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Blackrock Sees Outflow From Bond Funds


The world's largest money-manager isn't immune to fear in the bond market.

Investors pulled a net $1.5 billion from BlackRock Inc.'s BLK +0.31% fixed-income exchange-traded funds during the second quarter, the company reported as part of its earnings release Thursday. The ETF business, branded iShares, saw total net outflows of $963 million, including outflows from bond funds, according to the company. BlackRock is the country's largest provider of ETFs, which typically track an index and trade on an exchange.

Institutional investors—pension funds and endowments—pulled a net $1.3 billion from active fixed-income products during the quarter. BlackRock has total fixed-income assets of about $1.2 trillion.

Bond funds across the money-management industry have suffered large outflows in May and June, as investors have fled, fearing a spike in interest rates. Not all of BlackRock's bond funds have seen outflows. The company's retail and index funds saw net inflows during the quarter of a combined $7.8 billion.

BlackRock's chief executive and chairman, Laurence D. Fink, said in an interview with The Wall Street Journal Thursday that the company has spent much more time recently reassuring investors concerned about their fixed-income investments in particular.

Mr. Fink said he wouldn't be surprised if 10-year Treasurys closed the year at a 3% yield, although he said rates would likely be tethered around 2.5% "for awhile." Bond yields rise when their prices fall.

Mixed messages from the Federal Reserve about when it might scale back a popular bond-buying program have caused volatility across financial markets.

"Obviously there's a great deal of confusion about the timing from the Fed," Mr. Fink said.

BlackRock reported a profit of $729 million, or $4.19 a share, for the quarter ended June 30, beating a $3.82-a-share earnings target, according to a poll conducted by Thomson Reuters. Earnings per share jumped 36% compared with $3.08 a year earlier.

But the company's $2.482 billion in quarterly revenue narrowly missed a target of $2.489 billion, according to Thomson Reuters. Revenue rose 11% from $2.2 billion in the second quarter of last year.

BlackRock's total assets under management slipped about 2% to $3.86 trillion compared with the first quarter of 2013, although they are up 8% from a year earlier.

The company said that inflows into its ETF business already have rebounded, with net new inflows of about $7 billion so far through July.

Rather than a "great rotation" out of bonds, Mr. Fink said in his investor call that BlackRock is seeing its fixed-income investors move into bond funds that aren't tethered to an index, also known as unconstrained bond funds.

BlackRock's shares rose $6.60, or 2.4%, to close at $278.91. The stock has risen nearly 60% in the past 12 months.