So far in 2025, the financials sector has been among those outperforming the overall market as of the Jan. 17 close. The Financial Select Sector SPDR (NYSEARCA: XLF), which tracks the performance of financial stocks in the S&P 500, is up nearly 4%. That is double the 2% return of the S&P 500 itself.
Although down on the year, one stock that has helped contribute to this sector's outperformance recently is BlackRock (NYSE: BLK). It is up over 5% in the past week. The world’s largest asset manager broke records with its latest quarterly results. The company posted record revenues, as well as record assets under management (AUM).
After these results, Wall Street analysts grew more bullish on the firm. Analysts at Morgan Stanley and Deutsche Bank increased their price targets. The average of the two implies an upside of 22% in the company’s shares. That’s solid, especially considering shares rose 26% in 2024, beating the market. Below, I’ll break down the company’s earnings reports and explain why the firm still has significant room for growth. I’ll also point out two other stocks to watch that can benefit from the same trends I see helping BlackRock.
Fink Calls BlackRock’s Success “Just the Beginning”
In Q4, BlackRock grew its AUM by $281 billion, bringing its overall AUM to $11.6 trillion. The company’s yearly asset inflows also topped the previous record, coming in at $641 billion. The 23% gain in revenue from the previous year's quarter helped bring the company’s total 2024 revenue to $20.4 billion. This is also a record. After noting BlackRock's annualized total return of 21% since its 1999 initial public offering, Chief Executive Officer (CEO) Larry Fink called it “just the beginning.” That return, far and away, exceeds the 8% total annualized return of the S&P 500 over the period.
He said, “BlackRock enters 2025 with more growth and upside potential than ever." Considering the massive size BlackRock has already achieved, this is quite a bullish statement. At the same time, it’s not showing signs of slowing down. The company’s ability to grow its AUM briskly, even after becoming the largest player in the space, shows its competitive strength. But can it really keep this up?
BlackRock’s Private Markets Opportunity and the Trump Bump
Most know BlackRock for its low-cost ETFs. They let investors easily track market indexes. Clients have invested trillions in these strategies. However, strong competition and a lack of product differentiation mean BlackRock must charge very low fees for them. BlackRock's iShares Core S&P 500 ETF (NYSEARCA: IVV) has an expense ratio of just 0.03%.
One reason to believe in Fink’s message is that BlackRock has and is currently pursuing a big area for growth. This area is private market investment products. This includes funds that invest in private equity and private credit. With private market investment products, companies often charge 2% fees. There are also extra fees if returns exceed certain targets. As it stands today, private markets AUM make up only 2% of the company’s total AUM. Yet, it makes up 11% of the firm’s base fee revenue. This ratio of revenue versus AUM far exceeds any other BlackRock product, making assets in the area more valuable and at a higher margin. Given the low percentage of the company’s total assets that private assets represent, there is significant room to grow this area of the business.
It is already making big moves to grow its private markets business. It acquired Global Infrastructure Partners, a private market infrastructure investment company. It also acquired HPS Investment Partners, a private credit investor. Some expect private market AUM to grow at twice the rate of public markets through 2032, making this a good time for BlackRock to invest more in this space.
Additionally, analysts see merger and acquisition (M&A) activity increasing substantially during the Trump administration. A rise in M&A activity is good for private markets. It allows them to sell their private assets more easily and realize profits. Overall, I see private markets as a strong long-term growth driver for BlackRock.
Two Other Stocks to Watch
Two other firms that can benefit from the same trends include State Street (NYSE: STT) and KKR & Co. Inc. (NYSE: KKR). State Street wants to launch the first ETF that allows anyone to invest in private assets, looking to benefit from this growing market. KKR is one of the world’s largest private asset management firms and stands to benefit from increased deal-making under the Trump administration.
