U.S. money manager BlackRock reported higher first-quarter profit on Wednesday as assets under management grew, but earnings fell far short of Wall Street estimates, hurt by market turmoil.
"As the second quarter begins, markets remain highly unstable and continue to be a challenge for investors worldwide," Chairman and Chief Executive Laurence Fink said in a statement.
First-quarter profit was down from the 2007 fourth quarter, but BlackRock , the largest publicly traded U.S. asset management company, said its new business pipeline stood at a record $105.8 billion as of April 14.
Net income for the first quarter was $242 million, or $1.82 per share, up from $195.4 million, or $1.48 per share, a year earlier. Excluding costs related to compensation expenses, the company earned $1.90 a share.
Analysts' average earnings forecast was $2.00 per share, according to Reuters Estimates.
BlackRock earned $2.43 a share in the 2007 fourth quarter.
Assets under management, the main driver of revenue and profits at money management companies, rose to $1.364 trillion as of the end of March, up 18 percent from a year earlier, driven by acquisitions.
In 2006 BlackRock acquired Merrill Lynch's funds unit for $9.5 billion, the biggest purchase yet in the U.S. fund industry. And last year it bought the fund of funds business of Quellos Group for $1.7 billion.
Performance fees earned on its hedge funds tumbled to $42 million in the first quarter from $153 million in the fourth quarter. The firm said this was mainly "due to fewer performance fee contracts with performance measurement periods that concluded in the first quarter."
The market turmoil caused BlackRock's investment net asset values to decline by $27.4 billion net of foreign exchange effect in the first quarter, the firm said. But this was offset by net new business of $35.2 billion, with net inflows mainly in its cash management business, it said.
"Solid quarter but clearly the bar just got too high for (BlackRock)," Douglas Sipkin, analyst at Wachovia Capital Markets, wrote in a note to clients. "The combination of weaker performance fees and weak non-investment income was too much to overcome to maintain the same level of outperformance."
But Sipkin added that he was heartened by the firm's $106 billion business backlog.
BlackRock began as a bonds shop about 19 years ago under co-founder Fink, but it has diversified over the years into equities and alternative investments and competes with Legg Mason and AllianceBernstein, among others.
Merrill is BlackRock's biggest shareholder with a 49 percent stake. PNC Financial Services Group Inc owns 34 percent of the firm.
BlackRock shares have had a volatile ride in 2008 and are down 5.45 percent so far this year. They closed at $205.19 on Tuesday.