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BlackRock profit jumps 10 percent on stock funds' strength

A BlackRock building is seen in New York June 12, 2009. REUTERS/Eric Thayer
A BlackRock building is seen in New York June 12, 2009. REUTERS/Eric Thayer

(Reuters) - BlackRock Inc said on Tuesday that first-quarter net income rose 10 percent as investors increasingly turned to the money manager's higher-fee stock funds.

New York-based BlackRock said net income increased to $632 million, or $3.62 per share, from $572 million, or $3.14 per share, a year earlier.

During the quarter, investors showed a strong preference for equities for the first time since the financial crisis. At BlackRock, customers added $33.7 billion to equity offerings out of total net inflows of $39.4 billion into long-term funds.

Assets under management rose to a record $3.94 trillion at the end of the quarter, including new money and market gains.

BlackRock's $25.6 billion of long-term net inflows into its iShares exchange-traded fund family shifted from emerging markets products into U.S. broad market and large-cap equities, reflecting more confidence in the economy, the company said.

Investors withdrew more money than they added into BlackRock's bond funds, pulling out $2.6 billion. They also withdrew $2.2 billion from currency funds, while adding $9 billion to multi-asset portfolios and $1.5 billion to core alternative funds.

Low yields on bonds and fears that interest rates may rise and hurt bond prices prompted some of the moves toward stocks, BlackRock Chief Executive Laurence Fink said.

"This is having a significant impact on where we're seeing asset flows as investors seek other sources of yield, including from equities," Fink said in a statement.

Excluding costs to launch a closed-end fund, a compensation plan funded by PNC Financial Services Group and other items, BlackRock reported earnings of $3.65 per share. On that basis, analysts, on average, expected $3.58, according to Thomson Reuters I/B/E/S.

A reorganization-related severance program drove up compensation in the quarter to 36 percent of total revenue, Chief Financial Officer Ann Marie Petach said on a conference call with investors. That was higher than usual, despite seasonally higher first-quarter costs, but should fall through the rest of the year, she said.

Retail mutual fund assets were $421.1 billion. "We are committed to improving performance" in active management of U.S. mutual funds, Fink said on the call.

Shares of BlackRock rose 1.5 percent at $257.77 in early Tuesday trading. The stock has risen 23 percent so far this year, surpassing a 9 percent gain for the Standard & Poor's 500 Index <.SPX>.

(Reporting by Aaron Pressman and Jed Horowitz; Editing by Lisa Von Ahn)

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