness of our platform, the ability to bring -- to customize also solutions on behalf. But as you frame the question also, we are seeing more investing in the U.S. globally through ETFs that are domiciled in those locations.

So across the board, adaptation and the democratization of investing and moving away from the total reliance on bank and bank savings to growing with your country, we're seeing this more and more worldwide. And it's showing up vividly in Europe, and that's one of the big reasons why we believe we're so well positioned. And I do believe by being the global market leader in ETFs globally allows us to have that differentiation. Whether there is demand for a U.S.-based investment or Asian or European. I can't tell you we're seeing any more or less investing from Europe into U.S.-based assets.

I would have said a year ago, you saw some I would say so many investors globally were so overallocated in dollar-based assets that we actually witnessed last year a modest reduction in that overallocation. I would say very clearly because of the U.S. -- because of the growth of U.S. and U.S. technology companies, I would say most global investors allocation to dollar-based assets are back to their fullest level.

That being said, let me be clear, the volatility of the dollar does play a role in how people think about the allocation in the dollar-based assets. So this is all interconnected. And obviously, the value of the dollar is so interconnected to what is the -- what will the Fed reserve do related to higher or lower interest rates, which would affect the valuation of the dollar.

But overall, there is -- we are the most well-positioned firm in Europe to take flow as more and more individual investors are moving towards capital markets as a mechanism to grow with our country.

Can I have one flow highlight there, Larry. I think it's interesting to what you add is if I think about kind of iShares globally as access vehicles to markets all around the world, we've run that playbook in the U.S., we've run it in Canada, we've run it in Europe. I thought one thing that was really interesting in the quarter is that we saw obviously declines in crypto and Bitcoin in Ethereum by 30%. We actually had very strong inflows into the European Bitcoin ETF, about $650-plus million in international exposures.

And so I think it's just as clients build portfolios, look for diversifiers, iShares are the access vehicle and being able to bring them to Europe, Canada, Latin America, Asia, U.S., in a way that people make 1%, 2% allocations to their portfolios. We're seeing that strategy really starting to work in route.

Next question will come from the line of Alex Bond with KBW.

I wanted to ask around Aladdin and Preqin. Maybe if you could just add a little bit more color on the trends you're seeing in and around those businesses at the moment? How are synergies progressing here? And also maybe how is demand for these services progressing in light of calls for more transparency in private markets?

And then lastly, can you also expand upon how you see AI impacting this area of the business, both currently and also in the future?

Let me start off with Martin, and then I'll follow up.

Yes. So we had a strong quarter -- we had a strong quarter in Aladdin and continue to see really good growth across the technology and subscription revenue business. Obviously, 13% revenue growth, 15% ACV growth in the quarter.

Technology is the main engine for investment performance. It's the main engine for operating leverage. It's the engine for great client experiences and clients are investing more in technology. They're accelerating their tech spend and they're consolidating to leverage fewer providers that have deep integrations across fintech and data ecosystems, and they want to work with BlackRock as a firm that can bring it together across the whole portfolio of services, public and private markets.

The combination of Preqin with our capabilities in Aladdin and eFront, it's complementary, it's delivering more value for clients in BlackRock, and we look forward to executing on the opportunities that bring the benefits of Aladdin to new clients and expanding relationships with existing clients.

I'd say some of the gyrations in the private markets and moves on the regulatory landscapes have been real accelerants for Preqin, eFront and Aladdin more broadly. So we have a really strong pipeline ahead of deals across Aladdin, eFront and Preqin. I'd offer, for example, the Department of Labor's proposed safe harbor rule is clear that fiduciary standards are going to demand rigorous data, performance benchmarking for private assets in 401(k). Some of the recent gyrations in nontraded BDCs and private credit have led investors across the whole portfolio to say, where do I really have exposure to software? Where do I have exposure that is literally the software? Where do we have exposure to something that's classified as health care, but is really health care IT.

So that ability to bring more transparency is a real accelerant for Preqin. We reiterated our low to mid-teens ACV target. And from what we see in the pipeline and some of these external catalysts like regulatory and the markets, we think it's a great environment for Aladdin, Preqin and eFront.

I would just say, as Martin was describing, this is one of the biggest priorities within BlackRock. And we are the technology provider to help investors from retail to institutions to have a seamless blending of public and private markets across our portfolio. We are not there. Nobody is there yet in the totality of the analytics and data that is provided in the public market space. But that's just why we bought Preqin, why we bought eFront and we have a huge task force and making sure that we could deliver in the future a seamless analytical platform to help evaluate the attended risk across public and private markets.

And so each and every client from a retail client to an institutional client can seamlessly understand their risk across their entire platform, public-private, and that is going to be the real destination for BlackRock. And this also, as Martin was saying, this confirms and validates the purchase of Preqin and why we needed that to bring this forth. We're not 100% there yet, but the demand and the pending demand of having those analytics to seamlessly move across public and private markets on one common technology platform is very, very important. It's very important for us to be that deliverer of that content. And this is one of the key priorities for BlackRock over the coming year.

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

Thank you, operator, and I want to thank everybody for joining us this morning and your continued interest in BlackRock. BlackRock continued to deliver record growth for the first half of 2026, representing the strongest start to our year in our history. The investments we made in our platform are showing up in our results, and I believe the best of BlackRock is still ahead. I am very confident in our ability to continue to deliver for our clients and for our shareholders alike. Everyone, have a good quarter and enjoy the summer.

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

Good morning. My name is Jen, and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the BlackRock, Inc. First Quarter 2026 Earnings Teleconference. Our host for today's call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Martin S. Small; President, Robert S. Kapito; and General Counsel, Christopher J. Meade.

[Operator Instructions]. Mr. Meade, you may begin your conference.

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 Martin.

Thanks, Chris. Good morning, everyone. It's my pleasure to present results for the first quarter of 2026. 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 results. A reconciliation between GAAP and our as-adjusted results has been included in the tables attached to today's press release. I'll be focusing primarily on our as-adjusted results.

It's been a standout start to the year for BlackRock. Our first quarter revenue, operating income and earnings per share grew double digits. We expanded margins by over 100 basis points, and we delivered 8% organic base fee growth. That's our seventh consecutive quarter at or above 5%, bringing the last 12 months organic base fee growth to 10%. What's driving that performance is deep engagement with clients. We're providing advice, insights and access across the whole portfolio, allowing clients to efficiently implement both long-term strategic asset allocation moves and tactical exposures to navigate near-term themes and markets. These higher velocity markets bring clients closer to our firm.

BlackRock is winning mind share and wallet share reflected in $130 billion of net inflows in the first quarter. Organic growth is durable and broad-based. It's consistently across product, region and client type. Firms we brought together deliberately are now compounding even faster in our results and with our clients. You see it across the BlackRock portfolio. Aperio flows accelerating as advisers bring tax-aware direct indexing into the core of accounts, iShares leading the industry across active and index, infrastructure fundraising and deployment ahead of plan.

The first quarter of 2026 unfolded in a more volatile market environment. Markets showed heightened sensitivity to incremental economic data with volatility rising across rates, equities and currencies. There is real impactful geopolitical uncertainty. There's both excitement and anxiety about how artificial intelligence will impact day-to-day lives and business models. As capital reallocates and assumptions are challenged, markets can feel unsettled even when underlying fundamentals are sound. That dynamic is evident today.

While headlines and sentiment remain uneven, BlackRock's performance tells a very different story. Our fundamentals are strong. Organic base fee growth remains well above target and margin expansion continues to reflect the operating leverage built into our model. Momentum across our business continues to accelerate. That momentum is rooted in clients wanting to partner with scaled, trusted platforms, and they're consolidating more of their portfolios with BlackRock.

Turning to our financial results. First quarter revenue of $6.7 billion increased 27% year-over-year, driven by organic growth, the impact of higher markets on average AUM, the acquisitions of HPS and Preqin, and higher technology services and subscription revenue. Operating income of $2.7 billion was up 31% and earnings per share of $12.53 was 11% higher versus a year ago. EPS also reflected lower nonoperating income, a higher effective tax rate and higher share count in the current quarter linked to the closing of the HPS transaction on July 1, 2025. Nonoperating results for the quarter included $66 million of net investment gains, driven primarily by equity method earnings and noncash valuation gains in our minority investments.

Our as-adjusted tax rate for the first quarter was approximately 23%. This reflected $57 million of discrete tax benefits related to stock-based compensation awards that vest in the first quarter of each year. We continue to estimate that 25% is a reasonable projected tax run rate for the remainder of 2026. The actual effective tax rate may differ because of nonrecurring or discrete items or potential changes in tax legislation.

First quarter base fee and securities lending revenue of $5.4 billion was up 24% year-over-year, driven by the positive impact of market beta on average AUM, organic base fee growth and approximately $230 million in base fees from HPS. On an equivalent day count basis, our annualized effective fee rate was 2/10 of a basis point higher compared to the fourth quarter. Our fee rate benefited from outperformance of international equity markets relative to the U.S., along with client demand for international iShares exposures and our structural growers in systematic equities, private markets, Aperio and active ETFs. Performance fees of $272 million increased from a year ago, reflecting higher revenue from alternatives, which includes $121 million of performance fees from HPS.

Quarterly technology services and subscription revenue was up 22% compared to a year ago. Growth reflects sustained demand for our full range of Aladdin technology offerings and a full quarter impact of the Preqin transaction, which closed on March 3, 2025. Preqin added approximately $65 million to first quarter revenue. Annual contract value, or ACV, increased 14% year-over-year. We remain committed to low to mid-teens ACV growth over the long term.

Total expense increased 24% year-over-year, reflecting higher compensation, sales asset and account expense and G&A. Employee compensation and benefit expense was up 27%, reflecting higher incentive compensation linked to higher operating income and performance fees and higher headcount associated with the onboarding of HPS and Preqin employees. Sales asset and account expense increased 25% compared to a year ago, primarily driven by higher distribution and servicing costs and direct fund expense. G&A expense increased 14%, primarily driven by the impact of the HPS and Preqin acquisitions. Excluding the impact of the HPS and Preqin acquisitions, G&A would have increased a mid-single-digit percentage from a year ago.

Our first quarter as-adjusted operating margin of 44.5% was up 130 basis points from a year ago, reflecting the positive impact of markets on revenue and strong organic base fee growth. We continue to deliver higher margin expansion on recurring fee-related earnings. Excluding the impact of all performance fees and related compensation, our adjusted operating margin for the first quarter would have been 45.6%, up 180 basis points year-over-year.

We repurchased $450 million worth of shares in the first quarter. At present, based on our capital spending plans for the year and subject to market and other conditions, we still anticipate repurchasing at least $450 million of shares per quarter for the balance of the year, consistent with our January guidance. In the first quarter, BlackRock generated total net inflows of $130 billion, led by strength across ETFs, active and private markets. Record first quarter ETF net inflows of $132 billion were led by index bond ETFs with $41 billion of net inflows. Precision exposures, core equity and active ETFs added $39 billion, $32 billion and $19 billion, respectively.

Client demand for international diversification presents meaningful upside for BlackRock, particularly in areas like emerging markets and precision single country allocations. This demand for premium exposures that are specific to iShares resulted in double-digit organic base fee growth for ETFs in the quarter. Retail net inflows of $15 billion reflected continued strength in our systematic liquid alternatives, active fixed income and evergreen private markets offerings. Subscriptions for HPS' flagship non-traded BDC continue with approximately $150 million of subscriptions for the April window. Demand for Aperio and SpiderRock is also accelerating as financial advisers turn to these platforms for customized and tax-aware strategies. Aperio generated a record $13 billion of net inflows and SpiderRock added over $1 billion in the quarter. Aperio's AUM has more than tripled and SpiderRock's AUM has more than doubled in the 5 and 2 years since their respective closings.

Institutional active net inflows were $24 billion, driven by our LifePath target date franchise, private markets and systematic strategies. These inflows were partially offset by a few client-specific active fixed income redemptions. Institutional index net outflows of $35 billion were concentrated in low-fee index equities. In private markets, we continue to see strong momentum supported by investment performance, differentiated deal flow and the breadth of our client relationships. We saw an aggregate $9 billion of net inflows led by private credit and infrastructure and primarily driven by deployment activity. Finally, BlackRock's cash management platform saw $6 billion of net outflows in the first quarter. Cash management results reflected seasonal redemptions from U.S. government funds, partially offset by growth in customized cash mandates.

BlackRock is at its best helping clients navigate intense periods of transformation across industries, markets and geopolitics. Capital is moving. Wealth management platforms, institutions, consultants, they're evaluating their providers of asset management services. Our whole portfolio model has a proven track record of capturing momentum and gaining share in these environments. BlackRock is simultaneously a leading public markets manager, a scaled private markets platform and a global technology company. That's not something that can be replicated overnight. Our clients know it, our results prove it. We generated 8% organic base fee growth in the quarter and 10% over the last 12 months. At the same time, we grew revenue and operating income double digits and expanded margins by over 100 basis points.

When clients are making big decisions about their portfolios, they're choosing BlackRock, because we can meet them across public markets, private markets and technology, all on one platform. We have the investment expertise, the technology, the global reach and the track record. And we have nearly 25,000 colleagues, One BlackRock, working together to deliver excellence for our clients and growth for our shareholders.

With that, I'll turn it over to Larry.

Thank you, Martin. Good morning, everyone, and thank you for joining the call. This was one of the strongest starts to a year in BlackRock's history. Clients awarded us with $130 billion of net inflows in the first quarter. That drove 8% organic base fee growth, representing our highest first quarter in the last 5 years. Technology Services ACV grew 14%. Our margins expanded by over 100 basis points to 44.5%. And our firm's effective fee rate moved upward. And over the last 12 months, clients entrusted BlackRock with $744 billion in net new assets, powering 10% organic base fee growth.

Our result reflects a global business with accelerating momentum, deep client engagement worldwide and a platform built to compound through cycles. But our position reflects something larger than 1 quarter or even 1 year results. The conversations I'm having with clients around the world confirm what our results already show. Our business is becoming more global and more connected. Our brand is strengthening in every region in which we operate. I've seen it deepen even in the last few weeks in my trips to Mexico, Europe and my conversations with colleagues and clients in the Middle East. I want to recognize the resilience and partnership from our employees, our clients and our Board members in the Middle East. We'll continue to do everything we can to support them.

In a world where capital is moving and provider relationships are being reevaluated, BlackRock is a trusted destination. A major part of my role has always been spending time with clients. By 2026, schedule has already been filled with rich dialogue with CEOs, sovereign wealth funds, pension funds, insurance CIOs, wealth managers and governments. In these conversations, I hear a consistent theme, the world feels different, not just uncertain, but different. The world is reorganizing around self-reliance. AI is reshaping how we live and how we work. Private markets are a large and growing part of the capital markets, and clients are turning to BlackRock to help them understand what this means for their portfolios and for their beneficiaries.

We're engaged with clients across every channel, geography and asset class. Many of these conversations would not have been possible 5 years ago, because the platform we now have built did not exist. We built it by bridging public and private markets and by expanding iShares into new regions and asset classes, by unlocking personal SMAs through Aperio and by making active a true scale business through systematic alpha.

BlackRock is playing a role that goes beyond asset management. We're partnering with governments and clients to help more people grow with their economies and with their countries. Through iShares and our local platforms, we're helping turn citizens into investors in their local economies in India, in Mexico, in Japan, in Europe and beyond. Much of our work is focused on making retirement investing more accessible. Strong retirement systems deepen on deep functioning capital markets, and deep capital markets are built in part by the savings of people planning for retirement. BlackRock's role in retirement is resonating in every conversation I have with every governmental leader. Retirement is foundational to BlackRock.

Our platform spans defined benefits and defined contributions and brings together public and private markets, active and index and technology at a global scale. That combination differentiates us in the U.S. as plan sponsors consider the role of private markets in 401(k)s. But it's also shaping how we partner with clients in regions like the Middle East and India to build a more durable retirement system and local capital markets. We're invested ahead of our clients' needs and secular forces driving growth in capital markets. We're more confident than ever in our model and the breadth of our pipeline has never been greater.

BlackRock's diversified platform is an advantage. We develop whole portfolio solutions at scale. We're deepening client relationships and enabling more durable growth. It provides resilience and it gives us upside capture when market conditions shift. When clients rotate towards international exposures, as they did this quarter, BlackRock benefits. iShares is differentiated in that it indexes virtually every slice of global equities and bond markets from broad benchmarks to emerging markets to single country precision exposures. Demand for these premium exposures drove record iShares first quarter net inflows of $132 billion, with net base fees double what they were compared to this time last year.

Our active ETF platform has grown 4x in the last 2 years to more than $110 billion in AUM. Net inflows of $19 billion led the industry. We said that we believe that active ETFs can be a $500 million or greater revenue generator by 2030, and we're already more than halfway there. Strong client engagement drove $3 billion of active equity net inflows. For BlackRock, active equity is a growth area. Our systematic equity offerings remain one of the leading investment performance engines. We're working on a number of other systematic equity assignments with clients around the world. Clients want to harness AI, decades of proprietary data and BlackRock's track record of turning quantitative rigor into long-term investment performance. Then in retail active fixed income, we raised $2 billion, led by our top-performing unconstrained strategic income opportunity fund.

We're firmly in the era of whole portfolios. Clients want advice. They need allocation and implementation across public and private markets together at scale. A decade ago, fiduciary's best practice often meant diversifying across a number of managers. As portfolios and governance have grown more complex, our clients are actually increasingly choosing to work with fewer strategic partners, many times just one. We see that shift reflecting in the industry outsourced CIO assets, which have more than doubled over the last 5 years. This movement towards whole portfolios is playing directly to our strengths. Clients are choosing BlackRock because we build together asset management and technology across public and private markets seamlessly in one integrated platform. The whole portfolio construct has resonated for years in our institutional channel, where we've been entrusted with approximately $300 billion in large-scale outsourcing mandates over the last 3 years.

In wealth, we are also opening new avenues of growth as demand for public, private tax awareness investing reshapes how investors build their portfolios. BlackRock's wealth platform spans over $1 trillion in AUM with global distribution across tens of thousands of financial advisers. It delivers seamlessly integrated public and private market solutions, model portfolios and practice management capabilities. That significant value proposition as wealth management firms rethink their product shelves and look to do more with fewer partners. We're seeing demand across our wealth offering. That includes a record quarter in Aperio and SpiderRock, outsourcing mandates and net inflows into liquid active and private market strategies. Private markets, including net inflows into our ELTIF 2.0 funds in Europe and our flagship non-traded credit BDC.

The combinations of GIP and HPS with BlackRock are surpassing the highest expectations we underwrote. GIP V closed above its $25 billion target and is already majority committed through recently announced deals like TCR, AES and Aligned. Then joining HPS outsourcing and structuring expertise with BlackRock's relationship network has supercharged our combined origination capabilities. That allowed us to be more selective while still actively deploying capital at scale. These businesses are not just integrating, these businesses are accelerating.

There's been a lot of attention on private credit, but the headlines do not reflect what clients are telling us, what our portfolio data shows or where we see the market going. Demand is structural. Private credit serves an important role in the financing ecosystems. Banks, governments, public capital markets cannot fully address the world's growth and investment capital needs. That isn't changing. Much of the focus on wealth vehicles like BDCs, interval funds and tender funds. But these funds, these make up around $550 billion in AUM or about 25% of the $2.2 trillion private credit industry.

Actually, institutional demand is accelerating. They're increasing allocation to private credit as wider spreads are enhancing return potential and defaults while normalizing or still within historical standards. Private credit has historically offered asset level yields that are approximately 150 basis points higher than comparable rated traditional fixed income. New activity levels have been somewhat lower in the first quarter, which is partially seasonal and reflects related to market uncertainty. But new regular way direct lending opportunities are being quoted 25 to 50 basis points wider than where the market was in the fourth quarter, with select opportunities over 100 basis points wider. Periods of market disallocation (sic) [ dislocation ] are when private credit investment opportunities are most compelling.

BlackRock's private financing solutions platform benefited from a balanced and diversified client base across investor types and geographies. We have particularly strong representation among insurance companies and pensions as well as sovereign wealth funds and private market relationships. About 85% of private financing solution investor base is institutional focused, leading to greater capital durability across market cycles. This enables us to remain active investors across market environments, which should ultimately lead to better long-term risk-adjusted returns.

Over the last 5 to 7 years, relatively benign credit markets have lifted all boats. As the overall market environment becomes more complex, we expect to see much more dispersion in performance among private credit managers. That's an environment we like to compete in. We believe that HPS' strong underwriting discipline and its proactive risk management will compare favorably and ultimately result in differentiated returns and share gains.

Private credit has scaled rapidly and the risk management infrastructure supported has not kept pace. That is a meaningful opportunity for Aladdin. We already have a comprehensive public private workflow and data offering through Aladdin, eFront, and Preqin. We are positioning BlackRock and Aladdin to be the language of private credit portfolios for transparency and for risk analytics. We believe that the combination of Preqin and eFront data represents the broadest universal (sic) [ universe ] available in the markets. Aladdin's value as an enterprise-wide operating system is only amplified in a world with more need for real-time verified data on one single platform.

We have visibility on strong future fundraising and deployment across multiple dimensions of our private credit platform. Institutional client demand for private credit continues to grow, particularly with insurance companies. This quarter, we signed a multibillion-dollar rotation into a high-grade private credit from an existing insurance client. This will drive revenue growth as it is deployed over future quarters. We have a multibillion notified insurance pipeline for similar mandate. Fundraising in HPS' junior capital strategy is tracking well, and we saw approximately $150 million in HLEND April subscriptions.

BlackRock is at the forefront of innovation and advocacy in retirement. That includes reimagining how people save and spend across longer lives. It's working with plan sponsors and policymakers to deliver better retirement outcomes. The Department of Labor's proposed rule is a major development towards a framework to include private assets and target date funds. BlackRock will be at the forefront of this opportunity. We have a $600 billion LifePath target date franchise, where we saw $15 billion of net inflows in the quarter. That included $4 billion into LifePath Dynamic, our active solution. Our LifePath Dynamic range is well positioned to eventually include private markets exposure along public equities and fixed income.

As private assets potentially enter the defined contribution market, plan sponsors need to partner with a target date history, long-term track record, private market scale and technology and data to satisfy their fiduciary oversight. BlackRock delivers on every one of those points. We have our leading DCIO business, a top 5 alternatives platform, a public and private technology and data platform. The DOL's proposed rule is clear that fiduciary standards will demand rigorous data and performance benchmarking for private assets. It reinforces what we've been saying all along. Plan fiduciaries will need institutional-grade data and performance benchmarks to make defensible allocation decisions. That's exactly what Preqin provides, and our leadership in target date, private markets investing and data clearly differentiates BlackRock with all our plan sponsors.

This has been one of our strongest starts in BlackRock's history. It's not that we were benefiting from a favorable moment. We're actually benefiting from a durable platform, one that has been built over decades, over long strategies, and we are equipped for this type of environment, an environment where capital is moving and fundamentals are being reevaluated. The pipeline ahead of us is among the broadest I have seen at BlackRock. Actually, momentum is accelerating. We're energized by these opportunities ahead. And most importantly, I would like to thank all of our BlackRock colleagues for the work they've done each day to deliver for our clients and our shareholders.

With that, operator, let's open it up for questions.

[Operator Instructions] Your first question comes from Michael Cyprys of Morgan Stanley.

I wanted to ask about the wealth channel penetration. I was hoping you could update us on the progress penetrating U.S. and international wealth channels, particularly for alternative products. What milestones should we be tracking over the next 12, 24 months? And what impact might we see from the uptick in redemptions across evergreen private credit products?

Martin?

Thanks, Mike. So we're proud to manage more than $1 trillion of assets for wealth managers across the BlackRock platform. It really covers every corner of a client portfolio from models to separately managed accounts, ETFs, private markets. We're a technology provider. Our Aladdin technology sits on the desktop of financial adviser that brings institutional quality portfolio construction right to the desktops. We have the largest client-facing team in the industry covering every corner of the U.S. marketplace from full-service brokerage and wirehouses to independent broker-dealers and RIAs. And we have very strong relationships with private banks all across the world in the United States, in the Americas, Europe and Asia.

We have a diversified product business, strong track records and great distribution. I think you really see that come through in the first quarter retail net inflows of $15 billion. That was driven by a record $13 billion into Aperio, $3 billion into liquid alternative strategies as well as demand for strategic income opportunities, active fixed income and our evergreen private markets. I'd call out that, that's 9 consecutive quarters of retail net inflows. So this continues to be a durable, strong growth channel for us.

Let me comment just on kind of 2 areas that I think are worth highlighting. So the first is that growth in this channel is being driven by demand for whole portfolio services, the move from brokerage to advisory, and that's led to a growth of ETFs and SMAs, 2 places where BlackRock is an industry leader. It's also put a big focus on after-tax investing. I think for a long time, the language of the industry was sort of pretax returns or asset class level returns. The fact is our clients pay for college, they pay for health care, they pay for mortgages. They ultimately pay with those things with after-tax dollars. So putting after-tax portfolio construction has been at the heart of what we're trying to do at BlackRock for taxable investors all over the world. It was at the heart of the rationale for the Aperio acquisition, and it's really driving growth in these businesses. Aperio net inflows were record levels for a fifth straight year in 2025, and we saw a new quarterly record in the first quarter with $13 billion. SpiderRock added a quarterly record of $1 billion of flows with options overlay on top of SMAs.

I'd call out just some interesting things there that I think are kind of high-growth areas. In that $13 billion of direct indexing flows, about $9 billion was long-only traditional direct indexing. $4 billion was in long/short strategies. Think of those as having additional abilities to create tax loss harvesting opportunities. We continue to see a lot of growth there in that platform, and we have a really unique advantage of bringing together the long-only capability with the long/short. So we continue to believe that long/short direct indexing with options overlay is going to be a great growth area, and we hope to double, triple that business over in the near term.

Second, model portfolios. Model portfolios in the Wealth Management segment is the same as OCIO in the Institutional segment. It brings professional management, it brings scale, it brings convenience, and customized and ETF-based models are really a huge part of an adviser's growing practice. Roughly 40-plus percent of our iShares flows, particularly in the U.S., come from model portfolios. So we're expanding those solutions to include private markets in the convenience of a model portfolio.

And then just last on your piece about evergreen. Evergreen wealth strategies are a big part of what we see as being retail access vehicles for wealth management platforms. And even with some moderation of private credit BDC flows, overall evergreen flows are pretty stable and steady. I think you see that in the industry data, whether that's on interval funds, tender funds, private equity, real estate, secondaries, infrastructure, so on and so forth. So we think there's a great opportunity to continue to expand our evergreen lineup. We have our HLEND flagship, and we're on track to bring an H series of vehicles to market for private wealth over the course of 2026.

You can actually find registration statements on the SEC EDGAR website for Real Assets or [ HREAL ] and net lease strategies with HLEND -- excuse me, [ HNET ]. And we launched [ HLEND E ] in Europe, and we're bringing a new GIP core infrastructure fund to market in Europe as well, which we think will be a great jumping off point for private wealth. So we have a lot of ways to grow in wealth. We continue to be really optimistic about our opportunities there in ETFs, SMAs, liquid alts, private markets as well as Aladdin Wealth and models. So we look forward to keeping you updated on our progress there.

Your next question comes from Craig Siegenthaler with Bank of America.

Two weeks ago, we received a proposal from the Department of Labor to help support DC plan sponsors' decisions to select privates in the $14 trillion 401(k) channel. So just given your size with your target date franchise, what are your initial thoughts on the proposal? And also, any thoughts on if you could launch a new series of target date strategies or use your existing strategies and just have a private allocation?

I'll have Martin start with that, and then I'll finish it up. But let me just say one thing importantly, every country that we are talking to are refocusing on how can they expand their capital markets through retirement. And they're seeing retirement as an incredible important component. And when you think about more and more countries that are focusing on how to become more self-reliant, whether that's in the form of technology or energy, there is more and more conversation about being more self-reliant on their own fundraising needs. And to do that is to move money from bank accounts into investable assets. And so retirement is a conversation we have in every country. Let me turn it to Martin specifically with the DOL question.

Thanks, Larry, and thanks, Craig. So we're really energized by this activity that we've seen from policymakers, consultants, plan sponsors. As I've said before, I've been doing this for 20-plus years. We've seen more advancements on private markets to 401(k) in the last 12 months than in the last 20 years. I would really applaud the leadership team at the Department of Labor for huge engagement with the industry, with the trade associations, with consultants, with plan sponsors, with companies. They've really sweated the details.

And I think the notice to propose rule that the department released, to be honest, is better than we expected it to be and really paves the way, I think, for healthy engagement in this comment period about opportunities to make this even more compelling for planned fiduciaries, and most importantly, to deliver diversified professionally managed portfolios that put together public and private markets for long-dated retirement portfolios.

More than half the assets that we manage at BlackRock are related to retirement. As Larry mentioned in his remarks, we're the #1 DCIO firm with over $600 billion in target date funds, and we're a top 5 private markets manager. So we see a great opportunity to really deliver for clients here. If you look at the Department of Labor notice to propose rulemaking, it sort of goes through and emphasizes ERISA and a process-based review of 6 factors: performance, fees and expenses, liquidity, valuation, benchmarking and complexity. And I think in Larry's comments from quarter-to-quarter, he's been very clear in talking about the value of things like Preqin data, especially on that part of benchmarking and how plan sponsors and consultants can make good fiduciary sound process-based decisions under the protections of ERISA by leveraging data. We think that's a huge opportunity to do good while we do well, to do good for plan sponsors and for plan participants while we do well.

Second, we think kind of delivering performance, value for money, liquidity, sound valuation, doing that in a target date fund, delivering these exposures in a target date fund, we think it's the best way to do it for DC plans. If you look at inflows into 401(k), they almost all come through QDIA, which is target date funds, balanced funds and managed accounts that look like those things. So ultimately, we think that as and when the new DOL rule takes hold, we believe that a broader range of target date funds are really going to benefit from the diversification of private markets in a professionally managed vehicle that has fiduciary sound decision-making.

We have our product coming to market with Great Gray this year. We're going to be launching a LifePath with privates, all of which is to try to build a track record so that plan sponsors and consultants can get more comfortable with these structures as the DOL rule hopefully takes hold towards the back half of the year and we get really running in 2027.

I would just add another macro view. I think if we are going to really excel as a country, but across all countries, the need for more citizens to grow with our country by utilizing savings and translating that into investing and have a complete range of investable products, whether they're passive or active, public or private, I think is very important. This is the type of conversations we're having across the spectrum of countries and opportunities. I think there's a huge awakening of understanding the power of retirement that flows through the capital markets. And so this is not just a U.S. phenomenon, but it's a phenomenon that is being discussed in all the corners throughout the world.

Your next question comes from Alex Blostein of Goldman Sachs.

I wanted to ask you guys a little bit of a bigger picture question. So you mentioned in your prepared remarks that in prior periods of dislocation, BlackRock tends to gain share. We've seen it in multiple cycles when there's more money in motion. Does that happen again this time around? And if so, I was hoping you could add a little more specificity in terms of which products or which asset classes BlackRock is best positioned to gain share if, in fact, we do see more money in motion on the back of all of this and ultimately implications for the firm's organic base of growth over the next 12 to 18 months.

Well, I think we've said it in different snippets, but I do believe our positioning in retirement, our positioning in now infrastructure and privates, our positioning in iShares and the breadth of the global footprint we have, we're just seeing more and more different types of opportunity. The speed in which we're deploying capital in GIP V and infrastructure, I talked about that.

The opportunities for more and more countries that are looking to and having a great need to build out their infrastructure, especially with this AI revolution going on, actually now getting back to self-reliance, more and more countries have a greater need to find different sources of power for self-reliance and dependent on the importation of energy. So the need for building out, let's say, solar, which I talked about in my Chairman letter a few weeks ago. But I do believe it's our positioning across ETFs, the scale of our ETFs, the granularity of our ETFs, which are unmatched by any other ETF provider, and then just the entire footprint allows us to have these different types of conversations globally.

In the U.S., as Martin just discussed, the role of Aperio in terms of tax advantaged portfolios as the threat of higher taxes and all these other issues are playing into the strength of the platform that BlackRock systematically built over the last 20 years. And I think if you think about the platform that we built across public and private markets and now the platform we've built across public and private markets, overlaying investment technology has given us this unique ability to have conversations in all the corners of the world. And I can't underscore enough the conversations we're having related to the growth and role of capital markets.

I have had conversations even in this week about the need for Europe to have a capital markets union. What does that mean? The conversations we're having across Japan and the Middle East and every other corners. I was in Mexico last week talking about that role and that opportunity. So we're involved in these conversations at the government level, we're involved in these conversations at the institutional level, and our platform also speaks to the wealth platforms worldwide. Martin, do you want to follow up with any more of that?

Yes. I think Larry captured the sort of gestalt of the client perspective, I think, beautifully. Alex, I'd note for you that March 2026 was the worst month for broad markets since September 2022. In September '22, broad stocks were down 10%, Broad bonds were down 4% to 5%. In March '26, stocks were down 7% to 10%, broad bonds traded down 2% to 3%. I think BlackRock is getting better and better and better through market environments of taking share and delivering more sustained organic growth. And we think we can confidently and consistently deliver 6% to 7% growth from our structural growth segments when markets are especially supportive or when clients rotate into higher fee segments in any quarter.

There's 2 broad vectors for this growth. The first is structural growers. The second is whole portfolio relationships. The structural growers are the products and services that have this all-weather growth. They're ETFs, they're private markets, models, tax-aware strategies like Aperio and SpiderRock and Systematic. They're the ones where I think we take disproportionate share as those structural trends advance forward. But the second avenue of sustained organic growth is whole portfolios, right? It's that clients want to consolidate business with fewer providers. They're looking for more from the platforms that they do business with. So share gains are a source of organic growth for scaled players like BlackRock.

I mean, if you look at the industry flows for the last several years, the top 5 asset managers, they're consolidating 80-plus percent of the flows. But this is still an extraordinarily fragmented business by assets and revenue. So this ability to consolidate share is another avenue of sustained organic growth. And my own sense of the markets today across some of the private credit tumult is that this is an opportunity for BlackRock to take share in that market, particularly in private markets across wealth platforms, where clients are saying, we want a more whole portfolio relationship, so that we can think about how to put our public markets together with our private markets, how we can manage our practices through these market cycles. So we actually think some of the shakeout in credit is actually good for our organic base fee growth profile away from the structural growers that we're confident in already.

Your next question comes from Mike Brown of UBS.

I have a bit more of a macro question here. With the Middle East conflict, that certainly presents some clear geopolitical macro challenges here that could perhaps shift some of the capital priorities. You touched on that a little bit here. But are you seeing any change in sovereign wealth behavior as they think about allocations? And maybe any read on Asia, just given some of the added pressure to their economies from higher energy prices?

Specifically in the Middle East, we have not seen any change in behavior. Just this week, I'm meeting 2 finance ministers from the Middle East. We can tell you in some of the co-investments that we've done already in the last few months, the Middle East has participated quite largely in some of our co-investments and the opportunities. So in actuality, we've seen actually no change in behavior. We have an announcement that's forthcoming in the next week or so related to retirement win we have in the Middle East. So actually, very little behavior change, but our dialogues are probably a little more constant, a little more talking about how should they play all this and what should they do. But at this moment, we have not seen any withdrawals from sovereign funds to the treasuries of these countries. If anything, I think the money is still continuing to flow into their own individual sovereign funds. But their investment behavior has not changed.

Now obviously, things could change if there's a prolonged uncertainty and a prolonged violence in the region. So on that note, we are working closely with our friends, our employees, everybody who is affected by this conflict. So we have spent a lot of time there. We've been working with our employees. Over the course of the last year, we built out our offices in almost every country in the Middle East with the idea that we see huge opportunities. We are continuing to build out those offices. Obviously, there is stress around that at the moment related to the conflict, but we see no behavior changes at all. And in fact, they're probably more -- they're articulating, I would say, more opportunities, not less opportunities at this moment.

Related to any places in the world where higher energy cost is a tax, as I said earlier, we are witnessing in some places where the increase in energy costs are being absorbed by governments, and that's happening in parts of Europe already and also in Asia. All that means is the deficits are probably going to be rising or a need to do -- as they build out infrastructure, a need for more public, private is more realistic. And so I would argue this all presents bigger and better opportunities across the board.

That being said, obviously, we don't have any insight as to how and when this conflict will end. But we are in constant dialogue with our partners and our friends in the Middle East. We probably have had more client calls, more calls with leadership and governments than ever before. And we need to be making sure that we're staying in front of our clients and remain a trusted partner. And I think the evidence speaks quite loudly that we are one of their key trusted partners.

Your next question comes from Brian Bedell of Deutsche Bank.

So a question on -- I mean, it's a 2-parter, one for Martin and then one for Larry. But it's around organic base fee growth and scaling that. So beta has always been your best sort of incremental margin opportunity. But as you grow the organic base fee growth faster, do you see a better ability to scale that over time? And are you seeing more demand from outside the U.S. Like you said, there was an incremental shift towards non-U.S. Are you seeing that continuing? And then if you could just comment on the expansion in the base fee rate, but if you can comment on what you're seeing as the exit base fee rate for the quarter. I don't think I heard that.

I'll pass that to Martin.

Thanks, Brian. I hope you're well. So maybe I'll start just on kind of margin. We continue to deliver industry-leading margins over the cycle, and as I laid out at 2025 Investor Day, we continue to target a 45% or greater adjusted operating margin with our margin on recurring fee-related earnings running higher. We expanded both operating and recurring FRE margins by over 100 basis points this quarter. We did that in an environment where AUM actually finished on a spot basis lower than average. Our operating margin for the quarter was 44.5%, while the margin ex performance fees and related comp was 45.6%.

I guess on the forward, what I'd say is we've run BlackRock at margins north of 45% before. We've run them close to 47% back in '21. And we did that at a time when we didn't have a large-scale private markets franchise. Now we've added these engines of infrastructure and alternative credit with our colleagues from GIP and HPS. Both of those franchises were north of 50% FRE margins when they joined BlackRock. So I think we can ultimately do 2 things. Over time, we'll see the margin on fee recurring earnings driving upwards towards the trajectory of what I'd say is the best-in-class private markets names, north of 50%. We think we can do that through the acquired businesses, but we also have these highly scaled franchises in ETFs, and digital assets and systematic equities that can help propel FRE margins higher.

And then second, with constructive margins -- excuse me, with constructive markets, with a higher fee rate on flows, which we've been driving and strong organic growth, we can pull the fully burdened operating margin of the company up as well. And as I said, we've run the company at 47%. So I don't see 45% or 46% as a ceiling. As you mentioned, we had 8% annualized organic base fee growth in the quarter, 10% over the last 12 months. That's 7 consecutive quarters over 5%. The fee rate was up 2/10 of a basis point sequentially. That's on strong market performance in our higher fee public markets book, particularly coming from EM and international equities, along with this client demand for international iShares exposures and the systematic growers that have higher fee rates like systematic equities, private markets, Aperio and active ETFs.

What I'd say is global equity markets have improved in April, and we always disclose the revenue-weighted indexes in the supplement, but the BlackRock Equity Index is up about 5% in the first 2 weeks of April. At the end of March, our base fee entry rate was approximately 2% lower than the first quarter base fees, but that's basically been recovered with the April market performance.

Your next question comes from Dan Fannon of Jefferies.

I was hoping you could expand upon some of the trends at HPS and just private credit broadly and distinguish between the institutional conversation activity versus what you're seeing in retail and also comment on deployment in this type of market as well.

Martin?

Yes. I guess I'll start with first that HLEND is one of the best-performing non-traded BDCs in the market. It's logged 10.4% annualized total return since inception. It's one of the only funds among major peers with positive performance in '26 with $840 million of Q1 subscriptions, including the DRIP and approximately $150 million for the April window. We continue to see good engagement with the HLEND base. We continue to see good engagement across wealth clients for evergreen structures, and we continue to believe that we can grow there through time.

I would offer just briefly that I think BlackRock is in a different place than other firms on these questions. For BlackRock, our 2030 strategy is to drive organic base fee growth at 5-plus percent through a broad public private markets platform and our track record showing that we can more consistently generate 6% to 8%. And so we're not reliant on any one engine. We're not reliant on any one product. So we may or may not go through a period of elevated redemptions relative to historical levels and more muted subscriptions in wealth channels for private credit funds. We don't know for certain.

We do see long-term demand for institutional-grade private credit as intact and HLEND flows and fee rates are just generally accretive to our 2030 plan, whether they're at 25% or 50% or 75% of historical levels. We're broadening out the evergreen lineup, as I mentioned, with real assets, with net lease strategies, with Europe. So we think we have great opportunities to grow in wealth.

What I'd say is, the business is generally about 10% retail private markets at BlackRock. So call it, 85% to 90% of the base is institutional. And there, we've actually seen strong demand. If anything, with some of the retail pullback, we've seen stronger institutional fundraising, stronger institutional deployment, and some of the spreads that we see today in direct lending and asset-based finance are some of the most attractive on this market pullback. So we generally are very constructive on institutional fundraising in and around private credit strategies.

Your next question comes from Brennan Hawken of BMO Capital Markets.

Curious to hear your plans. We saw that you guys filed for the IQQ. So curious to hear your plans around that and the NASDAQ complex and whether or not you guys are considering a fee holiday to help your product gain scale. Looking at the S&P complex, it's much larger. So if we see a chance for competing products to get launched there, do you have the idea that it would expand the pie versus cannibalize?

Martin?

Thanks, Brennan. I hope you're well. So we filed a registration statement with the SEC on the NASDAQ 100 Index ETF, the IQQ. So due to those regulatory filing restrictions, we're not able to provide a lot of detail beyond what's in the filing. What I will say is that at BlackRock, we have a long-standing and continuously growing partnership with NASDAQ. We're already the largest manager of NASDAQ 100 ETFs outside the United States. We manage $25 billion across ETFs listed in Europe, Canada and Hong Kong.

In the U.S., we also have the NASDAQ Top 30 and Next 70 Index ETFs as well as the NASDAQ Premium Income ETF. And now IQQ is similarly trying to facilitate access for U.S. investors with an iShares quality option in one of the most widely tracked indexes. We're differentiated at BlackRock. We've got 2 distinct global ETF ranges, the U.S. and Europe. These scaled platforms enable us to port proven growth franchises and distribution approaches across geographies. That's a meaningful differentiator for BlackRock. So we believe we can continue to grow access to these exposures with high-quality iShares institutional-grade management, and we look forward to keeping you updated on our progress once we get through the registration period.

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

Thank you, operator. Thank you for all joining us this morning and for your continued interest in BlackRock. We opened 2026 with one of our best starts to the year on record. We're aligning our platform alongside long-term client needs and structural growth drivers, and it's showing up in a meaningful way in our results. The strength of the firm, our breadth, our scale, our connectivity is positioning us well to continue to be delivering value for our clients and differentiating long-term growth for our shareholders. Thank you, and have a good quarter.

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

Welcome to Bank of America's 34th Annual Financial Services Conference. This is Craig Siegenthaler, North American Head of Diversified Financials at BofA. And it's my pleasure to introduce Martin Small. Martin is the CFO of BlackRock and serves as the Global Head of Corporate Strategy. He's also a member of BlackRock's Global Executive Committee. Martin, first, thank you for joining us here in Miami.

Thanks, Craig. Great to be here with everybody. Hope everyone is having an excellent day.

All right. So a quick background on BlackRock. I know you all know it, biggest asset manager in the world, over $14 trillion of AUM. More importantly, it's a leader, a first mover and scaled in all the major secular growth businesses, ETFs, technology and data, retirement solutions and private markets.

With that, let's get started on that record 12% base fee organic growth that you ended 2025 with. So seasonality and cycle may have helped a little bit, but for the full year, it was 9%, so a really strong number, well above market expectations 12 months ago. What were the key drivers of that acceleration over the past couple of years? And do you think it's sustainable?

We've seen really excellent momentum in organic base fee growth at BlackRock. It's been geared around the firm's long-term strategy of serving every corner of an investor's portfolio and marrying public and private markets, marrying asset management and technology. And you're right, Craig, it's 6 consecutive quarters north of our 5-plus percent target. It's every quarter in 2025, north of 6%. It's 9% for the year, 10% in Q3, 12% in Q4.

So we've seen organic growth really, really ticking up. As you said, I think there are some chunky enterprise wins that happened. So we had the Citi SMA portfolio solutions win that we had in the fourth quarter. We've had some big outsourcings. But even if you wanted to sort of remove some of those and say, what's just sustainable normalized organic base fee growth, we feel really comfortable that we're kind of clicking along at 6%, 7%, and we think we can sustain that in terms of the mix of the businesses that we have across ETFs, both active ETFs, traditional ETFs, digital assets, private markets, systematic equities.

We've really seen a lot of breadth in the organic growth. So when we think about the top 5 contributors we've had, they've been both businesses that we've built or acquired in the last 2 years, and they've been kind of foundational platforms that we've operated for a decade. I think there's 2 really important vectors for sustainable organic base fee growth for us. And both of them are entrenched in just making sure we're constantly organized around these structural growth engines, the movement from brokerage to advisory, the opening up of retail investments and 401(k) to private markets.

We're really well positioned in those structural growth areas. So I think those structural growers are the foundation of sustained organic base fee growth. And second, I think that the market is basically consolidating managers over time. Clients are looking to do more business with fewer providers. They're looking to extract more value from the platforms that they do business with. And so the stock of the industry's assets is a source of organic growth for the scaled players.

I think if you look at flows in the industry for the last several years, the top 5 asset managers are consolidating something on order of 80% of the flows. But there's still an extraordinary amount of fragmentation in this industry, both by assets and by revenue. If you were to compare the asset management industry to, say, credit cards or sales and trading or airlines, you'd find our industry is not at all concentrated. So the opportunity to consolidate share out of the industry stock and to consolidate revenue share, we think, is enormously attractive for BlackRock and how we're positioned.

Great. Martin, let's hit on your strategic priorities for 2026. So you've been very active on the M&A front, 3 sizable deals, private credit, infrastructure, alternative data. So I'm sure integrating them is probably kind of top of the list. But what are you working on this year? What are your major goals for 2026?

BlackRock is pioneering what we think of as the future of asset management, which is bringing together asset management and financial technology across public markets and private markets. and delivering that in the whole portfolio context. The acquisitions that we've done in the last 2 years are at the top of our list to integrate and realize the planned synergies.

That's Global Infrastructure Partners, which is an infrastructure leader, and that's HPS Partners, which is a leader in private and alternative credit, maximizing the synergies of that and being a scaled provider across public and private. That's at the top of our list to get right in terms of helping clients build integrated public and private portfolios. Private markets and alternatives at BlackRock today is $676 billion.

We're a top 5 player, present in all the fastest-growing categories, and we think our ability to grow organically there is very, very strong. At our Investor Day in 2025, we talked about the 4 or 5 $500 million revenue businesses that we're building. That's private markets to insurance, that's private markets to wealth, that's active ETFs, that's digital assets. Those are evergreen builds that we're continuing to work and are continuing to deliver in their growth.

But maybe I'll highlight a couple of strategic priorities that I think are top of mind for the management team in '25 and '26. The first is fundraising. So at our Capital Markets Day, we talked about $400 billion of growth fundraising out to 2030. We think we're on a good trajectory for that over the next couple of years. That's both kind of mining our institutional relationships, mining the wealth channels, also working with our insurance and wealth clients in order to grow there. The second would be iShares.

I find it pretty incredible that this industry continues to grow in exchange-traded funds at double-digits organic growth. We had $530 billion of organic asset growth in iShares last year, finished #1 across the world. But we're still opening up new use cases for ETFs in fixed income, in active ETFs, in nonlinear ETFs that incorporate options in terms of covered call writing or puts and calls that are structured note replacements. And I think of kind of the growth of ETFs around the world, in Europe, we have the leading ETF market platform. It's setting new records.

It set a record in '25. It's had a record January. And so the growth of exchange-traded funds outside of the United States, we think, is a very meaningful opportunity. They've built a big business in Europe without a national best bid, best offer system without a single capital markets regulator, the way we have in the United States. And so I think as those trends take hold in Europe, the opportunity to grow exchange-traded funds outside of the United States is a real strategic advantage for BlackRock.

I think the third is technology and data. Our Aladdin business finished 2025 at 16% ACV. We continue to target mid-teens ACV for our growth through the cycle, and it's an important part of reaching our 2030 objectives of $36 billion of revenue and doubling our operating income. And the last thing I'd highlight is just wealth everywhere. The opportunity in wealth, we think, for us is incredible. That is the movement from brokerage to advisory continues in the U.S. market. We continue to see an expansion of the independent RIA.

We continue to see big scaled wealth platforms at the full-service wealth managers, grow their model portfolios. We continue to see all channels across the wealth market, both in the U.S. and in Europe and incorporate more private markets. We think those are huge opportunities for BlackRock, where we can both be a great product provider, but also a provider of technology, custom models, SMAs, after-tax strategies, think of things like Aperio Long/Short, options overriding with SpiderRock. We have the largest wholesaling teams in the industry across the U.S. and Europe, and we think the opportunities in wealth are absolutely terrific.

Martin, let's stick with wealth for a second. You really upgraded your offering last year with both GIP and infrastructure in HBS and private credit. So maybe dig a little deeper into that one. And where do you think we are in terms of this migration long term for retail investors globally going into alternatives?

So think of our strategy in wealth as being around 2 major things. The first of which is products, the second which is portfolios. And we have a significant amount of product, obviously, across the public markets and mutual funds, ETFs, SMAs. And we've been growing our roster of evergreen products in wealth and retail for alternatives. As I've mentioned, we're growing in H-Series led by the flagship HLN, the nontraded BDC, capital solutions, triple net lease, multi-strategy credit, private equity.

We'll have all the building blocks effectively for wealth investors to build great public and private portfolios. So having all the building blocks is a part of the strategy. Where I think BlackRock has historically had disproportionate amounts of success relative to the industry is in bringing those things together in whole portfolio strategies. We've done that in models. We've done that in SMAs that put together ETFs and SMAs, but effectively building public-private model portfolios, we think, is the destination that ultimately puts a lot of scale in financial adviser practices and integrates that experience for advisers in such a way that allows them to focus on the things that add the most value for their clients, financial planning, tax planning, intergenerational wealth transfer.

And so our effectively being able to deliver institutional-grade OCIO-like services to wealth managers through whole portfolios. It's built on the products, but the products are just the building blocks of the strategy, which is ultimately to really deliver whole portfolio services that bundle asset allocation the product building and then all of the reporting and technology that goes along with it.

We think we can do that here in the United States, and we can do it in Europe. We launched in January, our alts completion portfolio with Partners Group as in all private markets, a set of models with balanced income and growth. Those are completion models that have a single sub dock that rebalance without financial advisers having to go do all that work. We think that is a really terrific opportunity. We've put up public and private portfolios on places like GeoWealth to be fully integrated. And then we have a whole custom model solutions business that can do that as well.

All right. Well, let's talk about crypto for a moment. Very quickly, you build a very large ETF business. You have a tokenized money market fund with BUIDL. And also you've integrated into Aladdin. So kind of really turn that around. I know crypto can be choppy, but what are your aspirations for that business?

So we ultimately see digital wallets as a new distribution channel. And many of the characteristics of digital wallets today feel to me like what retail brokerage looked like in 1991, which is people opening digital online accounts, starting with some amount of recreational stock trading, but ultimately amassing wealth and economic value that become managed accounts, that become professionally managed offerings.

And if I look at the business today of most of the big retail brokerages, they started with active traders and ultimately really built wholesale managed account businesses that drove a lot of growth and shareholder value. We see digital wallets shaping up to be the same way. When I talk about digital wallets, what I mean is there's 820 million crypto wallets. There's 820 million crypto wallets in the world that own Bitcoin and other coins. There's about $2.5 trillion of value. It's volatile. It's been $3.5 trillion to $4 trillion. It's been $2 trillion to $2.5 trillion, but there's a serious amount of economic value there that we will -- that we believe over time will be in search of long-term investment products.

There's 820 million crypto wallets. There's 4.5 billion digital wallets. So think of your Venmo, PayPal, Alibaba Pay, Apple Pay. All those are places where individuals are keeping economic value that ultimately are going to be in need -- we believe are going to be in need of long-term investment products and the same services that you would see in retail brokerage and wealth. $2.5 trillion of crypto, $300 billion of stablecoin, another $37 billion of tokenized assets, meaning tokenized stocks, bonds, loans, other assets. What we want to build at BlackRock is a digital wallet native asset management capability.

So all the same services we offer today in a model portfolio in the cash world and traditional capital markets, Craig, we want to be able to offer in a digital wallet. I want to be able to sign an investment management agreement. I want to be able to deliver a proposal. I want it to be able to invoice. I want to be able to research products to trade, to rebalance, to tax loss harvest, all of those portfolios. Tokenized iShares, I think, is our best spear tip to enter into the world of digital wallets and provide access to long-term investment products.

I just have a foundational belief along with my partners at BlackRock that there will be a growth in crypto assets and stablecoin. And eventually, someone will say, I should probably derisk half of this into long-term investment products like U.S. equities and the ag. And that, we think, is a tremendous opportunity that is unattached to the short-term volatility of crypto. This is a new distribution channel. There's already 4.5 billion people. There's already 4.5 billion people with digital wallets. Half the world has a digital wallet. So this is a channel that we think we have to get access to in order to continue to lead the market.

Or maybe even tokenized IAU might do pretty well right now.

I think we'll see some of that. Yes, sir.

But one more question on crypto. And you hit on this a little bit just then, but both you and Larry Fink, your CEO, talked about tokenizing your ETF suite to address that new growing channel. Where are you in sort of that? And is that still something you want to do today?

So I think it's worth observing. I've had the real privilege and honor of spending time with some of the new leadership at the SEC, Chairman Atkins, Jamie Selway, Brian Daley and I am. I give this team very, very high marks on their engagement with the industry. I'm a member of the Investment Company Institute Board. They have been there engaging, wanting to open up innovation. They've made a lot of time.

They've made a lot of time to come talk about how we build into a tokenized ecosystem, how distributed ledger technology can actually be an enabling agent to make markets better, how distributed ledger technology can actually free up collateral through near instantaneous settlement that can be channeled into the real economy. I think actually Mark Ueda, Commissioner Ueda had a speech on that today. So this commission, I give very, very high marks on engaging with the industry. We've spent time with the commission on what an operating model looks like for tokenized iShares, how creation and redemption would work, how the arbitrage mechanism would work.

And there were 40, 50 people from the staff in this working session with great questions. These are the guardians of the crown jewel of the United States, which is our capital markets. These are the guardians of the National Best Bid Best Offer system of the National Securities Investment Market Improvement Act. Like these are the people, and they are thoroughly engaged in how to do this. I can't tell you if it happens in 90 days or in 12 months, what I'm saying is there are real people working on this, and there is more progress in the last 3 months on this than I've seen in the last 5 years. in this space.

I would say the same about 401(k) and private markets into D.C. But this commission is really engaged, and I think we're going to make progress in getting tokenized investment products into digital wallets, which I think will be good for clients in the long term.

Just a follow-up on that. We've had a mutual fund since 1924.

Technically since the 1800s.

Yes. And the ETF and even the SMA, they -- there's a lot of improvements off the mutual fund vehicle with that. But with the tokenization wrapper, there's a few more, like 365, 24/7 trading, self-custody, maybe the expense ratio is a little lower because less counterparties. Is that the major selling point? Or is the fact that there's this growing ecosystem that asset management really isn't participating in today that BlackRock wants to address? Or is it everything?

I would overwhelmingly weight the growing ecosystem than anything else. And I think I'd flag kind of 2 -- think of the sources of where this growth is coming from, right? I think, number one, there are the true believers in cryptocurrency, right, who believe that cryptocurrency could be a long-term disruptor of fiat currencies and may be ultimately a better protector of value over time. There are those that are unbanked, right?

There's a significant portion of digital wallets in crypto for people who just can't get bank accounts or just aren't served by traditional banking system. They've ultimately been able to create economic value and should have access to long-term investment products. There are speculators and investors and traders who are active in cryptocurrency who ultimately want a vibrant ecosystem to be able to invest, trade, make markets in all the things that they make markets in, in the traditional capital markets to do so with digital wallets.

I think BlackRock has been at its best in making markets interoperable. So today, we're the leading manager of fixed income ETFs. When I sat at these types of conferences 10 years ago or 15 years ago, people talked about how you can never bring together over-the-counter markets in bond trading and put them on an exchange. Today, it's absolutely remarkable in how seamless that has been. It's provided more liquidity to the bond market. It's provided more pricing transparency to the bond market.

Everyone has figured out how to create more value for clients doing that. The idea of portfolio trading and fixed income didn't exist really before the fixed income ETF. I see all the same possibilities of bridging the traditional capital markets with the digital markets and distributed ledgers that will create lots of value and lots of opportunities. All the market makers who have made markets in the traditional capital markets will have to come to digital wallets in order to make markets.

Tokenized exchange-traded funds won't work unless we have market makers and authorized participants who can do business in the digital wallet and on digital exchanges. So it's a big part of work, but I think that's where the overwhelming amount of growth will come from, I think, is from bringing a whole generation of new investors who live in digital wallets that historically haven't had access through the traditional capital markets.

Great. Martin, let's change up the topic and go to quant. So your systematic active equity business really showed some strong flow improvement last year. And you're seeing across the industry from my seat, better hedged on returns, better quant hedge returns. Some of it is tax aware related. What is driving the improving demand that you're seeing in BlackRock?

So I'd offer the more macro thought first. I think there was high degrees of conviction that used to live in kind of our client base, used to live with consultants and asset allocators that somehow alpha could only really be achieved by small niche players that once you achieve large scale, somehow that would become impossible because you were too lumbering or slow or you weren't commercially nimble enough.

And I think what the ensuing decade has proven actually is that in Alpha, scale is a key engine. And that's true in the private markets. That's also true in the public markets. And so when you look at where the big drivers of alpha are coming from, it's coming from big scaled players that have ample technology resources, can drive alpha streams through multiple different types of investment vehicles through multiple different type of markets.

They can be more portable. And it's harder for smaller players actually to drive alpha. It's harder for them to drive alpha through pricing. It's harder for them to drive alpha through trading. And so I think that's a real change in the industry structure, and it really came through in 2025, which is that scaled players have an advantage when it comes to being able to drive alpha. We certainly saw that at BlackRock in our systematic business. We have $50 billion of inflows into systematic strategies.

I'd flag 2 things. These strategies are so different than traditional security selection. These strategies are using and deploying signals across thousands and thousands of securities. And if you were to open up the portfolio and just eyeball the list of 1,000 line items, and it wouldn't be immediately apparent to you what was going on without understanding what the signals are that are driving those overweights, underweights, longs and shorts.

And so just the idea of how you create alpha today involves macro themes that I think are really different than simply trying to pick overweights and underweights against an index. The second thing is you have to be able to distribute these alpha strains more broadly. So if I look at what's happening in our systematic business, it's not one flagship product. that is driving all of the flows in alpha, it's spread across a multitude of sources.

And by the way, it's spread across a multitude of sources that are kind of lower touch in kind of the teens basis point business and across things that are higher touch that are driving the north of 100 basis point business. But in our systematic business, we had at least 5 to 6 different products across kind of active ETFs, Liquid 40 Act hedge funds, traditional institutional hedge funds as well as mutual funds that all drove systematic flows. So being able to scale those alpha streams into kind of different alpha targets into different wrappers and vehicles into different parts of the world, I think, is a really key part of being able to grow in active management.

And I think that's really what we are able to do at BlackRock, and we're very bullish about the growth of the systematic equities business. One other thing I'd flag is like this is an engine of scale and portability for us at BlackRock. It's also an engine of operating leverage. So we launched a domestic asset management business in Saudi Arabia some years ago. What we started with was systematic strategies.

That's because that chassis of being able to deliver alpha signals into different markets is highly portable around the world. We launched a joint venture in India with Jio Financial and Reliance. We started with systematic strategies there because they're highly portable and are able to be transported around the world to different wrappers. So it's also an engine, I think, of really efficient growth at BlackRock that creates a lot of leverage for how we grow active management around the world.

Great. Two questions ago, you talked about this fixed income ETF bogeyman, which never sort of developed. Now let's take it a step further. You just did the Frequent acquisition, which is all data. Now with that long-term data, you can create indexes. And with those indexes, you potentially could create private equity ETFs. So where are you in that build-out with kind of 2 steps: one is, you need the indexes. And two, you need then the ability to put that inside of an ETF.

Right. So we closed the Preqin acquisition in March of 2025. And the strategy with Preqin is basically fourfold. The first of which is we'll continue to offer and it continues to be an attractive growth engine, Preqin Pro, which is the traditional subscription-based data business. That data business is the gold copy when it comes to LPs and GPs, connecting on fund terms, fund performance, track records, who are the investors in private markets. that data set has a lot of enduring value to the industry in it.

It's very, very hard to assemble. Many of the elements and attributes in it aren't even available anymore. You can't just go put a foyer or request out for something that's no longer in existence to come get it. So that data set itself continues to grow, improve and offer a lot of long-term value to our clients. The second is with the Preqin data and the Aladdin environment, our aim is to create more risk models in and around the Preqin data to help measure, define do performance attribution.

And if you think of what some of the index companies have done of creating this positive flywheel effect between their index businesses and their analytics businesses, we're aiming to do that with the Preqin data as well, which is to drive a real intersection between the language of private markets and the risk models that measure them, ultimately using the Preqin data. The third part of our strategy is to make that data factory more efficient. And interestingly enough, this is the intersection of things like generative AI and process automation in order to make the data factory more efficient. I would say Preqin was run really, really well, but we've run a big scaled data processing and information processing business at BlackRock for 30 years.

We think basic deployment of things we use in our data factory for Aladdin against Preqin can make Preqin even more efficient and put a lot more leverage in the business. And the last leg of the strategy is the one that you're getting at, which is ultimately to create investable indexes is to take the data that we have in Preqin to standardize to standardize it by cohort. So it might be private equity funds of a certain vintage.

It might be private equity funds or private credit funds or real estate funds covering a certain segment of the market to be able to standardize the inclusion, units of measurement, pricing and ultimately publish those indices and then create tradable products over them. The number one question I get there, Craig, often is, well, if you can't physically replicate all of the underlying funds that you put in that index, how could you ever make an ETF? Which is often like a head scratcher for me because most of what trades in the financial world is cash settled. It's not physically replicated.

So if I think about the S&P Mini contract, it's not really settled in stocks, it's settled in cash. But take something like the K-hiller Home Price futures contract, it's not settled in houses. Economic surprise indices are not settled in surprises. Like interest rate indexes are not settled in interest rates. They're settled in cash. And so being able to create prices, time series and cohorts that ultimately can have 2-way markets on them, if you can make futures, if you can make swaps, if you can have a contractual exchange of cash flows, that can be put in an exchange-traded fund.

Remember that the first exchange-traded funds and digital assets in Bitcoin were in futures. They were not in physical Bitcoin, whatever physical Bitcoin is. They were not in physical Bitcoin. They were actually in futures. So I think if we can get to a place where we have futures contracts, even if they have lighter 2-way volume, like they just need some volume. If we can get futures contracts on private markets indices, we can make iShares.

So let's talk about the op margin. At the last Investor Day, you talked about a greater than 45% target. Last year, on an adjusted basis, you basically got there. On a reported basis, it was lower because of performance fees, which come with a different carry ratio in there. How do you think about that long term? And then if we have a bear market or you have a lot of performance fees, I guess that year might be a little tough. And also, what happens when you get a little bit above 45%? Is that -- are we at a ceiling at that moment?

So we finished the year in the fourth quarter with our operating margin as adjusted. And that operating margin, that's a real operating margin. It's fully burdened for all of our stock-based compensation and everything at 45%. Our margin on recurring fee-related earnings was 45.5%. So we continue to drive industry-leading margins. This business has the industry-leading margins. And I think if you were to really dig through traditional managers and the alternative managers, if you were to really dig through their real SEC financial statements and Ks and Qs, you'd find BlackRock's every bit as profitable, if not more profitable, I think, than the peer group.

So we continue to drive industry-leading margins there. When I think about the margin dynamic, we have run BlackRock at margins north of 45% before. We've run them close to 47% back in 2021. So we've run the business there before. We've been able to put a lot of scale and operating leverage. We did that at a time in 2021 when we really didn't have a big scale private markets franchise, and we were able to propel the business there.

I think today, with the engines we have in GIP and HPS, both of which were north of 50% FRE margins when they came into the company, I think we can continue to propel kind of -- we can continue to propel 2 things. One is FRE growth at margins north of 50%. We can do that through the acquired businesses as well as highly scaled businesses we have like active ETFs, ETFs, digital assets, systematic equities, all of which I would say operate at north of our average margin, not below our average margin, they can be real drivers of FRE margin expansion.

And then ultimately, I do think that with strong markets and with higher fee rates and strong organic growth, we can pull the operating -- the fully burdened operating margin of the company up as well. And as I said, we've run the company at 47%. So I don't see 45% or 46% as a ceiling. What I do see as a natural governor on this is we will continue to invest in the business. We're going to continue to invest in the business. When I talk to our long-term shareholders, our long-term shareholders would say, we would prefer to see a point of organic growth over a point of margin.

They're both important. They're both important. We're very focused on driving profitable growth on dropping more earnings into the profile of the company, but we will continue to invest in the company. And at times when there are market pullbacks, those are the times when it's important to keep investing. I think it's when your competitors sometimes take their foot off the gas in investing, and we'll keep do that.

So we're always going to be balancing optimizing long-term organic growth in the most efficient way possible with driving more margin expansion through technology, automation, footprinting, higher value, higher fee rate strategies. Those are ultimately the pushes and pulls. And as you said, on the performance-related side, historically, I think the performance-related revenues at BlackRock had kind of a very defined margin as we've pulled in or a defined comp-to-revenue ratio, if you'd like to flip it around, as we've brought in these highly scaled private markets franchises, they have more market-based compensation practices and the comp-to-revenue ratio, the PRE margin, if you will, will reflect what you see out in the marketplace. But I still think we can hit our north of 50% FRE margin, and we can grow the fully burdened margin north of 45% out to 2030.

Great. Martin, at this moment, let me just look at the audience, see if anyone has a question. Please raise your hand, and we'll get your microphone. It looks like we have one over here.

So I guess after a very active period of M&A, I guess, including the 3 large deals that you've been speaking about, it sounds like you're now more focused on smaller tuck-ins over the near term. I guess like however should we completely rule out prospects of another larger deal?

Thanks for the question. So first, I'd say, important to note that we don't need M&A. We don't need more M&A to hit our north of 5% organic base fee growth target. We did 9% over the trailing 12 months. We did 10% in Q3. So the strategy is working in terms of driving more sustained and higher organic base fee growth. We're very focused on integrating the transactions that we've done in the last 2 years and driving those planned synergies.

That said, we're open to transactions that would be accretive towards our 2030 plan in private markets, in technology and distribution. A good template for that was the Elmtree acquisition in the net lease space that we announced last year in terms of adding capabilities that we ultimately think can really help grow the private markets franchises. M&A is notoriously hard to schedule.

So like you can never say never about things like that. But what I'd say is we're focused on integrating and realizing the planned synergies. We'll always be very selective and tactical. Any acquisitions that we do are going to be focused on growth. They're going to be focused on optimizing organic growth, not on expense control. So the M&A approach to the company, I think, is completely consistent with historical practices.

And so far, we're really, I think, very pleased with the progress we've made on the GIP, HPS and Preqin acquisitions. So we're going to continue to be very focused on realizing those planned synergies.

Maybe just a follow-up on that. No asset management in the world is as diverse as BlackRock and has a few white spaces as BlackRock. What are your white spaces setting? And do you maybe not want to tackle some of them due to secular growth challenges?

So I think we're always -- the acquisitions that we're best at, like the organic builds and the acquisitions we're best at tend to be around capabilities expansions, right, around product expansions. I think that's really what we're best at driving. And I think there's some white spaces, both in terms of build, buy, partner.

So one, I'd say secondaries, all things secondaries is an opportunity to expand our offering. We have a great team. We have a good track record. We've been building in that space there. But I'd say that market continues to be a growth market and a real opportunity. So there may be things there to do there across buy, build, partner. I think all capabilities of expansion around investment-grade, high-grade asset-based finance, whether that's kind of teams or firms, those are real opportunities for us. And then we look at, I think, a number of kind of data completion -- sort of data completion opportunities to Preqin that could be interesting. Those are, I think, are the big white spaces that we've got going across the list now.

Great. Well, with that, we are out of time. So Mark, on behalf of all of us at Bank of America, thank you very much. Great to see you.

Good morning. My name is Jennifer, and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the BlackRock, Inc. Fourth Quarter 2025 Earnings Teleconference. Our host for today's call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer; Martin S. Small; President, Robert S. Kapito; and General Counsel, Christopher J. Meade.

[Operator Instructions] Thank you. Mr. Meade, you may begin your conference.

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 was 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 systems.

So with that, I'll turn it over to Martin.

Thanks, Chris. Good morning, and Happy New Year to everyone. It's my pleasure to present results for the fourth quarter and full year 2025. 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. A reconciliation between GAAP and our as-adjusted results is included in today's press release. I'll be focusing primarily on our as-adjusted results.

We're closing out one of the strongest years in our history. Clients awarded us nearly $700 billion in net new assets, 9% organic base fee growth and 16% technology ACV expansion. Our whole portfolio strategy is winning both mind and wallet share with clients. It's bringing even more momentum to the breadth of our organic growth. We had nearly 150 products across our ETF and mutual fund ranges with over $1 billion in flows.

We had over $24 billion in revenue alongside nearly $10 billion in operating income, both up 50% since 2020, and earnings per share was a new record. Our platform demonstrated resilience and growth even when markets were in turmoil back in April and captured steep upside when they rallied.

2025 was another proof point that BlackRock is a share gainer when there's money in motion. Our 10% increase to our 2026 dividend per share and increase in planned share repurchases to $1.8 billion are driven by our accelerating growth trajectory and platform success in 2025. That's our highest dividend increase since 2021 and comes after a record $5 billion payout to shareholders in 2025.

Supported by both 9% organic base fee growth and favorable markets, we entered 2026 with a base fees run rate that's approximately 35% higher than our base fees in 2024 and approximately 50% higher than 2023. This stronger entry point enhances our ability to deliver future earnings, return capital to shareholders and execute on our 2030 ambitions.

We delivered 6% or higher organic base fee growth in each quarter of 2025. We finished the year with 2 consecutive quarters of double-digit organic base fee growth, including 12% in the fourth quarter. That growth is broad-based across our systematic franchise, private markets, ETFs and digital assets, cash and outsourcing. And it's across capabilities that we've had for decades and others that we've built or acquired in the last 2 years. That gives us confidence we're on the right track with clients and we have a lot of optimism for the years ahead.

You've heard us say it's not that the big are getting bigger. It's at the best we're getting bigger. Size and scale are outputs and performance. We've wrapped a successful 2025 and now we're moving with speed and scale to go upward from here. We're building leading franchises in newer high-growth markets across the industry, private markets to insurance, private markets to wealth, digital assets and active ETFs. We think these can all be $500 million revenue generators in the next 5 years.

We already have industry-leading margins, and we see real opportunity to drive margin expansion through the FRE growth trajectory of our private markets and our highly scaled foundational businesses. We entered 2026 with strong momentum, and our first year as a fully integrated firm with GIP, Preqin and HPS. We're pioneering what we believe is the asset management model of the future. It's one that seamlessly brings together public and private markets.

It interoperates between traditional and decentralized financial ecosystems, and it's powered by technology and data with Aladdin, eFront and Prequin. BlackRock houses the world's #1 ETF franchise, a top 5 alternatives platform with more than $675 billion in client assets, $0.5 trillion in target data AUM, leading advisory services and a tech and data SaaS franchise with nearly $2 billion in revenue.

Moving to financial results. Full year revenue of $24 billion was up 19% year-over-year. Operating income of $9.6 billion was up 18% and earnings per share of $48.09 increased 10%. Fourth quarter revenue of $7 billion was 23% higher year-over-year, driven by the acquisitions of HPS and Preqin, organic base fee growth over the trailing 12-month period and the positive impact of market movements on average AUM.

Quarterly operating income of $2.8 billion was up 22%, while earnings per share of $13.16 increased 10% versus a year ago. EPS also reflected a lower tax rate, lower nonoperating income and a higher share count in the current quarter linked to the close of the HPS transaction on July 1. Nonoperating results for the quarter included $106 million of net investment losses primarily due to a noncash mark-to-market loss linked to our minority investment in Circle.

In mid-December, we contributed a portion of our stake in Circle to our existing donor-advised fund. Following this transaction, we maintained approximately 1.1 million shares of Circle common stock, which will continue to be marked through investment income. Our asset-adjusted tax rate for the fourth quarter was approximately 20% and benefited from discrete items. We currently estimate that 25% is a reasonable projected tax run rate for 2026.

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 $5.3 billion was up 19% year-over-year, driven by the positive impact of market beta on average AUM, organic base fee growth and approximately $230 million in base fees from HPS.

On an equivalent day count basis, our annualized effective fee rate was approximately one-thenth of a basis point lower compared to the third quarter. This decrease was primarily due to higher securities lending revenue in the third quarter, which benefited from specials. We're seeing client demand from our structural growers like private markets, systematic models, OCIO, ETFs and SMAs, and these capabilities provide positive leverage to average fee rates.

The fee yields on new asset flows this year are 6x to 7x higher than they were in 2023 and are at a premium to our overall fee rate. Fourth quarter performance fees of $754 million increased from a year ago, reflecting higher revenue from alternatives and included $158 million from HPS. Full quarter and full year technology services and subscription revenue each increased 24% year-over-year, reflecting the successful onboarding of a number of new clients, expanding relationships with existing clients and the closing of the Preqin transaction.

Preqin added approximately $65 million and $213 million of revenue in the fourth quarter and full year, respectively. Annual contract value, or ACV, increased 31% year-over-year, including the impact of Preqin. ACV increased 16% organically. Total expense increased 19% in 2025, primarily driven by higher compensation, sales asset and account expense and G&A expense.

Full year employee compensation and benefit expense was up 20%, primarily reflecting higher incentive compensation associated with performance fees as well as higher operating income. The year-over-year increase also reflects the impact of onboarding GIP, Preqin and HPS employees.

Full year G&A expense was up 15%, primarily due to M&A transactions and higher technology investment spend. Our fourth quarter as-adjusted operating margin of 45% was down 50 basis points year-over-year. Our full year as-adjusted operating margin of 44.1% decreased 40 basis points from a year ago. Both periods reflect the impact of performance fees and related compensation.

We continue to deliver margin expansion on recurring fee-related earnings. Excluding the impact of all performance fees and related compensation, our adjusted operating margin for the fourth quarter would have been 45.5%, up 30 basis points year-over-year. Our full year margin would have been 44.9%, 60 basis points higher relative to 2024.

As we execute on our organic base fee growth and operating margin ambitions, we'll continue to be disciplined in both our hiring and our investments. After annualizing for the impact of HPS and Preqin, we would expect a mid-single-digit percentage increase in G&A. Additionally, we would expect BlackRock's headcount to be broadly flat in 2026.

After investing for growth, we returned a record $5 billion to our shareholders through a combination of dividends and share repurchases in 2025. This includes $500 million and $1.6 billion of share repurchases for fourth quarter and full year, respectively. BlackRock's Board of Directors recently approved a 10% increase to our first quarter 2026 dividend per share, building on our track record of strong dividend growth and demonstrating confidence in our cash flow generation and durable earnings expansion. That represents a 13% increase in the dollar amount of dividends expected to be paid.

The Board also authorized the repurchase of an additional 7 million shares under our share repurchase program. At present, based on capital spending plans for the year and subject to market and other conditions, we are targeting the purchase of $1.8 billion worth of shares during 2026.

Full year total net inflows of $698 billion reflected positive flows and organic base fee growth across all asset classes and active and index. IShares led the industry and set a new flows record with $527 billion in 2025, representing 12% organic asset and 13% organic base fee growth. Net inflows were diversified across core equity and premium categories like fixed income, active and digital assets ETPs.

IShares net inflows of $181 billion in the fourth quarter once again demonstrated strong momentum into year-end, supported by seasonal portfolio reallocations. Full year retail net inflows of $107 billion were led by the onboarding of the $80 billion SMA assignment from City Wealth during the fourth quarter. Separate from this assignment, Aperio had its fifth consecutive record year of net inflows with $15 billion, active fixed income added $3 billion and alternatives generated $12 billion in 2025.

BlackRock's institutional active franchise generated net inflows of $54 billion in 2025, reflecting the onboarding of multiple outsourcing mandates, the above target close of GIP 5 and deployment in private credit. Institutional index net outflows of $119 billion were mainly driven by redemptions from low-fee index equity strategies. Our scaled private markets platform delivered $40 billion of full year net inflows led by private credit and infrastructure.

We're targeting $400 billion in gross private markets fundraising through 2030 powered by origination, strong investment performance and the depth of our client relationships. Our valuable position as a trusted long-term partner to corporates and sovereigns provides us with unique visibility and insight into capital markets and client activity, enabling differentiated deal flows, tailored solutions and long-term value creation for our clients and shareholders.

Finally, BlackRock Cash Management saw $74 billion of net inflows in the fourth quarter and $131 billion in 2025, driven by U.S. government, International Prime and Circle reserve funds. BlackRock's platform is anchored by growth engines tied to the long-term expansion of global capital markets and fast-growing client and product channels. The opportunity ahead is inspiring to reshape portfolios for more complex markets, to deepen partnerships with clients and to deliver durable profitable growth for our shareholders.

We entered 2026 with the combined strength of BlackRock, GIP, HPS and Preqin, now all on BlackRock, and we're excited to share our growth with clients, employees and shareholders.

I'll turn it over to Larry.

Thank you, Martin. Good morning, everyone, and Happy New Year. Thank you for joining. .

We entered 2026 with accelerating momentum across our entire platform. It will be the first full year with the combined strength of BlackRock, GIP, HPS and Preqin. We're coming off the strongest year and quarter of net inflows in our history. Clients awarded BlackRock with nearly $700 billion in new assets in 2025, including $342 billion in the fourth quarter.

And the consistency of our results stands out even more over the long term with nearly $2.5 trillion of net inflows over the last 5 years. Our pipeline of business has broadened across products and regions, spanning public and private markets, technology and data and client channels. We're seeing excellent fundraising activity.

We have an ambitious 2026 fundraising plan diversified across infrastructure, equity and debt, private financing solutions and multi alternatives. Our client relationships have never been stronger and deeper. We're a scale operator in public and private markets, investments and technology that's significantly enhancing our position with clients worldwide.

We're building off accelerating growth over the course of 2025. We delivered 6% or higher organic base fee growth each quarter, and we ended the year with 12% organic base fee growth and 16% technology ACV growth in the fourth quarter. These growth rates are both a 4 points higher than last year and 9% full year organic base fees growth represents $1.5 billion of net new base fees. That means we enter 2026 with base fees approaching $21 billion, 13% higher than 2025.

And we delivered a premium 45% operating margin. Our scale and Aladdin technology fuels growth and helps push down our marginal cost. We're in an upward trajectory in our margins on fee occurring, reoccurring earnings as we continue to drive growth in private markets, and scale businesses like ETFs and systematic equities.

Our belief in our future growth, increasing profitability and durability of cash flow led us to increase the dividend per share by 10%, and step up planned share repurchases. Over the last 10 years, we delivered a 10% compounded annual growth rate in our dividend and over a 15% annual return on our repurchases. And we're confident than ever in our model and the outsized opportunity we see across multiple growth engines.

Our foundational businesses like iShares are unlocking new markets like in active ETFs and digital assets. At the same time, we're a leader in emerging trends like private markets to wealth, 401(k)s, tokenization and private market data. In private markets, our investments in infrastructure and private credit and all the wealth underpin our ambitions to raise $400 billion in private markets by 2030.

BlackRock is already managing $3 trillion on behalf of insurance, wealth and OCIO clients. We have a significant opportunity to deliver better outcomes and experiences for clients in private market allocations. And for our shareholders, that shift represents new private markets AUM and potentially over $1 billion in new base fees.

For example, BlackRock is the largest general account manager for insurers with $700 billion in AUM. With HPS, we're now also one of the largest asset-based finance and high-grade managers. We're in about 20 late-stage conversations to help insurers build more dynamic and diversified portfolios across public and private markets.

Similarly, in wealth, we're focused on expanding access to private markets. We're bringing together strong investment performance track records with BlackRock's scaled global distribution model. We have the largest who selling team in the industry covering every corner of the United States marketplace. We have very strong relationships in private banks in Europe. Our more than $1 trillion of wealth platform spans and clients' whole portfolios for models and SMAs to ETFs and private markets.

We're also a technology provider through Aladdin Wealth, which brings institutional quality portfolio construction right to the desktops of our financial advisers. We continue to expand and diversify distribution of HPS nontraded BDC to U.S. wirehouses and RIAs. And we believe model portfolios will be another unlock. We're also planning to widen our product range through an H Series family of funds. That would be led by the flagship HLEND alongside junior capital, real assets, triple net lease, multi-strat credit and secondaries and co-investment strategies. We plan to bring all the building blocks to serve wealth investors through coordinated multi alts portfolios.

Then the retirement. We're seeing important progress towards a framework to include private assets and target date funds. We expect to launch our first LifePath target date fund with private markets later this year. Most Americans only experience with capital markets is through their 401(k) plan. I said many times that helping workers build and spend their retirement savings is one of the greatest challenges of our generation, with long associated for better retirement solutions and easier access to investment options.

BlackRock has also championed early childhood savings accounts and the policies that make them possible, and we're encouraged by and supportive of the launch of these accounts in the United States. For retirement savers, there's a real opportunity to bring additional returns and diversification to investors through private markets.

BlackRock will be at the forefront with our leading DCIO business, our $600 billion LifePath franchise, top 5 alternative platforms and definitely Prequin. We expect plan sponsors will need standardized benchmarking and performance data to validate their planned choices, and Preqin can be the central provider. Our leadership in all of these areas distinguishes BlackRock with plan sponsors and policymakers.

We've always been a leader in retirement and a first-mover in developing new solutions in retirement. We started innovating LifePath Paycheck in 2018, and it's been the fastest-growing lifetime income target date strategy in the defined contribution market. We believe it will be the default retirement investment strategy. Guaranteed income and private markets are not 2 separate conversations.

BlackRock can bring it all together. Our vision is not just for incremental addition of private markets, it's the design of an optimal target date solution, one that combines public markets, private markets and guaranteed income like LifePath paycheck. BlackRock has long-standing relationships and decades of experience in working with plan sponsors and building client-first retirement solutions for their members.

We're a bit over a year into closing our GIP transaction, and we're already seeing synergies through our combined expertise and relationships. GIP 5 closed above its $25 billion target in July, and our AI partnership, which was not part of the deal model, continues to attract significant capital. AIP has raised over $12.5 billion from partnership founders and clients. Our initial target is to mobilize and deploy $30 billion of equity capital with a potential of reaching $100 billion, including debt.

More broadly, we're seeing excellent progress across the range of infrastructure strategies, including mid-cap and emerging markets infra and equity and investment grade, high-yield and credit-sensitive infra debt. The current cash flow and inflation affected return profile of infrastructure makes it an attractive sector for our clients, especially those saving for retirement.

More broadly, income-oriented strategies are a critical component of our clients' portfolios. BlackRock manages over $4.5 trillion in assets across both public fixed income, cash and private credit. This means we can provide an integrated fixed income solution for clients that deliver scale benefits. In 2025, we generated over $45 billion of net inflows across our high-performing active fixed income franchise, led by Rick Reeder.

We believe 2026 is shaping up to be another year where returns may be driven primarily by income rather than price appreciation. We're well positioned to capture flows with strong performance and differentiated strategies across municipals high-yield, total return and unconstrained fixed income strategies.

And we're leveraging active ETFs to provide access to our portfolio managers inside along with the benefits of the ETF wrapper. Our active ETFs drove more than $50 billion in net inflows in 2025, nearly tripling their assets in the last year. Rick's flexible actives income ETF Bank, BINC; and our systematic U.S. equity factor rotation ETF, DYNF, led our active ETF flows for the year. DYNF was the highest inflowing active ETF in the industry with $14 billion of net inflows. It is our flagship of our systematic equity platform.

Overall, our systematic equity franchise raised over $50 billion in 2025, even as the active equity industry saw another year of outflows. Our systematic investments have been using data and AI for 20 years. We've invested in this business, and today, its IP delivers alpha to clients and helps portfolio managers across BlackRock to invest better.

As more investors are looking at how to use AI for investments, we already have one of the best platforms utilizing AI and Big Data to drive thousands of alpha signals. We're optimistic about our systematic platform, continued double-digit organic base fee growth potential and its position as a bright spot in the active equity industry.

IShares continues to be an innovation engine for BlackRock. IShares remains the market leader in ETFs in terms of organic assets and base fee growth country served and in product lineup. 2025 was another record year for iShares with $527 billion of net inflows. In 2000, with just 40 ETFs, BlackRock iShares set out to revolutionize investing. And over those 25 years, iShares has led the way in democratization of access to the growth of capital markets.

BlackRock shaped the industry and we continue to expand choice and access for investors around the world. We brought U.S. investors access to international markets, and we introduced ETF to Europe. We launched the world's first bond ETF. We provide over 1,700 ETFs today, more than 6x the next largest issuer, and we're focused on providing investors value for their money while driving growth and margin expansion for our shareholders.

IShares AUM was about $300 billion when we announced our acquisition in 2009. Today, it's $5.5 trillion, and iShares revenues have more than quadrupled to over $8 billion. IShares is delivering growth both through core channels and newer premium initiatives like active ETFs, digital assets and in international markets. In Europe, ETF net inflows of $136 billion was approximately 50% higher than 2024, and we're seeing more individuals coming to iShares through digitally enabled offerings and monthly savings plans.

We're seeing similar trends in India where our JioBlackRock joint venture operates through a digital-first direct-to-consumer model. JioBlackRock raised $2 billion upon launch, 6x the previous industry record and now manages 12 funds spanning cash index, systematic equities on behalf of nearly 400 institutions and already more than 1 million Indian retail investors.

More broadly, we're seeing great momentum in connectivity with clients in international markets. Both in Asia and in LatAm, we saw double-digit organic base fee growth in 2025. Growth in Asia was led by our active wealth strategies and $30 billion of ETF net inflows across our locally listed and global ETF range.

In Latin America, our local presence is similarly resonating through our onshore ETFs and wealth offerings. And in the Middle East, we have a strong history as a trusted adviser to countries looking to allocate capital or to build out their own local markets. It is one of our fastest-growing regions.

Our Aladdin technology powers and unites all of our platform and all our work. The fact that BlackRock is the largest user of Aladdin allows us to stay attuned to changes in the marketplace and adapt Aladdin for our clients. Today, we're enabling our clients to more easily manage their exposure through end-to-end integration across public and private markets. 16% technology ACV growth reflected several innovative multiproduct wins, which will drive future revenues.

Through Preqin, we're expanding access to actionable private market data, giving investors the analytics they need to build strong and reliable portfolios. The BlackRock platform is comprehensive. It's global. We're a leader in public markets, we're a leader in private markets and we are a leader in technology and data. We're a foundational provider in the traditional financial markets and the evolving decentralized financial ecosystem.

Most importantly, we bring it all together to deliver BlackRock to our clients in a comprehensive, consistent, determined way. We're entering 2026 with elevated momentum, and we're positioned to have a big future opportunities. We ended the year with 12% organic base seed growth, record flows and a new AUM high at $14 trillion. This already lifts our base fee entry level rate by 13%.

We are confident in our organic base fee growth ambitions. We plan to raise the cumulative $400 billion in private markets by 2030. We're focused on our margins and driving profitable growth. This all should translate to shareholder value through higher earnings and then multiple expansion.

I'd like to thank our employees for the work they do every day on behalf of our clients, each and every client that we stand by as a fiduciary. When we do well for our clients, we also do well for our employees, and then we do well for our shareholders. I believe they'll all be beneficiaries of our future growth.

Operator, let's open it up for questions.

[Operator Instructions] Your first question comes from Craig Siegenthaler of Bank of America.

I have to congratulate you on the record base fee organic growth because 12% is pretty impressive for a $14 trillion manager.

Well, I hope it's going to be impressive when we're in a much larger manager than $14 trillion.

As we look ahead to 2026, can you flush out what you're all seeing in thinking on the net flow pipeline? And a sort of follow-up would be your money market business, which, is not a new modern business, has done really, really well over the last 5 years. Higher rates has been a factor there. But with the Fed cutting do you see flows reversing in this business? And if it does, where do you think that liquidity goes?

Thanks, Craig. It's Martin. Happy New Year. Let me just start by saying that organic base fee growth continues to outperform our 5-plus percent baseline target, 10% in Q3, 12% print in Q4, 9% for the year. And it's the momentum, I think, that really gives us a lot of energy. The growth has ticked higher each quarter. We were 1% to start 2024, 6-plus percent each quarter this year and then ending with 2 back-to-back quarters that are at double digits.

That means clients want to do more business and are giving more business to BlackRock. I think the success we've had with this structural growth strategy, it's driving strength and it's doing it across market environments in an all-weather way. And with more growth coming from our pipeline of private markets, systematic strategies, models, SMAs, digital assets, we think we can power organic base fee growth. It's more consistently 6%, 7% or higher. And in supportive market environments, I think like Q4, where there's some risk on sentiment for higher fee international precision exposures, private markets can tilt even higher. But we've always talked about our strategy being grounded in the whole portfolio, it's always been about breadth and serving every corner of a client's portfolio.

This year, we had really excellent breadth in organic base fee growth, and we're seeing that same breadth in our pipeline. Our fundraising plan is diversified across infrastructure, private financing solutions, multi alternatives. And I think 2026, to your point, on money funds it's shaping up to be the year of a steeper yield curve, and we think that era of EZ287 fund income looks to be fading. We think that bond returns are going to be driven more by income rather than rate moves or spread compression.

And I think even though cash is always going to be an allocation in a well-balanced portfolios, we'd expect that rate cuts are going to cause money market yields to fall and that some of the best opportunities for investors to be locking in bond yields are going to be in intermediate-term bonds. I think if the bond team was here, they say there's a generational opportunity to earn high quality, steady income in the front and middle of the yield curve using that full toolkit in fixed income, credit, securitized, government bonds, munis, active and index.

And we're seeing that energy on our platform. We saw more than $80 billion of fixed income flows in Q4 and more than $40 billion outside the new city mandate. IShares' bonds had $52 billion in Q4, $175 billion, that's 18% organic growth for the year. We manage over $3 trillion in fixed income. So we think we can meet clients with fixed income offerings across sectors and durations wherever they need it and to do it in a vehicle that works best for them. That's an ETF.

It's a separate account, a mutual fund or even yield-oriented exposures being a top CLO issuer and manager and by blending public and private fixed income through direct lending BDCs like HLEND. Our field on new assets to the firm in this pipeline is running 6x or 7x higher than the field on new assets in '23. And we think clients want to do more with BlackRock across the platform.

We saw it in the 2025 activity and in the early momentum in '26. So it gives us confidence that we're on the right track and gives us a lot of energy about what 2026 can look like on the organic growth front.

Let me just add one more point. As global capital markets grow, cash is going to grow alongside of it. So the base holdings of cash will be elevated as long as the global capital market continues to grow. And if you overlay, if tokenization becomes more real and the opportunity to have a tokenized money market fund alongside tokenizing other assets, I actually believe you're going to see probably above-trend holdings and cash.

That being said, I agree with everything what Martin said, we're going to see much more -- you're going to see more and more investors going out the curve, especially if the yield curve become steeper and steeper, which probably is going to be the outcome. But I think we have to look at the overall scale of the capital markets and its growth globally, and that is one of the foundational reasons like cash holdings will -- they look larger than ever, which they certainly are, but I think as the capital markets grows, so does holdings in capital markets cash.

And I think that is important -- there's an important connection between that. And it's not -- it's -- cash is just not an outcome of people are nervous and holding and are not looking to do it. As the capital market grows and as more people's wallets are in the capital markets, the role of the money market fund just grows. And I think that is one of the foundational reasons why we continue to believe that money market holdings will continue to be quite large.

Your next question comes from Michael Cyprys with Morgan Stanley.

I wanted to ask one about Asia. I was hoping you could speak to your priorities across your footprint in Asia, from your local partnership in India, 2 initiatives you have in Japan, among other countries. How are you looking to accelerate growth and expand contribution from Asia over the next couple of years? And what aspects might be most meaningful to the overall firm?

Well, I would say, first and foremost, Asia capital markets grew faster than the U.S. capital markets. More IPOs in Asia, especially in Hong Kong. So let's just start with that foundational base. The capital markets are going faster there. You're seeing historical changes in Japan because the NISA accounts and retirement accounts, you're just seeing more of wealth entering the capital markets out of the banking system. And that just represents more and more opportunities.

So Japan has been an exceptional platform for growth. The insurance industry in Japan, the pension fund industry as the NISA accounts grow, so that's just one really good foundational example. As I said, IPOs in Hong Kong and the scale of wealth management in Hong Kong and Singapore the wealth that is being generated in Southeast Asia, all leads to bigger opportunities, not just bigger opportunities to manage the money, but bigger opportunities to invest like GIP invested in the airports of Malaysia.

In India, I believe we have the best single platform to grow in India with a JioBlackRock partnership. I talked about the growth in 2025, but we have -- we believe that the transmission of the growth of the capital markets in India is just at the very beginning. Historically, Indians kept most of their money either in gold or in cash. And I think the opportunities to develop a self-directed retirement platform in India is real.

And as the platform grows in terms of retirement, the opportunities for us are very large. But even in places like in Saudi Arabia, there's conversations going on now to really build a Pillar 2 retirement system there and then obviously, a Pillar 3, and we're engaged in those conversations and opportunities. So historically, we looked at a lot of these markets who are exporters of capital, but now, in many cases, there are importers of capital, but more importantly, they're developing their own capital markets.

This is a trend that I've been talking about for years, and I think it's just that we're at the early stages of the growth of the capital markets in every place in the world. If you look at our growth rates, the double-digit growth rates and base fees in LatAm, it is another example of the growth of wealth and the opportunity that we have. And so the key is BlackRock is going to grow as long as the world and global capital markets grow.

But I would -- what I would clearly, say, what '25 indicates and what '26 offers is the growth of these capital markets are very beneficial for platforms like BlackRock, and we are involved in these conversations. We're building our platform in each and every country. And I believe this is one of the real foundational opportunity for us in the future.

Your next question comes from Mike Brown with UBS.

So Larry, you touched on the insurance channel in your prepared remarks, and BlackRock is a major player in the space and about 5% of your AUM today. But certainly, competition seems to be rising in the space. Can you just talk a little bit about how your differentiated offering like a full spectrum cash to private credit differentiates here maybe unpack your comments about how the demand for the channel is shaping up here in 2026?

Thanks. Maybe I'll start, Martin, and then I know Larry will add some color. So I'd start with, yes, the balance sheets of the world's largest insurance companies were traditionally invested in public fixed income. BlackRock has been very successful at capturing those allocations, and today, we're the largest insurance company, general account manager in the industry with $700 billion in assets, more than 450 insurance relationships.

HPS also manages over $60 billion of credit assets for over 125 insurance companies. And I think with our combined platform, we're better positioned than ever to be a high-grade solutions provider. We also have a service to the largest insurance companies on our Aladdin platform as well as an array of middle office services and accounting services. We think that private credit and building great public private portfolios is a very important growth vector within private markets and there's an opportunity for growth with asset-based finance and private high grade with insurance companies.

Just the penetration in this market is much smaller when compared to the corporate credit market. We have over 20 conversations right now where we're working on high-grade SMAs with leading insurers and building private high-grade portfolios. A number are in later stages. We'd hope to start seeing deployments pull through through the second half -- and we're really focused on 3 things with them.

The first is delivering better outcomes for our insurance clients by working with them to migrate something on order of 10% of their existing public fixed income assets into private high grade. So think of a $700 billion base migrating to $70 billion on order of that in private high grade.

The second is expanding high-grade mandates, meaning new assets and winning new assets with clients away from our existing book.

And the third is also pursuing strategic partnerships, minority investments to increase the pool of insurance assets managed here at BlackRock, similar to the minority investment and strategic alliance that we announced with Viridian last year. I think on our competitive advantages. I'd note that insurance company asset management, it's a highly customized effort working with clients every day. It's not one of these mandates that give me a benchmark, and I'll beat it and give you a monthly report.

Teams are basically in-sourced by the insurance company to be looking at cash flows to be thinking about credit to be thinking about the intersection of accounting and capital and managing those portfolios. It is a highly interactive day-to-day thing. So being able effectively to blend turnkey full-service capabilities for insurance companies. That's a key competitive advantage for BlackRock.

Integrating public fixed income, private credit, Aladdin, accounting, middle office services makes working with BlackRock a performance enhancer, a scale enabler. So there's no doubt that this space has become more competitive, especially in private high grade. But I think our experience is that insurance companies want a full-service partner and that we're well positioned to play that role given our track record in public fixed income technology and world-class capabilities in private credit.

Your next question comes from Alex Blostein with Goldman Sachs.

So question to you guys about margins, Larry, you mentioned it a couple of times, and Martin did as well. Obviously, the business has grown really well. You outlined a number of really compelling initiatives how growth could continue for '26, '27. So when I think about the 45% operating margin, excluding performance fees that you sort of highlighted for 2025, how should we think about that progressing over the course of '26, assuming kind of normal markets?

And then Martin, just a follow-up for you, the specifics around G&A, I heard mid-single digits, but maybe you guys could just remind us what the right base is?

Sure. Thanks, Alex. Happy New Year. So BlackRock, as I mentioned, we continue to deliver industry-leading margins. As we talked about at our Investor Day, we continue to target 45% or greater adjusted operating margin profile with our margin on recurring fee-related earnings running higher. Our operating margin in the quarter was 45%. And as I mentioned in my remarks, we continue to deliver margin expansion on recurring fee-related earnings.

So excluding the impact of performance fees and related comp, our margin would have been 45.5%, up 30 basis points. Think of that as more akin to an FRE margin burden for stock-based compensation. This growth here at BlackRock is fueled by strong FRE growth in our private markets franchises, along with high value, higher fee rate and scaled strategies and active ETFs, digital assets, systematic equities and other areas.

So we think that over time, we'll see the margin on fee-recurring earnings driving upwards towards the trajectories of the best-in-class private market name, so think north of 50%. A couple of things I'd remind you that we defer a portion of compensation linked to performance fees for talent retention. So in years where we see higher performance fees, we also see higher deferrals, which impact comp in future years.

We continue to drive operating leverage and growth through technology and automation, using the benefits of size and scale to reduce costs, strategically footprinting our business. And as we set out in the Investor Day, we're targeting that 45% or higher greater adjusted operating margin. We're delivering steady operating margin expansion before the GIP, Preqin and HPS transactions.

As we talked about during the announcement of those transactions, GIP and HPS both have 50% or higher FRE margins. So that's accretive to our margin on fee-related earnings. So we think the growth in these franchises alongside the highly scaled platforms like iShares, cash, model portfolios, they can fuel higher margins on fee-related earnings and over time, our overall adjusted operating margin.

And just in terms of your question, Alex, on G&A. We've talked about our financial rubric and how we aim to align organic revenue growth and controllable expenses across base salaries as well as G&A. Ultimately, I think with the long growth, the market is a structural tailwind, that's going to deliver more beta to the bottom line in op income growth and the benefits of scale to our clients and shareholders.

As I mentioned on my prepared remarks, after annualizing for the impact of HPS and Preqin, we'd expect a mid-single-digit percentage increase in G&A. In 2025, we didn't see the full year impact of acquired HPS and Preqin G&A, so it will impact the year-over-year comparison in 2026. If you annualize our second half 2025 G&A results, which fully captures HPS and Preqin G&A, our 2026 expected G&A growth is in the mid-single digits.

Once we've lapped the 2026 results with a full year of integrated expense in our results, we expect you'll continue to see controllable expenses within organic base fee growth, as we drive our 2030 strategy forward, that implies future years are in the mid-single-digit percentage growth.

Your next question comes from Ken Worthington of JPMorgan.

I wanted to dig a little bit further into Preqin. The alternative data business is evolving, several alternative managers and index companies have launched private market partnerships over the last few quarters with plans to launch various private market indices. How should we view the evolution of Preqin and BlackRock's initiatives around private market data? And what sort of outlook do you see for Preqin and BlackRock to participate in investable alternative indices?

Thanks. I'd start with we're basically 9 months-plus past the close of Preqin. The integration has really been terrific. We're very excited about the plans going forward. The 4 big things to do as part of bringing Preqin into BlackRock is first, expanding the distribution, obviously, of world-class Preqin data across our client base.

The second is the build-out of data and models for private markets using the Preqin data, creating that great ecosystem where you have data and models being able to power how asset allocators think about investing in the private markets, how they think about benchmarking and comparing returns, effectively creating the language of private markets, both in risk models and in data.

The third is enriching the data and building scale in the data factory. And then the fourth is the opportunity, you're touching on, which we think is the larger long-term opportunity of leveraging our engines in Aladdin and iShares to build the machine for the indexing of the private markets.

And when I think about what the creation of public markets did to drive stock markets, which especially we see through iShares, we think BlackRock and Preqin to do that for the private markets. We see that opportunity as being particularly compelling. We're working on building investable indices that we hope to bring to market here in the next few years.

And I think the real opportunity is to try to standardize index rules to try, to standardize pricing frameworks and ultimately, publication so that you can create markets and transparency that ultimately can power futures contracts, can ultimately power iShares, and that's a big part of our strategy in the overall growth of Preqin.

Let me add one other point. Because more and more insurance companies, more and more pension funds and sovereign funds are deploying more and more private market strategies and more wealth managers are anticipating more private market strategies, the need to have a comprehensive risk management platform is even more imperative.

So having a separate risk management system only for private markets is not going to be workable. And I think what Aladdin is bringing across the world and the spectrum of public and private markets, we're in a position of very large growth, and you saw that in our ACV growth in 2025.

And we expect that to continue over the coming years, the need to have a comprehensive risk platform. And especially if the Department of Labor approves the utilization of private markets in the 401(k) and the defined contribution business, each and every firm is going to have to validate and authenticate the risk that is being implied when they add private markets.

We are still going to have to live under some prudent ruling, maybe still a fiduciary ruling of some sort; we don't know. But I could say with absolute certainty, the need to have a comprehensive risk tools to understand the risks associated with adding private markets to a, what is, all public market portfolio is imperative. And so the need for a platform like Aladdin has never been greater, especially with the addition of private markets in the defined contribution space.

Your next question comes from Dan Fannon with Jefferies.

So just a question on private credit. I was hoping you could first disclose what the HPS flows were in the quarter? And then more broadly, how you're thinking about the outlook for growth given the headlines and news flow around this asset class, has that changed at all as we think about 2026 and beyond?

Thanks a lot. So we deployed $25 billion in 2025 across private markets, led by private credit and infrastructure. The deployment trends have been strong. We had $7 billion of private credit net inflows in the quarter, primarily due to deployment activity. We're seeing good and building momentum for private markets investing and private credit, I think, in particularly.

So that number, I think, is in the tables. We're generally seeing stable credit conditions across the main HPS strategies that today form the core of our private credit platform. We think some of the headlines that we've read often highlight isolated stress points rather than painting the full picture. But we generally see stable credit conditions across the portfolios that we're managing.

But I think the context is critical. Like defaults and losses in the non-IG direct lending to corporates have been abnormally low for years following low rates. Default rates in the broader leveraged loan market are averaging slightly below the long-term average of 3%. And in economic slowdowns like default rates rose to 4% to 5%, the all-time peak in the GFC hit 15% on an issuer-weighted basis, and so direct lending defaults are rising, but they remain in historical ranges. So I think we see this period as do many of the other firms as a period of expected catch-up following a long period of very low defaults.

So returning to normal defaults is something I think we expect. When we look through the universe of BDC loans, the $400 billion across 20,000 loans sitting in the valuation databases, we see nonaccruals that are inside the historical average. We see PIC as a percentage of total interest income in line with historical norms, recovery rates that are in line with historical norms.

The data does show some stratification between smaller companies and larger companies. So a $0 to $50 million EBITDA company looks very different than a $100 million to $200 million EBITDA company in terms of the ability to generate earnings. So I think going forward, it's not that there's nothing to see here, it's just that we'd expect smaller borrowers, particularly those that were financed at very high or peak valuations and capital structures that didn't contemplate a 3% to 4% neutral rate.

Those are the credits that we'd expect to be more challenged. The HPS teams have focused very consistently over the years on larger companies. The weighted average EBITDA in the HLEND portfolio is about $250 million. But these are lending businesses. There will be normalized default rates through cycles. And I think the team is very fond of saying the promise of private credit is not that there will be no defaults, is that detailed credit work is going to be rewarded and that lenders will be in a better position to maximize recoveries.

We continue to see good flows. We had strong gross subscriptions of $1.1 billion in the fourth quarter in HLEND. Redemptions were 4.1%, which was higher than recent quarters, but in line with the broader industry. I think a mix of factors affected the Q4 flows. There's generally elevated seasonal redemptions. There was media attention, some profit taking.

And then I think forward expectations on lower base rates also plays in. But still, most BDCs posted positive flows. In our Preqin survey data, we see the structural pipeline for private credit fundraising and deployment as intact. In the Preqin data, over 80% of investors plan to maintain or increase their allocations to private credit in the next 12 months. It's just becoming a more standard part of our overall fixed income allocations to provide income and diversification.

Your next question comes from Ben Budish with Barclays.

Maybe just following up on Dan's question. Just curious if you could provide a little bit more color on your expectations for the wealth channel more generally in 2026. HLEND, obviously, some good, if not better than average trends in Q4. What's the latest you're hearing from advisers?

For GIP, I know there was some press indicating that there were maybe some challenges getting a product off the ground. So just curious if there's anything you can share there? And then I think in the prepared remarks, you talked about model portfolios using private markets. So anything you can share in terms of what those products might look like, what we should expect in terms of timing would be helpful?

Sure. I'll give that one a go. I'd start with the framing that, again, at our Investor Day, we discussed how our platform is going to target $400 billion in gross fundraising from 2025 to 2030. We raised over $40 billion in private markets in 2025, and we're entering '26, I think, with strong momentum, very excited about the integrated public-private capabilities that now include GIP, HPS and Preqin.

In private wealth and retail channels, we currently have the flagship private credit BDC HLEND, as you mentioned, been raising about $1 billion a quarter. And we have semi-liquid strategies in senior secured loans, junior capital and broadly syndicated loans. In 40 Act interval and tender offer funds, we have multi-strategy credit and private equity solutions that combine for about $1 billion in AUM under the tickers and And in Europe, we recently launched multi-alternative solutions products using the LTIP vehicles, which stand at sort of $600 million plus in AUM, generally offered through private banks and retirement plans.

Looking ahead, as Larry mentioned, we're bringing in H series of vehicles to the market for private wealth and retail channels versus '26. The H Series is going to give investors access to key private markets building blocks, direct lending, junior capital, real assets, triple net lease, private equity solutions.

And at our Investor Day, we set out a goal to grow the private markets to wealth series of products to at least $60 billion of AUM by 2030. So I think you'll see here in the near term, a real asset strategy coming to market in the U.S., European direct lending to European private wealth clients and following the triple net lease and other strategies in the U.S. later this year.

Ladies and gentlemen, we have reached the 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 the continued interest in BlackRock. Our results in 2025 validate the power of our integrated platform and the strength of our positioning with clients. We entered 2026 with differentiated momentum and opportunities ahead for us. I think we're well positioned to deliver for our clients and in turn, create longer-term value for our shareholders. Everyone, have a very good first quarter and enjoy the winter.

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

Okay. Wonderful. Okay. Thanks. Well, good afternoon, everybody. We're going to get started. It's my pleasure to introduce Martin Small, CFO of BlackRock, the largest global asset managers with $13.5 trillion in assets under management. Despite its size, BlackRock remains one of the fastest-growing companies in the asset management space with plans to still double the business by 2030. The firm is well on its way there with organic base fee growth accelerating to high single digits so far in 2025. Early signs of success from the recently closed acquisitions in private markets and a sharper focus on driving positive operating leverage. So lots to discuss.

Welcome back, Martin. always great to see you. Yes. Thanks for being here.

So why don't we start with a question on organic base fee growth. Not surprisingly, it's an important metric for you guys and the one that you really trained the market to really keen in on. So BlackRock has delivered 8% organic base fee growth so far or call it, over the last 12 months or so, exceeding the 5% plus, so really leaning to that plus part. With a few weeks left in 2025, how is Q4 organic base fee growth trending? And what are your early expectations for next year?

Great. Well, it's wonderful to see everybody. Thanks again for having me, Alex. And I know these things don't organize themselves. So thank you to you and all the staff for putting together such a great session.

I would characterize 2025 as one of these eye-watering like white knuckle roller coaster experiences for investors like Level 5, white river rafting. I mean you had Liberation Day. Do you remember Liberation Day? Liberation Day, sharp equity market declines. I think for the first time in quite a while, we had questions about U.S. exceptionalism. We actually had international equities outperform U.S. equity markets by like 10 percentage points. Does anybody remember those days, right? We had gold, a hunk of rock on a 30-year horizon, outperformed the S&P 500. We've had Sabre rattling on tariffs, trade, taxes, like real geopolitical tensions, the largest CapEx boom in history. I mean this was a big year. And so I'm really excited.

Everyone at BlackRock is very excited about delivering one of the strongest years in terms of organic base fee growth that we've seen in the history of the company. We're sprinting into the end of the fourth quarter here, which is seasonally the strongest for us. We've had 5 consecutive quarters of 5% organic base fee growth or higher. We've been running, as you mentioned, at 8% organic base fee growth over the last 9 months. We closed the HPS transaction early in the third quarter. So that's given us a boost from here kind of on the forward growth trajectory. So we're excited about it.

To me, what really stands out, though, is BlackRock's strategy has always been about the whole portfolio. It's about breadth in products and services. It's about serving every corner of a client's portfolio with excellence. And I'd argue to you, it's not just about the 8% organic growth over the last month. It's about the quality of that and diversity of that organic growth. Our top contributors to organic revenue growth are really diversified. It's our systematic franchise. It's private credit, it's cash, it's OCIO, it's active ETFs, it's models. So we're really seeing a lot of breadth in the business in terms of growth engines. And it's not just capabilities that we've had for decades. It's new capabilities that we've built in the last 2 years as well as capabilities that we've acquired in the last 2 years. And that's what we're looking for. The structural growers that have a lot of tailwinds behind them that we can get deep in serving client portfolios.

For the fourth quarter, we've seen about $100 billion of iShares flows so far through last Friday, the 5th of December. That's about $450 billion of iShares flows through the year. That would make for an annual record. We're #1 in asset gathering in iShares ETFs globally as well as the #1 organic revenue grower, 3x bigger than any of the other issuers or the next largest issuer.

So the fourth quarter is shaping up well. We've continued to see good deployment in our private markets franchises. We've had about $16 billion through the third quarter and a very good pipeline in the fourth quarter. We made a previous announcement about our mandate with Citi's private wealth business, which is about $80 billion of inflows, which should hit here in December. We're very excited about helping Citi grow its private wealth business, leveraging the best of BlackRock portfolio solutions. So we expect that to be a strong contributor to organic revenue growth in the fourth quarter.

And as we look out to '26, Alex, we've built the business around these structural growers, right? It's SMAs, models, systematic equities, private markets, Aladdin, cash, digital assets. And we see those growth rates really pulling through. So we think, as I mentioned at Investor Day, it's 5-plus with a real emphasis on the plus. I think we can more consistently generate 6% or 7% organic base fee growth with these engines really firing the way they have been. And if we get some positive market tailwinds and good structural, I think, support, we can do even better than that.

And the thing that I really track is if you look at the fee yield on new money to the firm, if you look at the fee yield on our organic revenue growth, it's running 6 or 7x higher than our fee yields were running in 2023. And so long as we're pulling up that fee yield on new money over time, it will pull up the average fee rate of the firm. And that's our whole strategy that we talked about at Investor Day of going from about $20 billion of revenue to $36 billion of revenue by 2030. Doubling operating income, doubling the market cap of the firm. What it implies is basically pulling the fee rate up what seems like 3 basis points. But on the magnitude of the assets, that's very meaningful. But we're very focused there on delivering high-value strategies that command those fee levels that are above the average fee rate of the firm.

Great. Well, that's really helpful color, both for the near term kind of as well as how you're thinking about '26. Let's talk about expenses and margins as well for a couple of minutes. The margin story has been maybe a little bit more noisy recently. You guys had a number of deals that kind of created a little bit of funny P&L dynamic. So one, I was hoping you could just walk us through your latest thinking for...

CFOs love it when you say funny P&L dynamics. Funny -- jump suit out.

Yes. So...

Fair point.

Fair point. So when we think about the sort of the core G&A trajectory for the firm into '26 and longer term, help us kind of level set what that looks like on a sort of pro forma basis, pro forma for the funny noise.

Thank you -- thank you for that. So I think through the lived experience of the management team and working with clients over a very long horizon, we've developed, I think, a good acumen about how to invest in the business through market cycles to optimize organic growth and create a lot of scale. BlackRock has continuously delivered industry-leading margins. We aspire to deliver margins -- adjusted operating margins of 45% or greater with our margin on recurring fee-related earnings running even higher. We've managed to do that and do that, I think, fairly consistently.

When we announced the transactions with HPS and GIP and Preqin, we were already delivering steady adjusted operating margin expansion. And GIP and HPS are over 50% FRE margin businesses. So they've been net accretive to our fee-related earnings, and we continue to see that pull through in how we're building the business. That's in addition to the businesses we have that have a lot of scale in them already, ETFs, highly scaled business, SMA, highly scaled business, digital assets, highly scaled business, our systematic equity and systematic and businesses, highly scaled franchises.

So when I think about the FRE growth trajectory of the private markets business, the highly scaled franchises that we see in the traditional platform, we really have that ability, I think, to continue to drive margin expansion and profitable growth for shareholders.

On the expense side, we've talked a lot about our systematic budgeting framework for how we invest the operating expenses of the firm. And in particular, we've talked about the financial rubric, and that's just basically a set of rules for how we think about systematically investing the expense base. And the basic principle is to align organic revenue growth and controllable expense, align organic revenue growth and controllable expense. By controllable expense, I just mean salaries and benefits and G&A. Salaries and benefits and G&A. Those are the expenses that we control. And so keeping them aligned ultimately with organic growth means that with stronger markets behind us, we'll have more of that beta that's driving revenue drop into operating income, creating operating income growth and creating more operating leverage for our clients as well as our shareholders.

You see that strategy pulling through, I think, very much in action. If you were to look at margins in the third quarter, excluding the impact of performance fees and related performance comp expense, our margin on fee-related -- recurring fee-related earnings was 46.3%. That's up 110 basis points year-over-year. So we really see that ability to continue to drive operating margin expansion in the business through scale and the financial rubric.

When you think about the cadence, I guess, of overall margin expansion, -- and just to double-click on that. I think you guys are at around 44% margin or so so far for the year, if you kind of look at where consensus, et cetera. 45% plus really doesn't seem that heroic based on the things you just described, even assuming like a normal level of market returns, right? So as you think about more of like an annual margin expansion trajectory on your way to that 45% plus, what does that look like over the next couple of years?

Yes. So I think we continue to target that 45% adjusted operating margin. Keep in mind, that's a fully burdened with stock-based comp margin. Where I really see the ability to continue to drive margin expansion is in the private markets and scaled businesses like ETFs, systematic equities, et cetera, where I really think we'll see that margin on fee recurring earnings being able to drive up towards those trajectories of the best of the best -- the best-in-class private markets names north of 50%.

Yes. I got you. Great. Okay. Let's pivot to some of the businesses, starting maybe with the institutional channel. And given your size and just the global reach, I would love to hear your perspective on this. One of the themes we've seen recently, perhaps most pronounced with CalPERS announcement recently kind of moving from strategic asset allocation to a total portfolio approach. It feels like that plays well into what you guys have established, but curious if you hear more institutions following their path, what does it mean for the market? What does it mean for your ability to source assets?

Yes. So I would -- I put in a small plug here for my colleagues at the BlackRock Investment Institute, who just last week released their 2026 market outlook. But one of the things that the BII group has talked about is just that markets are changing so rapidly. These megatrends that are driving markets whether it's AI CapEx, whether it's geopolitical fragmentation, whether it's changes in demographics have really changed the way investors need to think about building long-term portfolios.

For generations, institutional investors have been doing strategic asset allocation. Every 3 to 5 years, either themselves or through a consulting firm, they do extensive studies, what have been the historical risk and return assumptions and volatilities for international equities for high yield. They look at them and say, these are expected returns. They build a portfolio ultimately that's on an asset class silo basis, they put it together. And hopefully, when you combine it, it meets the long-term required output for their asset liability management purposes.

But imagine doing an asset allocation, Alex, like that's 3 to 5 years old right now. Like we did all the study. I mean 3 to 5 years ago, there were no large language models. There were no advanced GLP-1s, like the Taylor Swift Eras Tour was not affecting regional GDP market, right? I -- imagine every 3 to 5 years, we study what the expected returns are in capital markets. And I think what you've seen is this move away from SAA from traditional long-term strategic asset allocation to this idea of a total portfolio approach, which is basically to set a single reference benchmark and a set of risk budgets and ultimately to be more nimble about accessing sources of risk and return.

And it's interesting, you flagged CalPERS made a big announcement about this. There's a study that's referenced actually in the CalPERS press release about adopting TPA. And it talks about that study has 26 other very large institutional investors. that have also moved to a TPA approach or something similar, which are about $6 trillion of asset allocators in the world.

But I want you to think about like TPA changes the way investors and I think kind of asset managers have to talk to each other. So it's not a conversation about what does this asset class do. It's about what's the role of this asset class in a portfolio? How does it affect all of the other parts of the portfolio performance or even more complicated, TPA actually contemplates, for example, equity, exposure, equivalents like EEEs, right? What's an EEE? Well, it's things that have equity-like characteristics that on a relative basis, a CIO might say, I like that to fill up my equity exposure and my equity risk in TPA rather than buying outright equities. And I've seen -- we've seen certainly places like down in credit, where perhaps some of the risk return on a relative basis has some principal protection like in a junior capital structure, but has equity-like upside.

So thinking about EEE, equity, exposure, equivalents, it's like an entire new language. It has profound, I think, impacts for how asset managers and asset owners talk to each other, for how they dimension risk and ultimately, how they -- I think they access capital.

If you were to actually go Google beyond that press release, what CalPERS has done, you'd actually find that a lot of Aladdin risk models are being used to calculate those EEEs and other ALM models for CalPERS on the TPA, on the total portfolio approach. So I think this is a really important profound change in how investors build portfolios. But I also think that it's a huge opportunity for firms like BlackRock, where we have tools and technology and data, combined with kind of a language of whole portfolios. We've always talked to clients about whole portfolios and how adding a particular risk exposure affects the outcome of the whole portfolio. I think there's lots of asset managers that are excellent in their vertical and their sphere, but they've never really had to be whole portfolio conversers before. And that's a really big deal.

So TPA to me, like if you want to be a great firm dealing with asset owners that do total portfolio allocations, you need to be an integrated asset manager with financial technology across public and private markets. I really think BlackRock was built for TPA.

Yes. No, it certainly feels like that. Okay. Let's turn to some of the bigger growth engines for the firm and obviously, some of the recent acquisitions starting with HPS and private credit. There's been a lot of narratives in the market over the last couple of months related to all things private credit, even though the actual tangible evidence of a broad-based deterioration in credit has been pretty minimal, at least so far. So one, hoping to get an update from you on how integration with HPS has come along. And two, given what we've learned so far, what are they seeing on the ground in terms of underlying credit trends across their private credit exposures? How are they changing at all, if at all, the way they monitor credit exposures given some of the recent issues?

So we closed our combination with HPS Investment Partners in July. We've been closed about 5 months. I think we're already seeing really excellent synergies and really excellent opportunities as a combined firm that are better than we could have ever seen on our own. 5 months together, I'd say, 5 big workflows that are happening across the firm.

The first of which is bringing together all of the origination, all of the relationships across banks and corporates to really widen out that funnel. If you're a credit investor, you want to see everything. You want to see everything. You don't want to do everything, but you want to see everything and you want to be global. And I think the team at HPS that's come to BlackRock would tell you the funnel, the pipeline is at least twice as big by bringing together the BlackRock relationships across corporates, across sovereigns, across banks. So I think that's been a real win. And over time, including so far, will help us with deployment, will help us earn attractive risk and returns for our clients.

I think the second set of workflows has really been trying to scale this asset-based finance and high-grade business with insurance companies. We have about 20 SMAs that are in the middle of various states of becoming operational, and we expect to see some of that pull-through in 2026 in terms of base fee growth. The third is private markets to wealth. HPS has some real flagship strategies, including the flagship nontraded BDC HLEND, but we're really building out the product agenda there, sort of 5 to 7 products, I think, in the United States, somewhere at 3 to 6 in Europe and then taking advantage of what is a very big BlackRock distribution network, particularly in places that HPS hasn't traveled as much like the RIA network or independent broker-dealers where we at BlackRock have big business.

I think the fourth thing is really technology has been very exciting, has been including private credit capabilities in Aladdin. And for sure, I'll tell you, the Aladdin team has been focused on building out excellent private credit capabilities, having another set of world-class practitioners to really shape and engineer the platform has been very exciting. And otherwise, all things pulling the firms together, cultural, real estate, all that stuff going very, very well. So we're very excited. 5 months in, 5 great workflows going on.

I think on credit conditions, if you were to chat with the team, the first thing we'd start by saying is both BlackRock and HPS have a heritage that is steeped in rigorous underwriting and making sure that we understand the risks that we're signing up to for our clients. Our clients expect us to generate attractive risk and return in these markets and, of course, to protect their investments and their principal.

I would separate out what we read in the headlines. I think any industry that's had strong growth attracts some degree of appropriate scrutiny in terms of things that are going on. And so I think the growth of private financing markets across direct lending, asset-based finance and beyond have grown right alongside the growth of the private markets and they're going to attract appropriate scrutiny. But I think when you really start to look at fundamentally what's happening in the marketplace, the headlines don't really match what we see.

So I think broadly speaking, if we looked at the universe of BDC loans, $400 billion or so, 17,000 or 20,000 loans that are sitting in the independent valuation databases, we see nonaccruals basically consistent with historical norms. We see PIK as a percentage of total income in line with historical norms. We see recovery rates that are in line with historical norms.

Now like the promise of private credit is not that there will never be defaults, right? These are below investment-grade direct lending businesses. There will be defaults. The hope is that they are navigated better, that the recoveries are better, that they're ultimately managed better.

But when I look at the environment that we've come through, we've come through an environment that's had very, very benign defaults. So if you look at levered loans to private equity companies, we've been running at 1% to 2% kind of default rates through the cycle, normal default rates might be 3% to 4%. If we were to look at single B loans in the syndicated loan market, the long-term single B default rates, 3% to 4%. We saw low teens defaults in the global financial crisis. So I'd expect to see some catch-up in default rates from here, like even moving to the historical norms of 1% to 2% to 4% ultimately implies a doubling of the default rates from here.

What I do think we see that's interesting and we have our eyes on is if you look at some of the independent kind of loan databases as well as looking through our own portfolios, I think you're starting to see some stratification between much smaller companies, like a $0 million to $50 million EBITDA company looks very different than $100 million to $200 million EBITDA company, both in terms of the ability to generate earnings. So we've seen in 2025, the bigger companies are growing EBITDA 10%, smaller companies are actually shrinking in earnings. If we look at covenant defaults, for example, not monetary defaults, covenant defaults, smaller companies are having more covenant defaults than larger companies, it makes sense. Where I think the HPS teams have focused very consistently over the years is in larger companies. The weighted average EBITDA in the HLEND portfolio is about $250 million.

So I think similar to what you hear from some of the other kind of large private credit providers, where we'd expect to see some more of the credit stresses are in the smaller companies that have a more difficult time navigating, I'd say, trickier economic cycles versus larger companies have more ability to weather some of these economic cycles. But ultimately, like that -- I think that's good for this marketplace, being able to separate out those that have done good underwriting, those that can manage through a cycle that ultimately, I think, allows you to distinguish your performance from others. And I think kind of coming through what's been a very benign default environment, ultimately, this will be the cycle where I think the best firms get to distinguish themselves on performance.

Yes, it's pretty consistent with what we're seeing for what it's worth. So let's pivot to private markets for wealth for a couple of minutes. So you mentioned HPS obviously has 2 flagship products. They can sort of stand on their own 2 feet, and we've seen them grow really nicely. You just mentioned that you plan to expand the product lineup a little bit. Maybe talk to us a little bit about what you're thinking in terms of new products, whether it's in credit or perhaps other parts of the ecosystem. Do you have enough capabilities to do that internally? We've seen obviously folks launch products, whether it's in private equity and secondary, you have less capabilities there. How are you thinking about the holistic approach to private wealth?

Yes. So I'd start by saying both BlackRock and HPS historically have strong heritages in the wealth space. I'd say HPS has really been geared towards the private bank space. At BlackRock, we've built a very, very large wealth business across the United States and in Europe and in Asia, built on the back of the ETF business, on the mutual fund business, the SMA business. We have a big liquid alts business. We have the largest wholesaling team in the industry out covering every corner of the U.S. marketplace and a very strong relationship with the thousands of private banks in Europe that ultimately drive a lot of the discretionary flow.

Number one, we're going to bring HBS in an appropriate controlled way across all those channels to increase fundraising. Investment performance comes first. It's the license to go raise capital. So the idea isn't bring it everywhere and try to raise money as possible. It's to make sure that you're gearing your fundraising with what you believe you can deploy at the right levels of returns.

That said, we see an opportunity to really widen out the product funnel here. And the goal, I think, would be in the United States to be developing a family of retail alts funds and access vehicles that go beyond the flagship HLEND and some of the junior capital solutions. But imagine an H-series family of funds, an H-series family of funds that is led by the flagship HLEND, has junior capital, real assets, triple net lease. We have some existing vehicles that we've been retooling like CREDX, which is a multi-strat credit interval fund that we've had the HPS team repositioning that I think is going to be a really attractive multi-strat credit product.

We have a primary secondaries and co-invest vehicle, BPIF, the BlackRock Private Investments Fund that I think can really become a secondaries and co-invest vehicle that's interesting to take these platforms. But the idea would be to create a family of funds that somewhere between 5 and 7. That's an H series that ultimately, I think we can bring in a very coordinated way so that you have basically all of the building blocks that would serve an adviser to have a multi-alternatives portfolio.

And then second, the idea would also be to start scaling those through our models business. We have $450 billion of SMAs and managed models at BlackRock. So again, just being able to achieve 10% penetration there in terms of being able to use some of these products in the models would allow us to improve the quality of those portfolios while also being able to leverage the asset base to drive the growth of the retail alts business.

That makes sense. That makes sense. Where are you in the build-out of these additional products? Is that likely going to be a '26 event, '26 launch? Or is that going to come...

That's a '26 launch. I think you'll start to see kind of real assets and triple net lease kind of in the first half of next year. And then obviously, kind of HLEND is out in the marketplace today and junior capital and other exposures are places that we can bring as well.

Yes. Let's talk about the 401(k) opportunity as well sort of related to the wealth ecosystem, but particularly with respect to the target date fund solutions. As a major DCIO manager with both robust passive and obviously now private capabilities, you guys clearly have the right to win as that market continues to develop. What's the plan in terms of launching LifePath target date funds with allocation to privates? I think that's a '26 event, but maybe expand kind of what are you doing to build up into that? And what do you expect the adoption curve and pricing to ultimately look like for these kind of products?

So I have worked in this space my whole career in asset management. And I can tell you that we have seen more progress on this topic of private markets into 401(k) basically in the last year than we've seen in the last 20. We haven't seen such seismic changes in this space since the Pension Protection Act in 2006. And I think it's really exciting. The President's executive order directing the agencies to make progress on private markets to define contribution was signed in August. It has about a 6-month time line to start showing some actions. So that puts us in, call it, February, let's call it, Q1 of 2026, where you'll start seeing some action.

I'm involved along with many colleagues in a whole array of industry groups and working with the SEC and the Department of Labor. And I can tell you there's really high-quality people doing this in Washington, D.C. who are very thoughtful and very mindful of the outcomes. And there is real work being done. There is a draft model legislation for a safe harbor for what is the process a plan sponsor has to go through in terms of product selection, monitoring and the like in order to fulfill the duty of loyalty and prudence required by the regulation. There is model legislation and actual legislation that's been introduced in the House of Representatives in order to reform bleeding standards in ERISA. The Department of Labor has been filing amicus briefs and certain types of litigation to start showing how it could ultimately influence courts on bleeding standards and litigation. So there's real activity happening here, not just press releases about things that can be done.

And so at BlackRock, as you mentioned, Alex, we're the #1 DCIO provider in the market. We run about $500 billion plus of target date strategies. More than half the assets that we manage at BlackRock, over $13 trillion of assets, more than half the assets we management are for retirement accounts. So this is top of mind for us and top of mind for our clients about basically how to bring what's always worked in DB, right? Like if you were to go -- like when we're talking about CalPERS and CalSTRS, those are defined benefit plans for state workers and for teachers. But why is it if you work on the assembly line for a corporate, you can't get private markets?

And so what we're just trying to do is bring the DB model to DC. The way most individual 2-legged creatures in the United States who work in a corporate job access the capital markets at all, at all is through a target date fund. And so the idea that they should have 0 private markets exposure defies all of the Nobel research that's been done in the history of time about what it builds to be -- what it means to build a diversified market portfolio.

So our first foray here has been in the collective trust product with Great Gray that we're bringing to market. We have plans to bring a LifePath with private target date fund to the market in 2026. And then ultimately, I think -- ultimately, over time, I do think there will be the ability to integrate into the traditional LifePath strategies. But all those things have to go in sequence. They all have to be done with plan sponsors, with consultants and ultimately will require the input and approval of all those clients. That's going to take some time.

But in '26, we'll get to market and start seeing these strategies in action. It's important that they build a track record so that when you go out to talk to consultants and plan sponsors, they're supportive and have a real lived experience. I think this is a place we can be really great and we can do good for our clients as well as do well for our shareholders.

Yes. No, definitely a really exciting part of the market to watch. Okay. I probably have a question only for -- time for one more question. And I probably want to hit on tokenization. Just given the fact that Larry has helped spend a quite substantial amount of time on the last earnings call discussing this opportunity for you guys. And you -- BlackRock as a whole already touches this ecosystem in a number of different ways. Obviously, there's a crypto ETF, tokenized money market funds. You're the largest manager of circle stablecoin, right? So you're already in this ecosystem. The thing that I think a lot of people found interesting and intriguing is the way you talked about or the firm talked about tokenizing longer-term assets, iShares, et cetera. What's the vision here? What's the commercial model? In your best guess, what does this look like 12 to 24 months from now?

Yes. So our strategy here is just to do 3 things. The first of which is to bridge the traditional finance world and the DeFi world, right? The crypto world, right? That's what the IBIT ETF is. That's what the [indiscernible] is, which is to make all the crypto world accessible in the traditional capital markets.

The second is to be the best stablecoin reserve manager in the industry. Today, we manage, as you mentioned, about $65 billion in the Circle Reserve Fund. There's $300 billion of stablecoin out there. And ultimately, we see the growth of stablecoin as a big part of the growth in digital wallets. Digital assets, tokenized real-world assets are in their infancy. Tokenized real-world assets are about $36 billion, and we have the largest tokenized fund, which is a tokenized liquidity fund that invests in U.S. treasuries and cash that's BUIDL, BUIDL.

But ultimately, I really believe that this world of digital wallets is going to be much bigger in 5 years. And so we want BlackRock to effectively be a digital wallet native asset manager. Like we want to be able to manage a model portfolio of stocks and bonds and ETFs and do proposal generation and reporting and trading the same way that we would do it in a unified managed account in the physical world.

We're working aggressively to create long-term investment products which is to start by tokenizing iShares, for example, and working on the workflow for how you do creation and redemption. Like how do you mint a new token for an iShare ultimately. I believe these markets can be much bigger and having a digital wallet native asset manager that can do everything from operate mutual funds and ETFs inside the digital wallet to ultimately build client portfolios and have them go from their cash position in stablecoin or their cash position in something like BUIDL that's a money market fund and convert that into the S&P 500 or IEFA or Taylor Swift royalties, whatever it might be, to be able to do that natively in the digital wallet, that's where we want to be in 3 to 5 years.

Great. Awesome. All right. Well, unfortunately, we're out of time. Martin, thank you so much. Appreciate you being here.

Thank you.

Good morning. My name is Jennifer, and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the BlackRock, Inc. Third Quarter 2025 Earnings Teleconference. Our host for today's call will be the Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer; Martin S. Small; President, Robert S. Kapito; and General Counsel, Christopher J. Meade. [Operator Instructions]

Mr. Meade, you may begin your conference.

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 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'll turn it over to Martin.

Thanks, Chris, and good morning, everyone. It's my pleasure to present results for the third quarter of 2025.

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. A reconciliation between GAAP and our as adjusted results has been included in the tables attached to today's press release, I'll be focusing primarily on our as-adjusted results.

At BlackRock, we always challenge ourselves to raise the bar and our results consistently reflect that mindset. We've been focused on building capabilities that we anticipate our clients will need in the future, while also implementing some of the largest and most multifaceted mandates in our history. This combination of forward-looking investment and consistent execution has fueled strong results across our business. The momentum we saw in the first half of the year accelerated in the third quarter. Our builds across ETFs private markets, whole portfolio and cash management drove 8% organic base fee growth over the last 12 months. That's our highest level in over 4 years, but even more importantly, it's broadly diversified.

We have great momentum across both our foundational businesses and categories that we've developed in just the last few years. That strength and diversification is resonating in meaningful opportunities across regions, client channels, prototypes and asset classes. We're entering what's typically our seasonally strongest quarter and coming off significant milestones in just the last 90 days.

Since July 1, we've closed our acquisitions of HPS and ElmTree, announced an $80 billion SMA solution with Citi Wealth and onboarded a $30 billion pension mandate. These represent just the start of what our newly integrated platform can unlock. We've expanded our capabilities across private markets, digital assets, data and technology. That strategy now moves forward with greater strength and scale. The opportunity in front of us far exceeds what we've ever seen before.

We finished the third quarter with record AUM, record units of trust of $13.5 trillion. Over the last 12 months, clients entrusted BlackRock with nearly $640 billion of net new assets powering 8% organic base fee growth. We generated $205 billion of net inflows in the third quarter, reflecting 10% annualized organic base fee growth, our highest quarter since 2021. This organic base fee growth was driven by broad-based client demand for iShares, private markets, systematic outsourcing and cash strategies. These are all capabilities we've invested in over recent years and demonstrate the success of our structural growth strategy.

Moving to financial results. Third quarter revenue of $6.5 billion was 25% higher year-over-year, driven by the acquisitions of GIP, Preqin and HPS, organic base fee growth over the trailing 12-month period and the positive impact of market movements on average AUM.

Operating income of $2.6 billion was up 23% year-over-year. Earnings per share of $11.55 increased 1%, reflecting higher operating income, offset by lower nonoperating income and a higher diluted share count in the current quarter compared to a year ago.

The higher share count included 6.9 million shares issued at the close of the GIP transaction on October 1, 2024, and 8.5 million BlackRock SubCo units issued at the close of the HPS transaction on July 1. The SubCo units are exchangeable on a one-for-one basis with BlackRock common stock and included as if converted in the company's fully diluted shares outstanding.

Nonoperating results for the quarter included $84 million of net investment losses, primarily due to a mark-to-market noncash loss linked to our minority investment in Circle.

Our as-adjusted tax rate for the third quarter was approximately 24% and benefited from discrete items. We continue to estimate that 25% is a reasonable projected tax run rate for the fourth quarter of 2025. The actual effective tax rate may differ because of nonrecurring or discrete items or potential changes in tax legislation.

Third quarter base fee and securities lending revenue of $5 billion increased 25% year-over-year, reflecting the positive impact of market beta on average AUM, organic base fee growth, higher securities lending revenue and approximately $215 million and $225 million in base fees from GIP and HPS, respectively.

On an equivalent day count basis, our annualized effective fee rate was approximately 0.5 basis points higher compared to the second quarter. This increase was primarily due to the onboarding of higher fee alternative credit assets of HPS, which was partially offset by $48 million of lower private markets catch-up base fees compared to the second quarter.

Performance fees of $516 million increased 33% from a year ago, primarily reflecting approximately $270 million of performance fees from HPS.

Quarterly technology services and subscription revenue was up 28% compared to a year ago, reflecting sustained demand for our full range of Aladdin technology offerings and the closing of the Preqin transaction, which added approximately $65 million of revenue in the third quarter of this year. Excluding Preqin, technology services revenue would have increased approximately 12% year-over-year.

Annual contract value, or ACV, increased 29% year-over-year, including the impact of Preqin. ACV increased 13% organically.

Total expense was 26% higher year-over-year, primarily driven by higher compensation, sales asset and account expense and G&A expense. Employee compensation and benefit expense was up 33% year-over-year primarily reflecting higher incentive compensation associated with performance fees as well as higher operating income. The year-over-year increase also reflects the impact of the onboarding of GIP, Preqin and HPS employees. G&A expense was up 18% year-over-year, primarily due to M&A transactions and higher technology investment spend.

Sales, asset and account expense increased 21% compared to a year ago driven by higher direct fund expense and distribution costs. Direct fund expense increased 22% year-over-year and 5% sequentially, primarily as a result of higher average ETF AUM.

Our as-adjusted operating margin of 44.6% was down 120 basis points from a year ago, reflecting the impact of higher performance fees and related compensation. We continue to deliver margin expansion on recurring fee-related earnings.

Excluding the impact of all performance fees and related compensation, our adjusted operating margin for the third quarter would have been 46.3% and up 110 basis points year-over-year. We provided additional disclosure in our earnings supplement on the contribution of performance fee related compensation to total expense.

In line with our guidance in July, we continue to expect a low teens percentage increase in 2025 core G&A expense. This year-over-year core G&A increase is mainly driven by the onboarding of GIP, Preqin and HPS.

Our capital management strategy remains consistent. We invest first in our business either to scale strategic growth initiatives or drive operational efficiency and then return cash to our shareholders through a combination of dividends and share repurchases. In the third quarter, we repurchased $375 million worth of shares. At present, based on our capital spending plans for the year, and subject to market and other conditions, we still anticipate repurchasing at least $375 million worth of shares in the fourth quarter, consistent with our previous guidance.

BlackRock's third quarter net inflows of $205 billion reflected deepening client engagement and were led by a new record flows quarters for iShares ETFs. We iShares ETFs generating $153 billion of net inflows in the third quarter. Core equity and index fixed income led the way with $53 billion and $41 billion of net inflows, respectively. Our digital assets ETPs raised another $17 billion in the third quarter. Our flagship offerings in IBIT and ETHA were among the top 5 inflowing products in the ETP industry. We're also seeing demand for our high-value higher fee active ETFs, which gathered $21 billion of net inflows.

Our institutional active franchise saw $22 billion of net inflows, driven by the onboarding of a $30 billion Dutch pension outsourcing mandate. This inflow was partially offset by a $15 billion single client transfer from quantitative to index equity with an immaterial revenue impact.

Institutional index net outflows were $14 billion, inclusive of this transfer. Retail net inflows of $10 billion were led by demand for active fixed income, liquid alternatives and Aperio. Across private market strategies, we saw $13 billion of net inflows driven by strength in private credit, multi-alternatives and infrastructure.

Our work with clients spans their entire portfolios from long-dated private market exposures to more near-term liquidity needs. Our cash management platform recently crossed $1 trillion in AUM, with $34 billion of net inflows in the quarter. The platform has grown 45% in just the last 3 years. We're seeing demand across scaled money market funds, customized and tokenized liquidity products and money market ETFs. And our partnership with Circle as the primary manager of their cash reserves is driving meaningful growth. Our mandate surpassed $64 billion this quarter.

BlackRock delivered some of the strongest organic base fee growth in recent history, and we entered the fourth quarter in an excellent position. The fourth quarter has traditionally been our strongest for organic growth.

In my nearly 20 years at BlackRock, I've never been part of deeper, more far-reaching client engagements than in recent months. We believe our strategy will continue to deliver for both our clients and shareholders, resulting in market-leading organic growth differentiated operating leverage, and earnings in multiple expansion over time.

With that, I'll turn it over to Larry.

Thank you, Martin, and good morning to everyone, and thanks for joining the call.

Our third quarter results reflect the strength of our global relationships and the deepening trust we've earned with clients. All of the high conviction growth themes we anticipated and invested ahead of are now leading in client conversations.

BlackRock is always thinking out to the future towards what our clients will need and want. ETFs, private markets, tech and data, digital assets are just a few examples. We were ahead of the game in recognizing their importance for clients, and we took leading positions. The accelerating activity we're seeing is the validation of the BlackRock business model. We nurture enduring and local client relationships, and we invest boldly. Total net inflows of $205 billion were positive across all asset classes and client types and powered 10% organic base fee growth in the quarter. That growth is even more notable than its diversification.

Just looking across our top 5 organic base fee contributors, it's our systematic franchise. It's our private credit franchise. It's a digital asset franchise, our cash franchise. And the whole business of outsourcing portfolios and general accounts to BlackRock. BlackRock's multiple source of growth differentiates us and makes us really optimistic for the future.

In April, tariff announcement shocked global markets. At the time, I traveled to several of our international offices to reinforce BlackRock's strong local mandates with each of our country managers. We bring our global expertise and tailored local insights to clients room and on the ground presence. That presence has strengthened our position as a trusted partner and adviser over many years, and it continues to further strengthen in 2025.

Over the last 12 months, we generated 8% organic base fee growth, excluding our target -- exceeding our target each quarter. Revenues grew

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new AUM records. Clients have entrusted BlackRock with $1.4 trillion of net inflows over the last 3 years and $2.3 trillion over the last 5 years.

When BlackRock acquired BGI and iShares, we gave investors the ability to blend active and index strategy seamlessly, something they hadn't been able to do before. Today, convergence of public and private markets is increasing. Clients are focused on strategies and solutions that work across the whole portfolio. Investors are seeking deeper, more dynamic partnerships across public and private asset classes. They're coming to BlackRock for a partner in portfolio management and in technology across a full range of capital markets.

As I meet with clients around the world, they've been excited about opportunity to do much more with BlackRock, and it's expanding the growth potential for GIP, HPS and Preqin. Our history of integrations is very different, and it has set us apart.

BlackRock's acquisition philosophy has always been about growth. What makes our acquisitions so successful is our belief in full integration. Our culture strengthens and evolves as we welcome new teams and new capabilities. But we continue to operate as One BlackRock, not a collection of boutiques. We do the work to make sure we are seamlessly connected to our clients with 1 platform, shared goals and a common Aladdin technology.

We're organized so the clients have access to all of BlackRock at a comprehensive, consistent way. We intentionally structured the GIP, HPS transaction so that the consideration was largely in BlackRock equity with long-dated performance milestones. We all have the same interest as significant shareholders alongside our broader shareholder base. Our acquired firms are becoming a part of the fabric of BlackRock, and I'm proud of the successes we see in just these early days.

Our closing of HPS just 3 months ago brought more than 800 colleagues to the BlackRock family. Our combined platform is becoming a first call for clients and borrowers around the world. Client engagement is even stronger than we expected, especially in the insurance and wealth channels. We're positioned to be a preferred capital partner with insurers while maintaining our balance sheet light approach.

In wealth, we brought together highly complementary capabilities that position us to be a leading player. On the investment side, our scaled franchises range from our nontraded senior bank BDC HLEND to credit solutions across the capital stack. HLEND continues to generate around $1 billion of net inflows a quarter, and from a distribution perspective, HPS has had strong connectivity to private banks and high net worth practices, that now -- that is now augmented by BlackRock's successive network across wirehouses, independents and RIAs.

Our $370 billion private financing solution platform alongside of our over $3 trillion public fixed income franchise positions us to be our clients' strategic partner across public and private debt markets. And just a year into our closing of the GIP acquisition, we made significant progress in both fundraising and deployment. GIP V closed above its $25 billion target in July, and it represents the largest ever client capital raise in a private infrastructure fund.

Our AI partnership continues to attract significant capital interest. Market-leading global technology, energy and financial organizations are considering -- are consolidating around AIP as a partner of choice. AIP includes MGX of Abu Dhabi, Microsoft, KIA of Kuwait and Temasek of Singapore and technology and energy advisers in NVIDIA, xAI, Cisco, GE Vernova, NextEra Energy. Our combined relationships and expertise are coming together to advance key discussions on fantastic investment opportunity for our clients.

GIP's track market in 1 of the largest data centers in the United States has been instrumental. There are significant opportunities for us ahead in the data center space, an estimated $1.5 trillion of capital is going to be needed in the next 5 years in just the core and shell of data centers, and that's not including the chips. The growth of cloud computing and AI propelling this capital demand and BlackRock with GIP is well positioned to expand our leadership.

Teams across BlackRock are exploring how AI can play a bigger role in making markets more accessible and more efficient. We see a future commercial opportunities in using tokenization to further bridge the gap between traditional capital markets and the growing digital asset space. This is 1 of the most exciting areas of growth in financial markets. There's over $4.5 trillion in value sitting in digital wallets across crypto assets, stablecoin and tokenized assets. We see this market growing significantly over the next few years.

Today, there is no access to high-quality traditional investment products in digital wallets. BlackRock plans to change that. BlackRock is a foundational player in the ecosystem. We manage the largest crypto asset ETP with over $100 billion in AUM. We're the largest reserve fund manager for stablecoin with over $60 billion in Circle's reserve fund. And we built a tokenized liquidity fund for digital assets native investors, which is available across multiple public blockchains. BUIDL has grown to nearly $3 billion in AUM. Now we're exploring tokenizing long-term investment products like iShares. We envision a future where investors never need to leave a digital wallet to allocate efficiently across crypto, stablecoin and exposures to long-term stocks and bonds.

The U.S. economy has been propelled in many parts by its leading market infrastructure. I believe the U.S. needs to accelerate regulatory clarity and investments in digital assets innovation. We need to be a leader in market infrastructure for much of the larger part of the world of digital assets. BlackRock brings technological and operational scale, client trust and a global footprint across 100 countries. We believe all these factors put us in a prime position to be a part of a global conversation around tokenization and digital assets. We've seen through ETFs how innovation and financial technology can unlock growth by making it easier for more investors to access the capital markets.

Our iShares franchise today has crossed over $5 trillion in assets during the third quarter with record net inflows of $153 billion. Double-digit organic base fee growth was once again led by digital assets, bond ETFs and active ETFs. Our digital assets and active iShares franchise are examples of how BlackRock operates as an innovation and scale engine. We build these businesses from the ground up to be a category leader in just a few years. Our digital assets, ETPs and active ETFs have grown from practically 0 in 2023 to over $100 billion, and digital assets in over $80 billion in active ETFs. The rapid growth of these premium categories is another proof point of our success in scaling distribution and quickly adapting to new offerings and in new markets.

In Europe, the growth of the ETF market is at an inflection point. Our 2025 net inflows of $103 billion have already surpassed last year's record full year flows. We're bringing learnings from our U.S. offerings to help grow the ETF market in Europe and better serve our clients in this region. And we're planting seeds for the future through our local investments as we facilitate the growth of capital markets and investing around the world.

In India, our JioBlackRock joint venture recently launched its first systematic active equity offering, building on our already high-performing global systematic franchise. The Indian market remains largely untapped and is today a country of savers rather investors. Through JioBlackRock, we're enabling individuals to more easily invest in their local economies and their local financial assets, and we're helping them build towards a more secure financial future. Many of our clients are investing on behalf of retirement savers and they're turning to BlackRock to scale and modernize the retirement plans options.

BlackRock continues to lead with innovation for retirement. With LifePath Paycheck, we're embedding lifetime income into plan options, and we're working to enable access to growth-oriented private market strategies in 401(k). Defined benefit pension funds, pension plans have been investing in private markets for decades, and we believe this opportunity should also be available for U.S. defined contribution plans. Even if a path clears for private markets in 401(k)s, the fiduciary standard rule still holds. Plan fiduciaries will need to carefully diligence all investments, just as they are required to do today. I think that could create an acceleration in demand for all the Aladdin products, including Preqin. Plans would need better data, better analytics on private markets to substantiate and justify their inclusion in 401(k) offerings, representing a large potential unlock for Aladdin and Preqin. We're already helping clients better manage private markets investments with eFront, alongside Preqin performance and investment data.

We recently signed our first whole portfolio technology mandate encompassing Aladdin, eFront and Preqin as a seamless public private workflow and data solution. And we're continuing to engage with clients on opportunities to integrate these capabilities to drive greater efficiency and growth for each and every 1 of our clients' portfolios.

I'm immensely proud of the connectivity we've seen from employees and clients alike as we fully integrate GIP, HPS and Preqin. As we've grown our firm, we've also evolved our leadership structure to help us meet client needs and develop our talent. We recently expanded our executive team to include a group of exceptional enterprise leaders to better serve clients and advance our long-term strategy. Together, we're both defining and fulfilling the future of asset management through a truly differentiated platform, one that is anchored by public private investment models backed by Aladdin technology united by a shared culture of performance and client service.

I have never been more excited about the future of BlackRock, our firm and the opportunities ahead for the entire worldwide position for BlackRock in the future.

Operator, let's open it up for questions.

[Operator Instructions] Your first question comes from Craig Siegenthaler with Bank of America.

Hope everyone is doing well. My question is on the breadth of the 10% base fee organic growth in the quarter. So we can all see that iShares was the major driver of the AUM flows. But I was curious on what the contribution looked like on a revenue-adjusted basis, really because it looked like alts, digital assets and systematic, all a pretty sizable when you look at it on a base fee basis.

Martin?

Craig, thanks for the question. I just think contextually, I go back to our Investor Day in June, we outlined our growth plan to 2030, targeting 5-plus percent organic base fee growth. Organic base fee growth continues to outperform that 5-plus percent target at 10% for Q3, 8% in the last year, 8% for the trailing 12 months. And that growth continues to take higher each quarter, Craig, from 5% in the third quarter last year, 6%, 7% in the last few quarters and now 10% for the third quarter.

BlackRock's strategy has always been a whole portfolio strategy. We've always been about breadth, but I'd say, this quarter and the way the strategy is playing out is what we're trying to do. That breadth is really impressive. It's every corner of a client's portfolio. And you see that in the contribution. The growth was highly diversified across franchises. Some of those are foundational platforms like ETFs that we've been in for years, and others are more recent innovations from just the last few years.

The top organic base fee growth contributors, you're right, they were in digital assets with IBIT and ETHA in the top grossing categories, active ETFs, where we've had $40 billion of flows year-to-date that basically doubles what we did in active ETFs last year, including 2 of the leading tickers there with DYNF that's managed by the systematic team. That's now a $30 billion franchise and BINC the flexible income fund that's managed by Rick Rieder and the team, that's a $13 billion franchise.

We had huge outsourcing wins that we noted, the Aperio direct indexing business continues to really grow a double-digit organic growth. And overall, we're seeing liquid alts also as a contributor from systematic and fixed income teams as well. With more growth coming from private market, systematic strategies and models, we think we should be able to power organic base fee growth. I think we're consistently at 6%, 7% or higher. And when markets are supportive like this, with risk on sentiment, we think that can tilt to even higher.

The last thing I'd flag is these strategies are contributing, I think, to the yield improvement we continue to see fee yields on flows increasing with these high value-add capabilities. We showed that at Investor Day in June. The fee yields on new assets to the firm are 6 to 7x higher than they were in 2023, and we'll continue to really aim at serving clients' whole portfolios and driving breadth.

Your next question comes from Michael Cyprys of Morgan Stanley.

Just wanted to ask about tokenization. I was hoping you could talk about your ambitions and steps that you're taking there, including how you might go about tokenizing ETFs. You already have the tokenizes money fund with BUIDL. So hope you could talk about some of the traction there you're seeing? And more broadly on use cases, how you see this all developing? And when we think about tokenization, curious your views on what's been the holdback from wider adoption of this technology has been around for some time. What do you see as the major unlock here?

So first of all, this is probably 1 of the most exciting potential markets for BlackRock. Let's just start off with our global footprint, with our scale operation in ETFs worldwide and our leading position in terms of digital assets we already are part of. We are having conversations with all the major platforms today about how can we move forward on the whole digitization and tokenization of traditional assets so they could play a role in the role of digital wallets.

The theory is, as I said in my prepared remarks, if you could keep all your money in a digital platform and a digital wallet, you could then seamlessly buy what we would traditionally say traditional assets like stocks and bonds. There was -- we had a survey related to the percent of young people are investing in equities that came out last weekend. And we believe if we could orchestrate a business plan around tokenization of ETFs. It is young people who are heavily users of tokenized assets. And then we can introduce them to more and more traditional assets sooner in their LifePath, the more prepared people will be related to long-term savings opportunities like in retirement. And so we are in deep conversations. We're spending a great deal of time on trying to develop our own technology related to this. And I do believe we have some exciting announcements in the coming years, on how we could play a larger role on this whole idea of the tokenization and digitization of all assets.

I mean it is our belief that we need to move rapidly, not just financial assets, but we need to be tokenizing all assets, especially assets that have multiple levels of intermediaries. So when you see the intermediaries in each and every intermediary is charging fees, for instance, like in real estate, the tokenization of these type of assets would eliminate much of the fees, and it would make it -- we're talking about homeownership and home -- the cost of home ownership, it would reduce the cost of buying real estate. That's something that we're not focusing on. But to me, that is just 1 of the great applications and the simplification. But if we could legitimately move towards a digital offerings of ETFs through tokenization. We could bring down the execution costs, the ability to deliver seamlessly remaining in a digital wallet environment. We believe this will begin a sooner and a broader pathway for more investments in our capital markets across bonds and stocks.

Martin, do you want to add anything that? You got it. That's it. Thank you.

We'll go next to Alex Blostein with Goldman Sachs.

Question for you guys around private credit. The market has grown increasingly anxious given some of the recent dynamics, both related to perhaps growth, kind of amid lower rates and data spreads as well as some of the kind of specific credit names out there. Curious what the HPS team is seeing on the ground, both with respect to kind of credit trends across their direct lending portfolios in the third quarter? And any growth implications you're seeing for the asset class broadly from lower rates and tighter spreads?

Thanks, Alex. I hope you're doing well. Listen, I'd start by saying just that the heritage of BlackRock and HPS and definitely the combined firms, it's steeped in rigorous underwriting. It's steeped in managing credit risk. Our clients, they expect us to generate risk-adjusted returns, attractive risk-adjusted returns, and they also, of course, expect us to protect their investments and protect their principal. So we've been talking a lot with the teams about the news. But I'd say the teams are generally seeing strong credit quality from borrowers. They're generally seeing a positive environment for credit investing. Even in syndicated loan markets, default rates have been declining.

We, of course, read the same headlines that you do around private credit bankruptcies. But those exposures are actually in syndicated bank loan and CLO markets they're not with large private credit managers and direct lending books. And in those very public cases, the ones that we're reading about, you're reading about potential frauds also been reported. But I think stepping back, when we talk to the teams, they always highlight the private credit market and outside of banks and public debt markets is a $2-plus trillion market. It's mainly focused on direct lending to corporates. Those are companies that borrow in private credit. They're not inherently riskier than those that borrow with banks or syndicated loan markets. And the team would highlight that private credit lenders have more control over credit agreements and terms. They tend to have more access to management teams. They have more information about company performance relative to the public markets.

I think they'd also flag on much of what we're reading in the news, that private asset-based finance is a smaller market, call it somewhere between $200 billion and $300 billion and the consumer receivables portion of that market is even smaller at maybe 10% of the total. It's smaller in scope and the reported cases look more like idiosyncratic pockets of stress and things like deep subprime or again, where there's been potential fraud reported, they don't look like broad stresses on asset-based finance or consumer credit. All that said, I know the teams are being very vigilant with our clients and monitoring credit conditions, but they're not seeing widespread credit stresses at this point.

We're seeing steady allocations to our nontraded BDCs in HLEND and BDEBT. You see the deployment numbers in the earnings release are strong and steady. And they would tell you the historical experience is that when syndicated loan markets and banks may reduce their lending activity and volatility tends to be some of the best opportunities for private credit deployment and the potential for wider spreads. That's generally, I think, good for continued access to credit for corporates, but it's also a good opportunity for clients to secure excess spread and long-term attractive risk-adjusted returns.

We'll move next to Ken Worthington with JPMorgan.

You mentioned throughout the call the success you're having in your active ETFs. There's been recent developments to potentially create ETF share classes for mutual funds. What could this mean for BlackRock? And do you think this could change the ETF landscape?

Thanks, Ken. So let me start by just saying that there's a proven track record that the ETF vehicle, the ETF wrapper, I think, is most optimal for the management of active equities and fixed income. We've launched almost all our active strategies that are new strategies in the last few years in ETF format. And you can see the results that we've highlighted in our active ETF book I talked a bit about DYNF managed by Raffaele Savi and our systematic team. That's a $30 billion ETF today, $10 billion of flows this year. BINC, the flexible fixed income ETF managed by Raffaele Savi and the fundamental teams, $13 billion plus, and our active ETF inflows are over $40 billion.

So there's a proven track record that this wrapper and vehicle is optimal for managing these strategies. That said, we view the introduction potentially of ETF share classes as a positive development, I think, for investors moving from brokerage to fee-based advice relationships and the ability of wealth and asset managers to serve them more efficiently in that context.

At BlackRock, we're definitely committed to providing clients choice on the investment products we offer. And we ultimately think the multi-share class structure will allow advisers and investors to choose share classes that best fit their needs. That's not just about investing. It's about their operational model. There's a lot of excellent work being done across the industry. I'm part of the operational teams and the investment company institute's that's working to operationalize ETF share classes, especially with service providers and intermediaries. And so there's really good progress there, but it will take some time for this to work its way, I think, through the product ecosystem.

For BlackRock and ETF share class would allow us to leverage our mutual fund AUM and track records to offer mutual fund strategies and ETF wrappers. It would allow us to expand distribution reach within fee-based models and self-directed accounts where ETFs are becoming more of a vehicle of choice.

As far as what we would pursue, we're going to evaluate that on a fund-by-fund strategy level basis, whether to offer an ETF share class. These considerations that we'd apply would be things like does the investment strategy fit well to the creation and redemption process. Does the portfolio turnover match well creation and redemption? How do we think about transparency and the shareholder base? For example, ETF share classes, they're not as relevant for fund shares, largely held in retirement accounts or brokerage. So this really is a bottom-up kind of building brick by brick by product and platform set of questions. I do think it could give us an opportunity to expand our share in the liquid active market, capturing money in motion as we continue to see a transition from mutual funds to ETF. Again, that will take some time to play out. But we've really been able to capture the flag, I think, in active ETFs, and this would give us another lever to do so.

We'll go next to Dan Fannon with Jefferies.

I just wanted to follow up a bit more on private credit. You talked about momentum in insurance and wealth with HPS. So I was hoping you could expand upon that opportunity a bit more in terms of what you're specifically doing in terms of expanding distribution as well as given the contribution of what HPS in terms of flows did in the quarter?

Great. Thanks so much for the question. Let me tackle each of those. So we've been really consistent on what we're trying to do, I think, on the private credit markets both in delivering private credit to insurance portfolios and in trying to deliver, I'd say, kind of retail also more broadly. We start with the fact that BlackRock is the largest insurance company general account manager in the industry with over $700 billion of assets across core fixed income. Insurance company asset management is a really highly customized effort working with clients every single day. It's not an arrangement where clients say, let's give you some money and here's a benchmark go beat it. You're highly connected. You're basically in-sourced by the company to be looking at premium cash flows every day, to be thinking about credit every day, to be thinking about the intersection of accounting and capital in managing those portfolios.

So we think we're in a great position effectively being extensions of the in-house team to help insurance companies rotate their portfolios to build great public private portfolios, in particular, with exposures to high grade. We have over 20 conversations going on now with the largest leading insurers in the general account about building private ABF and building private high-grade exposures. The team at HPS has brought some really terrific talent, both on the origination, asset management, but also the insurance solutions side. Those have been core skill sets with BlackRock as well, and being able to integrate all of that with Aladdin, we think will really allow us to grow and make meaningful progress here. Those discussions are all ongoing. We're starting to see some wins pull through, and I expect you'll see a lot more of that in the numbers into 2026.

When I think about kind of the wealth markets, HPS has a long heritage here of building, I think, a market-leading BDC in HLEND across the private wealth market. BlackRock has the largest distribution teams and great home office relationships across U.S. and Europe. We really see an opportunity to accelerate what we're doing here. We are accelerating the launch and marketing of semi-liquid products for wealth in both the U.S. and Europe across private credit, capital solutions, multi-asset credit and interval funds, triple net lease REIT, real assets, multifamily and senior housing and, of course, model portfolios. I think Scott Kapnick laid this out really well at Investor Day with our vision to go from probably what's about $30 billion of retail alts today on a fully consolidated basis with all these capabilities to $60 billion plus across private markets for wealth by 2030. We think there's real upside in that number. And we'll be looking forward to working on that with the teams over the coming quarter and into '26.

We'll go next to Brennan Hawken with BMO.

Larry, you spoke to this a little bit in your prepared remarks, but I was hoping to get maybe a bit more color on it. You guys have now done 2 rather substantial mergers with the private asset side. And BlackRock's got a very strong M&A track record. But these businesses are kind of different than a lot of the sort of platform approach given how alpha-oriented they are. So I was hoping to hear a little bit about how you're adjusting the approach to integration in order to maintain that One BlackRock approach even though these businesses are rather different.

Of course, they're different, but we were already in those businesses beforehand. And we had teams that are absorbed and part of the overall private credit team and the infrastructure team. We look at these integrations no differently than the integrations we did years ago with BGI or Merrill Lynch Investment Management. In actuality, those merger integrations were far more difficult than what we're accomplishing here because those were much broader enveloping the entirety of the firm. This is not enveloping the entirety of the firm by any imagination.

So the reality is, what I think is as our new partners join the firm and they see the power of the platform as we are participating in more and more of our presentations where we have conversations about Aladdin as an insurance company, we do have conversations about LifePath Paycheck, it is about how can we take on a part of their general account, let's say, in private credit. Or how can we invest in infrastructure to help their general account.

So I think what we've witnessed and now in October 1, we crossed the 1-year anniversary with GIP. And I would say across the board throughout the firm, the success of integration, the success of interconnectivity between all our parts of the firm, the interconnectivity with our clients worldwide, it has been a huge success. And we're going to have many, many more announcements over the coming year about all the successes we're seeing in infrastructure with GIP and BlackRock.

And I think, look, the HPS closing was 3 months ago, we're not as far down the pathway as we were at HPS, but these are -- these take time. And in some cases, they take 1.5, 2 years to fully integrate. As I said, the GIP integration was probably less than 6 months in terms of fully integrated onto the platform. So we actually feel very, very good about it, because I think as more and more of our new partners and more and more of our old partners who are now part of the new platform, seeing the virtue and the business logic and they're seeing it firsthand. It brings that spirituality of everybody understanding how this be built forward.

So it's early with HPS. We're far down the road with HPS. We're actually far down the road with Preqin, which is another one. I think we feel as strong and as good as ever related to the integrations of these organizations. As I said in my prepared remarks, we do all the hard work upfront. The key is if we are going to win whole portfolios, we cannot represent ourselves as a boutique. So I think across the board, our -- more and more of our teams are realized, we can't just go in there and selling a product, we're going there in a comprehensive way.

Now indeed, clients may only want 1 product, and that's what we're going to try to do. But then we then bring entirety of the firm together, and it expands the conversation and they see the breadth of the opportunity. And I could highlight many different insurance companies now where we had this legacy huge platform that Martin talked about earlier, where we had over $800 billion, $900 billion of insurance assets.

Now bringing those relationships into HPS, bringing those relationships with GIP, it shows the acceleration of our business and the opportunity. So I could not be more happy. That being said, we're not perfect, everything takes time. But I think our business model is intact, and it is going to -- again, and I want to underscore it again differentiating yourself versus all the other organizations that generally add on different businesses, but they keep them siloed, boutique, and we will not do that because we want to see each and every client worldwide as 1 firm. And through that, we are able to win more share of wallet by representing ourselves to this organization as 1 firm, 1 conversation.

Your next question comes from Brian Bedell with Deutsche Bank.

A lot of good things to talk about. I think you can tie 2 concepts together, the tokenization concept that you discussed and then tying that with maybe model portfolio. So as you think about exploring tokenization opportunities, do you envision having this the BlackRock centric digital wallets or rather participate in the broader intermediated ecosystem allowing your products to be tokenized there for sort of open distributed on an open architecture basis. And then tying it into model portfolios, is there an opportunity to create BlackRock centric digital wallet model portfolios?

Great question. Martin?

Thank you. So listen, the first thing I'd do is I'd echo Larry's comments. This is 1 of the most exciting areas in the financial markets. There's over $4.5 trillion of value sitting in digital wallets across crypto assets, stablecoins and tokenized assets. But Larry's point here resonates, which is there's really no access to long-term investment products. And so our goal is to basically replicate everything that sits in traditional wealth management, everything that sits in traditional finance in the digital wallet. So that an investor never needs to leave the digital wallet in order to build a long-term investment portfolio that's high quality. In order to build an asset allocation portfolio that can mix stocks, bonds, crypto, commodities and the like.

And we really think that, that model is best executed through partnerships, which is what we've been pursuing. We have successful partnerships with many of the leading exchanges and providers. And so that's pretty much what we expect and what we're actively working on, as Larry mentioned now. And so we do see a world where we could build great model portfolios that bring together crypto assets, tokenized long-term investment products and other exposures all natively in your digital wallet with all the same technologies effectively that we've used to build a scaled model portfolio platform. Tokenization can make that even better, faster, more efficient.

So when I think about some of the operational things that have to happen in managing the model portfolio today, especially 1 that's public private. It's having to deal with different settlement systems, it's having to deal with PDF subdocs for private markets and then dealing with cash markets for T+1 mutual funds or ETFs. The idea that all of these could be cleared and instantaneously settled in a tokenized market could make model portfolios even better than the ones that we know in traditional finance. So that's where we've aimed a lot of our energy.

Your next question comes from Ben Budish with Barclays.

I wanted to ask just a few housekeeping questions on HPS and the private markets business. I guess maybe two, I can wrap into one. First, just on the performance fees. I think the $270 million reference came in a bit ahead of what was sort of implied by the guidance last quarter. So curious what came in better than expected. And then just looking at your private markets flows, those sort of stepped up nicely sequentially as they did earlier in the year when you acquired GIP. Just curious if we're looking at fair sort of run rate as we think out over the next several quarters or anything unusual about this quarter?

Thanks very much for the question. So as I mentioned in my prepared remarks, HPS added $225 million in base fees in the quarter and $270 million in performance fees inclusive of Part 1 fees. HPS, GIP, they're both stable, high earnings power businesses. I think you've all had a chance to observe kind of HPS -- excuse me, GIP management fee run rates now for a couple of quarters, HPS now for this quarter, stable high earnings power businesses. I think the third quarter is a good starting point for modeling HPS management fees. The performance fees have some seasonality to them. I think we'd expect slightly lower performance fees from HPS in the fourth quarter. And so I think that's a good model.

Just in terms of, I think, kind of the deployment numbers and flow numbers that you've seen. I think this quarter, I think, in private credit is a good indicator of kind of the velocity that we've seen a mix between deployment that's coming from drawdown funds like the junior capital strategies as well as coming out of HLEND and the BDCs. I'd say in infrastructure, that can tend to have a bit more of periodicity to it. There's large transactions, and then there's larger realizations and you see some of that come through in the move of infra AUM. Those teams are tending to do kind of bigger, more episodic deals. So I'd expect those flows to have a little bit more periodicity to them rather than the private credit flows that are a little bit more regular way.

Your next question comes from Bill Katz with TD Cowen.

Maybe switch gears a little bit and talk about the retirement area. You seem to be ahead of many of your peers in terms of positioning as we look ahead. Could you speak to a couple of things, just how your conversations with maybe the consultant community, the regulators, the legislators are going around, so this change? And then how you sort of see pricing relative to maybe the legacy book of business that's sort of not retirement?

Thanks, Bill. I appreciate it. I have spent a lot of my time this year in Washington, D.C. I know Larry has as well. And so as our team I've had a lot of detailed discussions with policymakers, lawyers, trade associations for asset managers, plan sponsors. Let's not forget that this is about bringing the same portfolio of public and private markets that defined benefit plan investors have enjoyed for generations to the hourly workers that have defined contribution in 401(k) today. I've seen more momentum in the last 6 months than we've seen in decades of managing target date funds. There's the President's executive order, there's drafts of various safe harbor provisions that I think are making good progress. There's a draft class exemption under ERISA to address a lot of product level issues and address the obligations of service providers, and I'd say there's real interagency coordination and engagement between the Department of Labor and the SEC, which is so critical and important, and we really applaud all that work. All that said, still lots to do very significant word ahead, but the momentum is positive.

For BlackRock, more than half the assets we manage are for retirement. We're the #1 DC investment-only firm, $585 billion in target date AUM. And today, we have over $660 billion in private markets and alternatives, which allows us to bring the best of public and private to the target date funds. I think it's a great opportunity for BlackRock to do well for our clients in retirement, but also grow our business in target date and importantly, as Larry mentioned in his remarks, in data. We've got a leading presence in retirement channels. We've got relationships distribution, investment expertise. So the regulatory bodies coming into focus here, I think, will be a real accelerant for us.

We do think the vast majority of the opportunity is embedding private markets and target date funds. It's embedding private markets in target date funds. In that structure, there's a professionally managed qualified default investment alternative that fits well within the existing ERISA framework and it also fits well within the operational rails of the DC market. There's a reason that QDIA target date funds today capture the substantial majority, really the bulk of 401(k) participant-directed individual account plans.

And in target date, BlackRock, I think, is really well positioned against the market with our glide path design as a differentiator. Our glide path, meaning how we scientifically take clients from their mix and stocks, bonds, real estate, commodity, public, private, has more than 30 years of IP and experience. We've actually implemented it with a real track record over 3 decades. And we think that it allows us to build portfolios that take appropriate levels of risk across the working life and manage different levels of portfolio liquidity.

I think some of what we've seen in the market are ideas that a fixed 10% or 20% allocation to private asset classes, regardless of age and circumstances. Like those things we just don't think are right for every investor. Early career investors generally need growth assets, while later career and in retirement investors need diversification, capital preservation and income. And we think our glide path and our product lineup allow us to do that in a way that's really, really unique and differentiated.

The second thing is data where I think it's a real opportunity. As Larry said, like good fiduciary practice and all of the advice safe harbors, they're going to require some format for benchmarking and portfolio analysis like DC plan sponsors and their consultants are going to need more data and analytics to support a fiduciary decision that involves private markets and target date portfolios. We think that's a real another meaningful unlock for Preqin.

Just going to market and some of your questions about kind of pricing and product. Our initiative with Great Gray, the collective trust company that we told you about earlier this year. It's a great first step in providing more access to private markets. Pricing on that is firming up as it comes to market. We'd expect the smaller adviser sold plans to be first movers. They have the most familiarity with private markets and wealth management accounts. And historically, smaller plans have historically led faster on innovation.

We're expecting to launch a proprietary LifePath with private target date fund in '26. And depending on the status, I think, of legal and regulatory to more meaningful engage with our clients on exposures in the existing LifePath range. The executive order is a great positive step, and we look forward to kind of keeping you updated in this area.

Let me just add 1 last point. The sooner we could get young people to be investing in their retirement fund. And that's why we're so encouraged about what's going on digital wallets, where that money is if we could transform some of that digital liquidity into a retirement product to ETFs or whatever we can do, the better off the individuals will be, and they'll have -- will enjoy a much longer duration of compounding returns over time. I think it's essential that we elevate this call the action to get more and more people focusing on the needs to investing in retirement sooner. And this is a worldwide phenomenon.

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

Thank you, operator. I want to thank everybody for joining us this morning, and for your continued interest at BlackRock. Our third quarter results demonstrates again the depth and breadth of our global platform, our local position with clients our ability to provide them with whole portfolio analytics and research. We exhibited in the third quarter, the strong momentum, and we already are entering the fourth quarter with even stronger momentum. We're confident in our ability to deliver differentiated performance for our clients and our long-term value for our shareholders. Once again, thank you, and have a good quarter.

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