Laurence Fink: So, obviously, the foundation of the firm and the — was Milliman, the BGI transaction. But we’ve been quite active in deals and partnerships, whether it’s Jio BlackRock partnership that we’re working on, which I think will be transformational. That’s not an M&A deal. But our Aperio deal, our eFront deal, are great examples of execution, precision, with 20% and 50%, respectively, increase in revenues in both those businesses. I would look back and say, we spent about $4 billion on M&A over the last five years. And I’m now challenging all of us, including myself, about what are the ecosystem changes that are around today. And I — if you look back when we did the big transactions, there was a lot of market on settlement, and I think there is quite a bit going on now, big shifts.
And so, we are looking at different opportunities related to technology, private markets. We’re always engaged in conversations. But I’m challenging the team and myself to really — to think more broadly and more openly about the opportunities we have. And we’re engaged. We’re engaged in a large way across the world, across the opportunities. That is not going to be displacing the opportunities of partnerships like the partnership with Monzo, the partnership with Reliance Industries and Jio Financial. We see those going to be additive. They inform us. They help us be more connected. We see different opportunities. And so, we’re challenging ourselves. We are engaged in a lot of conversations right now, probably more than we have been in many, many years.
And we’ll see how this all plays out.
Operator: Your next question comes from Alex Blostein with Goldman Sachs. Please go ahead.
Laurence Fink: Good morning, Alex.
Alexander Blostein: Hi. Good morning, Larry. I appreciate the comments earlier. Maybe just another one around M&A. So, it sounds like you have a pretty wide lens through which you’re considering different targets or partnerships. Can you remind us about financial targets for a potential deal for BlackRock from an EPS accretion? And any other kind of framework you could put around what a potential deal could look like? Thanks.
Laurence Fink: I’m going to hand it off to Martin.
Martin Small: Hi, Alex. It’s Martin. How are you? So, the centerpiece and hallmark of the M&A strategy here has always been about accelerating organic growth. It’s been about developing capabilities that we don’t have and or de-risking capabilities that we’re building. And I’d say when you look at eFront, when you look at Aperio, when you look at many of the transactions Larry has talked about, that’s really been the center of the strategy. It’s about accelerating organic growth and delivering for clients. And as Larry said, in the last five years, we’ve spent about $4 billion on M&A. We’re not capital-constrained. We have ample debt capacity. And so our goal is to be able to drive earnings acceleration and also deliver more for our clients through M&A.
Laurence Fink: I would just add one more thing related to that. Martin, I just want to double-down. We have a lot of debt capacity. We have a lot of opportunities. And we’re really refocusing on where can we be additive. The one thing that I could tell you, when we do integrations of firms, we are not going to be a boutique. We are going to be organizing it and building it out. We love the opportunity of having Aperio, but it’s a part of a big organized firm. We love eFront. It’s organized around the whole Aladdin ecosystem. But it is not — we’re not building a boutique of different fragments. We’re building a unified organization. As Martin said, to be additive in revenues, additive in client connectivity, and additive in reach, reach in technology and reach in product.
Operator: Your next question comes from Daniel Fannon with Jefferies. Please go ahead.
Laurence Fink: Hi, Dan.
Daniel Fannon: Thanks. Good morning. Hi. Another question on flows, active equities and alternatives, both higher fee segments and, I think, key contributors to you hitting your long-term base fee target. Can you talk about the trends in those businesses outside of maybe just the seasonal stuff for 3Q? But really, as we think about the next 12 months, 24 months, the kind of funds and growth outlook you think for both, obviously, alternatives, but then also the active equity segment?
Martin Small: Thanks very much for the question. So, when I think about the active equities business at BlackRock, we had continued to see a very strong active equity business over the last three years. We’ve generated over $30 billion in active equity net inflows, while our average AUM has grown by 34%. And so, while, again, quarter-to-quarter and year-on-year, we’d fully expect to see, particularly in this environment, some rotations out of equities and into cash, which has been the main theme, I think, of this call and the many others, we still see really strong growth in the business. And we think it’s fundamentally a big part of client portfolios. I do think over time, in our product strategy, you’ve seen we’ve been adding, for example, transparent active ETFs, through which we’ll be growing our active equity business and our other active businesses.
And so, we think about these over time as being delivered through multiple rampers and an integral part of our base fee growth strategy.
Robert Kapito: And let me just add to that. Because we have to be a little bit careful about what we call active, because people are active with both their index and their ETFs through models and I would prefer to say it’s active as we originally knew the definition alongside of all of our ETF products. And when is active going to continue to have more flows? When you can add outflow? And we’re going into an environment where I believe active flows will be greater because there are now more opportunities to add alpha than there has been before. So we’ve seen $65 billion of active net inflows in 2023 year-to-date, which compares to industry outflows. And part of that is coming from some of the different pockets that we have created that require more active than passive management.
So, we continue to see strong demand in the private markets and in LifePath. These are the strength in income-oriented equities total return in core bond strategies. So just to give you an idea, since 2019, positive active flows have been in 16 out of the 19 quarters. And a lot of that also depends upon performance. And that’s what we’ve been able to keep our promise to with our clients and will drive active inflows going forward.
Laurence Fink: One more last thing on this, Dan, I would just say, we have committed enlarging our iShares platform globally. I think that’s going to be an integral part of what we’re doing in India. But if you look at the trends of ETFs in the year-to-date, in Europe, ETF flows are up 70%. In the US, the ETF flows are actually a little lower than they were last year. But as we continue to build out our platform globally, we become a very large beneficiary. And what is happening in Europe, the rise of its capital markets and the utilization of ETFs as an instrument of active and an instrument of exposures and an instrument of passives, we’re winning big market share in that business.
Operator: Your next question comes from Brian Bedell with Deutsche Bank. Please go ahead.
Laurence Fink: Good morning, Brian.
Brian Bedell: Great. Thanks. Good morning. Maybe, Rob, if we could just go back to institutional fixed income, a different angle of this being the prospect of pension plans immunizing their portfolios given how much longer-term bond yields have improved. What do you sense as sort of, I guess, first of all, the potential magnitude of that switch, of that reallocation to immunizing the plans as you talk with your clients and then sort of the timing of that? Are they also waiting for yields to peak to do that or is it more seasonal or something that might actually do by year end?
