Indeed, as BlackRock cements its place as the industry leader in terms of E.T.F.s — with the index giant Vanguard entrenched in second place — Mr. Fink will remain under pressure to ensure that its other activities, from managing bonds to to its struggling stock-picking division, keep pace with the surging passive business.
“This was one of our best quarters ever,” Mr. Fink said in an interview on Monday. “We had strong flows, our fees are up and we are continuing to build deeper and broader relations with our clients.”
In explaining the rush of money into E.T.F.s, Mr. Fink emphasized that now, more than ever, the job for financial firms is to provide solutions-driven advice as opposed to merely pushing a client into a certain fund.
“Clients are looking for outcomes — they are not looking for products anymore,” he said.
Generally one to take a cautionary view toward the markets, Mr. Fink said that the broader investment environment was rapidly improving — thanks to a turnaround in Europe, consistent growth coming out of China and an improving United States economy.
But he pointed out that equity markets were becoming increasingly expensive and would need to see a good batch of earnings this quarter as well as progress in Washington to remain at current levels.
“The price-to-earnings multiples are very high,” he said. “We will need to see validation in earnings, and I hope we see progress on tax reform and infrastructure, too.”
More than ever, Mr. Fink is positioning BlackRock to focus on such systematic investment strategies as basic index funds, E.T.F.s and blended strategies like smart beta and factors that target investment themes like momentum and low volatility.
The common theme: low costs and reliance on machines as opposed to experts making bets on stocks.
As of the end of the second quarter, BlackRock managed $3.7 trillion in passive investment money and $1.6 trillion in active strategies.
Mindful of low-cost competitors like Vanguard and Schwab, which through its booming adviser platform is offering E.T.F.s for free, BlackRock has been aggressively slashing the fees of its E.T.F.s.
Reflecting the buoyancy in the markets in the second quarter, BlackRock said that $51.8 billion flowed into equity E.T.F.s and $21 billion was directed toward bond E.T.F.s — an area of increasing focus for the firm.
During a time when bond markets have been less liquid than in the past,…