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Good morning. My name is Jennifer and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the BlackRock, Inc. Fourth Quarter 2025 Earnings Teleconference.
Our host for today's call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Martin S. Small; President, Robert S. Capito; and General Counsel, Christopher J.
Meade. [Operator Instructions] Thank you. Mr. Meade, you may begin your conference.
Good morning, everyone. I'm Chris Meade, the General Counsel of BlackRock. Before we begin, I'd like to remind you that during the course of this call, we may make a number of forward-looking statements. We call your attention to the fact that BlackRock's actual results may, of course, differ from these statements.
As you know, BlackRock has filed reports with the SEC, which list some of the factors that may cause the results of BlackRock to differ materially from what we say today. BlackRock assumes no duty and does not undertake to update any forward-looking statements. So with that, I'll turn it over to Martin.
Thanks, Chris. Good morning and happy New Year to everyone. It's my pleasure to present results for the fourth quarter and full year 2025. Before I turn it over to Larry, I'll review our financial performance and business results. Our earnings release discloses both GAAP and as-adjusted financial results.
A reconciliation between GAAP and our as-adjusted results is included in today's press release. I'll be focusing primarily on our as-adjusted results. We're closing out one of the strongest years in our history. Clients awarded us nearly $700 billion in net new assets, 9% organic base fee growth and 16% technology ACV expansion.
Our whole portfolio strategy is winning both mind and wallet share with clients. It's bringing even more momentum to the breadth of our organic growth. We had nearly 150 products across our ETF and mutual fund ranges with over $1 billion in flows. We had over $24 billion in revenue alongside nearly $10 billion in operating income, both up 50% since 2020 and earnings per share was a new record.
Our platform demonstrated resilience and growth even when markets were in turmoil back in April and captured steep upside when they rallied. 2025 was another proof point that BlackRock is a share gainer when there's money in motion. Our 10% increase to our 2026 dividend per share and increase in planned share repurchases to $1.8 billion are driven by our accelerating growth trajectory and platform success in 2025. That's our highest dividend increase since 2021 and comes after a record $5 billion payout to shareholders in 2025. Supported by both 9% organic base fee growth and favorable markets, we entered 2026 with a base fees run rate that's approximately 35% higher than our base fees in 2024 and approximately 50% higher than 2023. This stronger entry point enhances our ability to deliver future earnings, return capital to shareholders and execute on our 2030 ambitions.
We delivered 6% or higher organic base fee growth in each quarter of 2025. We finished the year with 2 consecutive quarters of double-digit organic base fee growth, including 12% in the fourth quarter. That growth is broad-based across our systematic franchise, private markets, ETFs, digital assets, cash and outsourcing. And it's across capabilities that we've had for decades and others that we've built or acquired in the last 2 years. That gives us confidence we're on the right track with clients and we have a lot of optimism for the years ahead.
You've heard us say it's not that the big are getting bigger, it's that the best are getting bigger. Size and scale are outputs of performance. We've wrapped a successful 2025 and now we're moving with speed and scale to go upward from here. We're building leading franchises in newer high-growth markets across the industry, private markets to insurance, private markets to wealth, digital assets and active ETFs.
We think these can all be $500 million revenue generators in the next 5 years. We already have industry-leading margins and we see real opportunity to drive margin expansion through the FRE growth trajectory of our private markets and our highly scaled foundational businesses. We entered 2026 with strong momentum and our first year as a fully integrated firm with GIP, Preqin and HPS. We're pioneering what we believe is the asset management model of the future.
It's one that seamlessly brings together public and private markets, it interoperates between traditional and decentralized financial ecosystems and it's powered by technology and data with Aladdin, eFront and Preqin. BlackRock houses the world's #1 ETF franchise, a top 5 alternatives platform with more than $675 billion in client assets, $0.5 trillion in target date AUM, leading advisory services and a tech and data SaaS franchise with nearly $2 billion in revenue. Moving to financial results. Full year revenue of $24 billion was up 19% year-over-year.
Operating income of $9.6 billion was up 18% and earnings per share of $48.09 increased 10%. Fourth quarter revenue of $7 billion was 23% higher year-over-year, driven by the acquisitions of HPS and Preqin, organic base fee growth over the trailing 12-month period and the positive impact of market movements on average AUM. Quarterly operating income of $2.8 billion was up 22%, while earnings per share of $13.16 increased 10% versus a year ago. EPS also reflected a lower tax rate, lower nonoperating income and a higher share count in the current quarter linked to the close of the HPS transaction on July 1. Nonoperating results for the quarter included $106 million of net investment losses, primarily due to a noncash mark-to-market loss linked to our minority investment in Circle.
In mid-December, we contributed a portion of our stake in Circle to our existing donor-advised funds. Following this transaction, we maintain approximately 1.1 million shares of Circle common stock, which will continue to be marked through investment income. Our as-adjusted tax rate for the fourth quarter was approximately 20% and benefited from discrete items. We currently estimate that 25% is a reasonable projected tax run rate for 2026. The actual effective tax rate may differ because of nonrecurring or discrete items or potential changes in tax legislation.
Fourth quarter base fees and securities lending revenue of $5.3 billion was up 19% year-over-year, driven by the positive impact of market beta on average AUM, organic base fee growth and approximately $230 million in base fees from HPS. On an equivalent day count basis, our annualized effective fee rate was approximately 0.1 basis point lower compared to the third quarter. This decrease was primarily due to higher securities lending revenue in the third quarter, which benefited from specials. We're seeing client demand from our structural growers like private markets, systematic, models, OCIO, ETFs and SMAs.
And these capabilities provide positive leverage to average fee rates. The fee yields on new asset flows this year are 6 to 7x higher than they were in 2023 and are at a premium to our overall fee rate. Fourth quarter performance fees of $754 million increased from a year ago, reflecting higher revenue from alternatives and included $158 million from HPS. Full quarter and full year technology services and subscription revenue, each increased 24% year-over-year, reflecting the successful onboarding of a number of new clients, expanding relationships with existing clients and the closing of the Preqin transaction.
Preqin added approximately $65 million and $213 million of revenue in the fourth quarter and full year, respectively. Annual contract value, or ACV, increased 31% year-over-year, including the impact of Preqin. ACV increased 16% organically. Total expense increased 19% in 2025, primarily driven by higher compensation, sales, asset and account expense and G&A expense.
Full year employee compensation and benefit expense was up 20%, primarily reflecting higher incentive compensation associated with performance fees as well as higher operating income. The year-over-year increase also reflects the impact of onboarding GIP, Preqin and HPS employees. Full year G&A expense was up 15%, primarily due to M&A transactions and higher technology investment spend. Our fourth quarter as-adjusted operating margin of 45% was down 50 basis points year-over-year.
Our full year as-adjusted operating margin of 44.1% decreased 40 basis points from a year ago. Both periods reflect the impact of performance fees and related compensation. We continue to deliver margin expansion on recurring fee-related earnings. Excluding the impact of all performance fees and related compensation, our adjusted operating margin for the fourth quarter would have been 45.5%, up 30 basis points year-over-year.
Our full year margin would have been 44.9%, 60 basis points higher relative to 2024. As we execute on our organic base fee growth and operating margin ambitions, we'll continue to be disciplined in both our hiring and our investments. After annualizing for the impact of HPS and Preqin, we would expect a mid-single-digit percentage increase in G&A. Additionally, we would expect BlackRock's headcount to be broadly flat in 2026. After investing for growth, we returned a record $5 billion to our shareholders through a combination of dividends and share repurchases in 2025. This includes $500 million and $1.6 billion of share repurchases for fourth quarter and full year, respectively.
BlackRock's Board of Directors recently approved a 10% increase to our first quarter 2026 dividend per share, building on our track record of strong dividend growth and demonstrating confidence in our cash flow generation and durable earnings expansion. That represents a 13% increase in the dollar amount of dividends expected to be paid. The Board also authorized the repurchase of an additional 7 million shares under our share repurchase program. At present, based on capital spending plans for the year and subject to market and other conditions, we are targeting a purchase of $1.8 billion worth of shares during 2026. Full year total net inflows of $698 billion reflected positive flows and organic base fee growth across all asset classes and active and index. iShares led the industry and set a new flows record with $527 billion in 2025, representing 12% organic asset and 13% organic base fee growth.
Net inflows were diversified across core equity and premium categories like fixed income, active and digital asset ETPs. iShares net inflows of $181 billion in the fourth quarter once again demonstrated strong momentum into year-end, supported by seasonal portfolio reallocations. Full year retail net inflows of $107 billion were led by the onboarding of the $80 billion SMA assignment from Citi Wealth during the fourth quarter. Separate from this assignment, Aperio had its fifth consecutive record year of net inflows with $15 billion, active fixed income added $3 billion and alternatives generated $12 billion in 2025. BlackRock's institutional active franchise generated net inflows of $54 billion in 2025, reflecting the onboarding of multiple outsourcing mandates, the above-target close of GIP V and deployment in private credit.
Institutional index net outflows of $119 billion were mainly driven by redemptions from low-fee index equity strategies. Our scaled private markets platform delivered $40 billion of full year net inflows led by private credit and infrastructure. We're targeting $400 billion in gross private markets fundraising through 2030, powered by origination, strong investment performance and the depth of our client relationships. Our valuable position as a trusted long-term partner to corporates and sovereigns provides us with unique visibility and insight into capital markets and client activity, enabling differentiated deal flows, tailored solutions and long-term value creation for our clients and shareholders.
Finally, BlackRock Cash Management saw $74 billion of net inflows in the fourth quarter and $131 billion in 2025, driven by U.S. government, international, Prime and Circle Reserve Funds. BlackRock's platform is anchored by growth engines tied to the long-term expansion of global capital markets and fast-growing client product channels. The opportunity ahead is inspiring to reshape portfolios for more complex markets, to deepen partnerships with clients and to deliver durable, profitable growth for our shareholders. We entered 2026 with the combined strength of BlackRock, GIP, HPS and Preqin, now all One BlackRock and we're excited to share our growth with clients, employees and shareholders.
I'll turn it over to Larry.
Thank you, Martin. Good morning, everyone and Happy New Year. Thank you for joining. We entered 2026 with accelerating momentum across our entire platform.
It will be the first full year with the combined strength of BlackRock, GIP, HPS and Preqin. We're coming off the strongest year and quarter of net inflows in our history. BlackRock awarded -- clients awarded BlackRock with nearly $700 billion in new assets in 2025, including $342 billion in the fourth quarter. And the consistency of our results stands out even more over the long term with nearly $2.5 trillion of net inflows over the last 5 years.
Our pipeline of business has broadened across products and regions, spanning public and private markets, technology and data and client channels. We're seeing excellent fundraising activity. We have an ambitious 2026 fundraising plan diversified across infrastructure, equity and debt, private financing solutions and multi-alternatives. Our client relationships have never been stronger and deeper.
We're a scale operator in public and private markets, investments in technology, that's significantly enhancing our position with clients worldwide. We're building off accelerating growth over the course of 2025. We delivered 6% or higher organic base fee growth each quarter and we ended the year with 12% organic base fee growth and 16% technology ACV growth in the fourth quarter. These growth rates are both 4 points higher than last year and 9% full year organic base fee growth represents $1.5 billion of net new base fees. That means we enter 2026 with base fees approaching $21 billion, 13% higher than 2025. And we delivered a premium 45% operating margin.
Our scale and Aladdin technology fuels growth and helps push down our marginal cost. We're in an upward trajectory in our margins on fee occurring -- recurring earnings as we continue to drive growth in private markets and scale businesses like ETFs and systematic equities. Our belief in our future growth, increasing profitability and durability of cash flow led us to increase the dividend per share by 10% and step up planned share repurchases. Over the last 10 years, we delivered a 10% compounded annual growth rate in our dividend and over a 15% annual return on our repurchases.
And we're confident than ever that our -- in our model and the outsized opportunity we see across multiple growth engines. Our foundational businesses like iShares are unlocking new markets like in active ETFs and digital assets. At the same time, we're a leader in emerging trends like private markets to wealth, 401(k)s, tokenization and private market data. In private markets, our investments in infrastructure and private credit and alts to wealth underpin our ambitions to raise $400 billion in private markets by 2030. BlackRock is already managing $3 trillion on behalf of insurance, wealth and OCIO clients.
We have a significant opportunity to deliver better outcomes and experiences for clients in private market allocations. And for our shareholders, that shift represents new private markets AUM and potentially over $1 billion in new base fees. For example, BlackRock is the largest general account manager for insurers with $700 billion in AUM. With HPS, we're now also one of the largest asset-based finance and high-grade managers.
We're in about 20 late-stage conversations to help insurers build more dynamic and diversified portfolios across public and private markets. Similarly, in wealth, we're focused on expanding access to private markets. We're bringing together strong investment performance track records with BlackRock's scaled global distribution model. We have the largest wholesaling team in the industry covering every corner of the United States marketplace.
We have very strong relationships in private banks in Europe. Our more than $1 trillion of wealth platform spans end clients' whole portfolios from models and SMAs to ETFs and private markets. We're also a technology provider through Aladdin Wealth, which brings institutional quality portfolio construction right to the desktops of our financial advisers. We continue to expand and diversify distribution of HPS nontraded BDC to U.S. wirehouses and RIAs, and we believe model portfolios will be another unlock.
We're also planning to widen our product range through an H Series family of funds that would be led by the flagship HLEND alongside junior capital, real assets, triple net lease, multi-strat credit and secondaries and co-investment strategies. We plan to bring all the building blocks to serve wealth investors through coordinated multi-alts portfolios. Then in retirement, we're seeing important progress towards a framework to include private assets and target date funds. We expect to launch our first LifePath Target Date fund with private markets later this year.
Most Americans' only experience with capital markets is through their 401(k) plan. I said many times that helping workers build and spend their retirement savings is one of the greatest challenges of our generation. We've long associated for better retirement solutions and easier access to investment options. BlackRock has also championed early childhood savings accounts and the policies that make them possible and we're encouraged by and supportive of the launch of these accounts in the United States.
For retirement savers, there's a real opportunity to bring additional returns and diversification to investors through private markets. BlackRock will be at the forefront with our leading DCIO business, our $600 billion LifePath franchise, top 5 alternative platforms and definitely Preqin. We expect plan sponsors will need standardized benchmarking and performance data to validate their plan choices and Preqin can be the central provider. Our leadership in all of these areas distinguishes BlackRock with plan sponsors and policymakers.
We've always been a leader in retirement and a first mover in developing new solutions in retirement. We started innovating LifePath Paycheck in 2018 and it's been the fastest-growing lifetime income target date strategy in the defined contribution market. We believe it will be the default retirement investment strategy. Guaranteed income and private markets are not 2 separate conversations.
BlackRock can bring it all together. Our vision is not just for incremental addition of private markets. It's the design of an optimal target date solution, one that combines public markets, private markets and guaranteed income like LifePath Paycheck. BlackRock has long-standing relationships and decades of experience in working with plan sponsors and building client-first retirement solutions for their members.
We're a bit over a year into closing our GIP transaction and we're already seeing synergies through our combined expertise and relationships. GIP V closed above its $25 billion target in July and our AI partnership, which was not part of the deal model, continues to attract significant capital. AIP has raised over $12.5 billion from partnership founders and clients. Our initial target is to mobilize and deploy $30 billion of equity capital with the potential of reaching $100 billion, including debt.
More broadly, we're seeing excellent progress across the range of infrastructure strategies, including mid-cap and emerging markets' infra equity and investment-grade, high-yield and credit-sensitive infra debt. The current cash flow and inflation-protected return profile of infrastructure makes it an attractive sector for our clients, especially those saving for retirement. More broadly, income-oriented strategies are a critical component of our clients' portfolios. BlackRock manages over $4.5 trillion in assets across both public fixed income, cash and private credit.
This means we can provide an integrated fixed income solution for clients, that delivers scale benefits. In 2025, we generated over $45 billion of net inflows across our high-performing active fixed income franchise, led by Rick Rieder. We believe 2026 is shaping up to be another year where returns may be driven primarily by income rather than price appreciation. We're well positioned to capture flows with strong performance and differentiated strategies across municipals, high yield, total return and unconstrained fixed income strategies.
And we're leveraging active ETFs to provide access to our portfolio managers inside along with the benefits of the ETF wrapper. Our active ETFs drove more than $50 billion in net inflows in 2025, nearly tripling their assets in the last year. Rick's flexible active income ETF, BINC, B-I-N-C, and our systematic U.S. equity factor rotation ETF, DYNF, led our active ETF flows for the year. DYNF was the highest inflowing active ETF in the industry with $14 billion of net inflows.
It is our flagship of our systematic equity platform. Overall, our systematic equity franchise raised over $50 billion in 2025, even as the active equity industry saw another year of outflows. Our systematic investments have been using data and AI for 20 years. We've invested in this business.
And today, its IP delivers alpha to clients and helps portfolio managers across BlackRock to invest better. As more investors are looking at how to use AI for investments, we already have one of the best platforms utilizing AI and big data to drive thousands of alpha signals. We're optimistic about our systematic platform, continued double-digit organic base fee growth potential and its position as a bright spot in the active equity industry. iShares continues to be an innovation engine for BlackRock. iShares remains the market leader in ETFs in terms of organic assets and base fee growth, countries served and in product lineup. 2025 was another record year for iShares with $527 billion of net inflows.
In 2000, with just 40 ETFs, BlackRock's iShares set out to revolutionize investing. And over those 25 years, iShares has led the way in democratization of access to the growth of capital markets. BlackRock shaped the industry and we continue to expand the choice and access for investors around the world. We brought U.S. investors access to international markets and we introduced ETFs to Europe.
We launched the world's first bond ETF. We provide over 1,700 ETFs today, more than 6x the next largest issuer. And we're focused on providing investors value for their money while driving growth and margin expansion for our shareholders. iShares AUM was about $300 billion when we announced our acquisition in 2009. Today, it's $5.5 trillion and iShares revenues have more than quadrupled to over $8 billion. iShares is delivering growth both through core channels and newer premium initiatives like active ETFs, digital assets and in international markets. In Europe, ETF net inflows of $136 billion was approximately 50% higher than 2024. And we're seeing more individuals coming to iShares through digitally enabled offerings and monthly savings plans.
We're seeing similar trends in India, where our JioBlackRock joint venture operates through a digital-first direct-to-consumer model. JioBlackRock raised $2 billion upon launch, 6x the previous industry record and now manages 12 funds spanning cash, index, systematic equities on behalf of nearly 400 institutions and already more than 1 million Indian retail investors. More broadly, we're seeing great momentum in connectivity with clients in international markets. Both in Asia and in Lat Am, we saw double-digit organic base fee growth in 2025. Growth in Asia was led by our active wealth strategies and $30 billion of ETF net inflows across our locally listed and global ETF range.
In Latin America, our local presence is similarly resonating through our onshore ETFs and wealth offerings. And in the Middle East, we have a strong history as a trusted adviser to countries looking to allocate capital or to build out their own local markets. It is one of our fastest-growing regions. Our Aladdin technology powers and unites all of our platform and all our work.
The fact that BlackRock is the largest user of Aladdin allows us to stay attuned to changes in the marketplace and adapt Aladdin for our clients. Today, we're enabling our clients to more easily manage their exposures through end-to-end integration across public and private markets. 16% technology ACV growth reflected several innovative multiproduct wins, which will drive future revenues. Through Preqin, we're expanding access to actionable private market data, giving investors the analytics they need to build strong and reliable portfolios. The BlackRock platform is comprehensive.
It's global. We're a leader in public markets. We're a leader in private markets, and we are a leader in technology and data. We're a foundational provider in the traditional financial markets and the evolving decentralized financial ecosystem.
Most importantly, we bring it all together to deliver BlackRock to our clients in a comprehensive, consistent, determined way. We're entering 2026 with elevated momentum and we're positioned ahead of big future opportunities. We ended the year with 12% organic base fee growth, record flows and a new AUM high at $14 trillion. This already lifts our base fee entry level rate by 13%.
We are confident in our organic base fee growth ambitions. We plan to raise a cumulative $400 billion in private markets by 2030. We're focused on our margins and driving profitable growth. This all should translate to shareholder value through higher earnings and then multiple expansion. I'd like to thank our employees for the work they do every day on behalf of our clients, each and every client that we stand by as a fiduciary.
When we do well for our clients, we also do well for our employees and then we do well for our shareholders. I believe they're all -- they'll all be beneficiaries of our future growth. Operator, let's open it up for questions.
[Operator Instructions] Your first question comes from Craig Siegenthaler of Bank of America.
And I have to congratulate you on the record base fee organic growth because 12% is pretty impressive for a $14 trillion manager.
Well, I hope it's going to be impressive when we're a much larger manager than $14 trillion.
As we look ahead to 2026, can you flush out what you're all seeing and thinking on the net flow pipeline? And a sort of follow-up would be your money market business, which is not a new modern business, has done really, really well over the last 5 years. Higher rates has been a factor there. But with the Fed cutting, do you see flows reversing in this business?
And if it does, where do you think that liquidity goes?
Thanks, Craig. It's Martin. Happy New Year. Let me just start by saying that organic base fee growth continues to outperform our 5-plus percent baseline target, 10% in Q3, 12% print in Q4, 9% for the year.
And it's the momentum, I think, that really gives us a lot of energy. The growth has ticked higher each quarter. We were 1% to start 2024, 6-plus percent each quarter this year and then ending with 2 back-to-back quarters that are at double digits. That means clients want to do more business and are giving more business to BlackRock.
I think the success we've had with this structural growth strategy, it's driving strength and it's doing it across market environments in an all-weather way. And with more growth coming from our pipeline of private markets, systematic strategies, models, SMAs, digital assets, we think we can power organic base fee growth that's more consistently 6%, 7% or higher. And in supportive market environments, I think like Q4, where there's some risk-on sentiment for higher fee, international, precision exposures, private markets, that can tilt even higher. But we've always talked about our strategy being grounded in the whole portfolio.
It's always been about breadth and serving every corner of a client's portfolio. This year we had really excellent breadth in organic base fee growth and we're seeing that same breadth in our pipeline. Our fundraising plan is diversified across infrastructure, private financing solutions, multi-alternatives. And I think 2026, to your point on money funds, it's shaping up to be the year of a steeper yield curve.
And we think that era of easy 2a-7 fund income looks to be fading. We think that bond returns are going to be driven more by income rather than rate moves or spread compression. And I think even though cash is always going to be an allocation in a well-balanced portfolio, we'd expect that rate cuts are going to cause money market yields to fall and that some of the best opportunities for investors to be locking in bond yields are going to be in intermediate-term bonds. I think if the bond team was here, they'd say there's a generational opportunity to earn high-quality, steady income in the front and middle of the yield curve using that full toolkit in fixed income, credit, securitized, government bonds, munis, active and index.
And we're seeing that energy on our platform. We saw more than $80 billion of fixed income flows in Q4 and more than $40 billion outside the new Citi mandate. iShares bonds had $52 billion in Q4, $175 billion. That's 18% organic growth for the year. We manage over $3 trillion in fixed income.
So we think we can meet clients with fixed income offerings across sectors and durations wherever they need it and to do it in a vehicle that works best for them. That's an ETF, it's a separate account, a mutual fund or even yield-oriented exposures being a top CLO issuer and manager and by blending public and private fixed income through direct lending BDCs like HLEND. Our fee yield on new assets to the firm in this pipeline is running 6 or 7x higher than the fee yield on new assets in '23. And we think clients want to do more with BlackRock across the platform. We saw it in the 2025 activity and in the early momentum in '26. So it gives us confidence that we're on the right track and gives us a lot of energy about what 2026 can look like on the organic growth front.
Let me just add one more point. As global capital markets grow, cash is going to grow alongside of it. So the base holdings of cash will be elevated as long as the global capital markets continues to grow. And if you overlay -- if tokenization becomes more real and the opportunity to have a tokenized money market fund alongside tokenizing other assets, I actually believe you're going to see probably above-trend holdings in cash.
That being said, I agree with everything what Martin said, we're going to see much more -- you're going to see more and more investors going up the curve, especially if the yield curve becomes steeper and steeper, which probably is going to be the outcome. But I think we have to look at the overall scale of the capital markets and its growth globally and that is one of the foundational reasons why cash holdings will -- they look larger than ever, which they certainly are. But I think as the capital markets grows, so does holdings in capital markets cash. And I think that is important -- there's an important connection between that.
And it's not -- it's -- cash is just not an outcome of people are nervous and holding and they're not looking to do it. As the capital markets grows and as more people's wallets are in the capital markets, the role of the money market fund just grows. And I think that is one of the foundational reasons why we continue to believe that money market holdings will continue to be quite large.
Your next question comes from Michael Cyprys with Morgan Stanley.
Wanted to ask one about Asia. I was hoping you could speak to your priorities across your footprint in Asia, from your local partnership in India to initiatives you have in Japan, among other countries. How are you looking to accelerate growth and expand contribution from Asia over the next couple of years? And what aspects might be most meaningful to the overall firm?
Well, I would say, first and foremost, Asia capital markets grew faster than the U.S. capital markets. More IPOs in Asia, especially in Hong Kong. So let's just start with that foundational base. The capital markets are growing faster there.
You're seeing historical changes in Japan because the NISA accounts and retirement accounts, you're just seeing more of wealth entering the capital markets out of the banking system. And that just represents more and more opportunities. So Japan has been an exceptional platform for growth, the insurance industry in Japan, the pension fund industry as the NISA accounts grow. So that's just one really good foundational example.
As I said, the IPOs in Hong Kong and the scale of wealth management in Hong Kong and Singapore, the wealth that is being generated in Southeast Asia, all leads to bigger opportunities, not just bigger opportunities to manage the money but bigger opportunities to invest like GIP invested in the airports of Malaysia. In India, I believe we have the best single platform to grow in India with the JioBlackRock partnership. I talked about the growth in 2025 but we have -- we believe that the transmission of the growth of the capital markets in India is just at the very beginning. Historically, Indians kept most of their money either in gold or in cash.
And I think the opportunity to develop a self-directed retirement platform in India is real. And as the platform grows in terms of retirement, the opportunities for us are very large. But even in places like in the -- in Saudi Arabia, there's conversations going on now to really build a Pillar Two retirement system there and then obviously, a Pillar Three and we're engaged in those conversations and opportunities. So historically, we looked at a lot of these markets who were exporters of capital.
But now in many cases, they are importers of capital but more importantly, they're developing their own capital markets. This is a trend that I've been talking about for years. And I think it's just that we're at the early stages of the growth of the capital markets in every place in the world. If you look at our growth rates, the double-digit growth rates in base fees in Lat Am, it is another example of the growth of wealth and the opportunities we have.
And so the key is, BlackRock is going to grow as long as the world and the global capital markets grow. But I would -- what I would clearly say what '25 indicates and what '26 offers is the growth of these capital markets are very beneficial for platforms like BlackRock and we are involved in these conversations. We're building our platform in each and every country. And I believe this is one of the real foundational opportunities for us in the future.
Your next question comes from Mike Brown with UBS.
So Larry, you touched on the insurance channel in your prepared remarks and BlackRock is a major player in the space and it's about 5% of your AUM today. But certainly, competition seems to be rising in the space. Can you just talk a little bit about how your differentiated offering like a full spectrum cash to private credit differentiates here and maybe unpack your comments about how the demand for the channel is shaping up here in 2026?
Thanks. Maybe I'll start, Martin. And then I know Larry will add some color. So I'd start with, yes, the balance sheets of the world's largest insurance companies were traditionally invested in public fixed income.
BlackRock has been very successful at capturing those allocations. And today, we're the largest insurance company general account manager in the industry with $700 billion in assets, more than 450 insurance relationships. HPS also manages over $60 billion of credit assets for over 125 insurance companies. And I think with our combined platform, we're better positioned than ever to be a high-grade solutions provider.
We also have service to the largest insurance companies on our Aladdin platform as well as an array of middle office services and accounting services. We think that private credit and building great public private portfolios is a very important growth vector within private markets and there's an opportunity for growth with asset-based finance and private high-grade with insurance companies. Just the penetration in this market is much smaller when compared to the corporate credit market. We have over 20 conversations right now where we're working on high-grade SMAs with leading insurers and building private high-grade portfolios.
A number are in later stages. We'd hope to start seeing deployments pull through, through the second half of 2026. And we're really focused on 3 things with them. The first is delivering better outcomes for our insurance clients by working with them to migrate something on order of 10% of their existing public fixed income assets into private high grade. So think of a $700 billion base migrating to $70 billion on order of that in private high grade.
The second is expanding high-grade mandates, meaning new assets and winning new assets with clients away from our existing book. And the third is also pursuing strategic partnerships, minority investments to increase the pool of insurance assets managed here at BlackRock, similar to the minority investment and strategic alliance that we announced with Viridium last year. I think on our competitive advantages, I'd note that insurance company asset management, it's a highly customized effort working with clients every day. It's not one of these mandates that's give me a benchmark and I'll beat it and give you a monthly report.
Teams are basically in-sourced by the insurance company to be looking at cash flows, to be thinking about credit, to be thinking about the intersection of accounting and capital and managing those portfolios. It is a highly interactive day-to-day thing. So being able effectively to blend turnkey full-service capabilities for insurance companies, that's a key competitive advantage for BlackRock. Integrating public fixed income, private credit, Aladdin, accounting, middle office services makes working with BlackRock a performance enhancer, a scale enabler.
So there's no doubt that this space has become more competitive, especially in private high grade. But I think our experience is that insurance companies want a full-service partner and that we're well positioned to play that role given our track record in public fixed income technology and world-class capabilities in private credit.
Your next question comes from Alex Blostein with Goldman Sachs.
So a question to you guys about margins. Larry, you mentioned it a couple of times and Martin did as well. Obviously, the business has grown really well. You outlined a number of really compelling initiatives, how this growth could continue for '26, '27. So when I think about the 45% operating margin, excluding performance fees that you sort of highlighted for 2025, how should we think about that progressing over the course of '26, assuming kind of normal markets?
And then, Martin, just a follow-up for you, the specifics around G&A, I heard mid-single digits but maybe you guys could just remind us what the right base is.
Sure. Thanks, Alex. Happy New Year. So BlackRock, as I mentioned, we continue to deliver industry-leading margins.
As we talked about at our Investor Day, we continue to target 45% or greater adjusted operating margin profile with our margin on recurring fee-related earnings running higher. Our operating margin in the quarter was 45%. And as I mentioned in my remarks, we continue to deliver margin expansion on recurring fee-related earnings. So excluding the impact of performance fees and related comp, our margin would have been 45.5%, up 30 basis points.
Think of that as more akin to an FRE margin burdened for stock-based compensation. This growth here at BlackRock is fueled by strong FRE growth in our private markets franchises, along with high-value, higher fee rate and scaled strategies in active ETFs, digital assets, systematic equities and other areas. So we think that over time, we'll see the margin on fee recurring earnings driving upwards toward the trajectories of the best-in-class private market names, so think north of 50%. A couple of things.
I'd remind you that we defer a portion of compensation linked to performance fees for talent retention. So in years where we see higher performance fees, we also see higher deferrals, which impact comp in future years. We continue to drive operating leverage and growth through technology and automation using the benefits of size and scale to reduce costs, strategically footprinting our business. And as we set out in the Investor Day, we're targeting that 45% or higher greater adjusted operating margin.
We're delivering steady operating margin expansion before the GIP, Preqin and HPS transactions. As we talked about during the announcement of those transactions, GIP and HPS both have 50% or higher FRE margins. So that's accretive to our margin on fee-related earnings. So we think the growth in these franchises alongside the highly scaled platforms like iShares, cash, model portfolios, they can fuel higher margins on fee-related earnings and over time, our overall adjusted operating margin.
And just in terms of your question, Alex, on G&A, we've talked about our financial rubric and how we aim to align organic revenue growth and controllable expenses across base salaries as well as G&A. Ultimately, I think with the long growth of markets is our structural tailwind, that's going to deliver more beta to the bottom line in op income growth and the benefits of scale to our clients and shareholders. As I mentioned on my prepared remarks, after annualizing for the impact of HPS and Preqin, we'd expect a mid-single-digit percentage increase in G&A. In 2025, we didn't see the full year impact of acquired HPS and Preqin G&A, so it will impact the year-over-year comparison in 2026. If you annualize our second half 2025 G&A results, which fully captures HPS and Preqin G&A, our 2026 expected G&A growth is in the mid-single digits.
Once we've lapped the 2026 results with a full year of integrated expense in our results, we expect you'll continue to see controllable expenses within organic base fee growth as we drive our 2030 strategy forward. That implies future years are in the mid-single-digit percentage growth.
Your next question comes from Ken Worthington of JPMorgan.
I wanted to dig a little bit further into Preqin. The alternative data business is evolving. Several alternative managers and index companies have launched private market partnerships over the last few quarters with plans to launch various private market indices. How should we view the evolution of Preqin and BlackRock's initiatives around private market data?
And what sort of outlook do you see for Preqin and BlackRock to participate in investable alternative indices?
Thanks. I'd start with, we're basically 9 months plus past the close of Preqin. The integration has really been terrific. We're very excited about the plans going forward.
The 4 big things to do as part of bringing Preqin into BlackRock is, first, expanding the distribution, obviously, of world-class Preqin data across our client base. The second is the build-out of data and models for private markets using the Preqin data, creating that great ecosystem where you have data and models being able to power how asset allocators think about investing in the private markets, how they think about benchmarking and comparing returns, effectively creating the language of private markets, both in risk models and in data. The third is enriching the data and building scale in the data factory.
And then the fourth is the opportunity you're touching on, which we think is the larger long-term opportunity of leveraging our engines in Aladdin and iShares to build the machine for the indexing of the private markets. And when I think about what the creation of public markets did to drive stock markets, which especially we see through iShares, we think BlackRock and Preqin to do that for the private markets. We see that opportunity as being particularly compelling. We're working on building investable indices that we hope to bring to market here in the next few years.
And I think the real opportunity is to try to standardize index rules, to try to standardize pricing frameworks and ultimately publication so that you can create markets and transparency that ultimately can power futures contracts, can ultimately power iShares. And that's a big part of our strategy in the overall growth of Preqin.
Let me add one other point. Because more and more insurance companies, more and more pension funds and sovereign funds are deploying more and more private market strategies and more wealth managers are anticipating more private market strategies, the need to have a comprehensive risk management platform is even more imperative. So having a separate risk management system only for private markets is not going to be workable. And I think what Aladdin is bringing across the world or the spectrum of public and private markets, we're in a position of very large growth.
And you saw that in our ACV growth in 2025. And we expect that to continue over the coming years. The need to have a comprehensive risk platform. And especially if the Department of Labor approves the utilization of private markets in the 401(k), in the defined contribution business, each and every firm is going to have to validate and authenticate the risk that is being implied when they add private markets. We are still going to have to live under some prudent ruling, maybe still a fiduciary ruling of some sort, we don't know.
But I can say with absolute certainty, the need to have a comprehensive risk tools to understand the risk associated with adding private markets to a -- what is -- all public market portfolio is imperative. And so the need for a platform like Aladdin has never been greater, especially with the addition of private markets in the defined contribution space.
Your next question comes from Dan Fannon with Jefferies.
So just a question on private credit. I was hoping you could first disclose what the HPS flows were in the quarter. And then more broadly, how you're thinking about the outlook for growth given the headlines and news flow around this asset class. Has that changed at all as we think about 2026 and beyond?
Thanks a lot. So we deployed $25 billion in 2025 across private markets, led by private credit and infrastructure. The deployment trends have been strong. We had $7 billion of private credit net inflows in the quarter, primarily due to deployment activity.
We're seeing good and building momentum for private markets investing and private credit, I think, particularly. So that number, I think, is in the tables. We're generally seeing stable credit conditions across the main HPS strategies that today form the core of our private credit platform. We think some of the headlines that we've read often highlight isolated stress points rather than painting the full picture.
But we generally see stable credit conditions across the portfolios that we're managing. But I think the context is critical, like defaults and losses in the non-IG direct lending to corporates have been abnormally low for years following low rates. Default rates in the broader leveraged loan market are averaging slightly below the long-term average of 3%. And in economic slowdowns, like default rates rose to 4% to 5%, the all-time peak in the GFC hit 15% on an issuer weighted basis.
And so direct lending defaults are rising but they remain in historical ranges. So I think we see this period, as do many of the other firms, as a period of expected catch-up following a long period of very low defaults. So returning to normal defaults is something I think we expect. When we look through the universe of BDC loans, the $400 billion across 20,000 loans sitting in the valuation databases, we see nonaccruals that are inside the historical average.
We see PIK as a percentage of total interest income in line with historical norms, recovery rates that are in line with historical norms. The data does show some stratification between smaller companies and larger companies. So a $0 to $50 million EBITDA company looks very different than a $100 million to $200 million EBITDA company in terms of the ability to generate earnings. So I think going forward, it's not that there's nothing to see here.
It's just that we'd expect smaller borrowers, particularly those that were financed at very high or peak valuations and capital structures that didn't contemplate a 3% to 4% neutral rate, those are the credits that we'd expect to be more challenged. The HPS teams have focused very consistently over the years on larger companies. The weighted average EBITDA on the HLEND portfolio is about $250 million. But these are lending businesses.
There will be normalized default rates through cycles. And I think the team is very fond of saying the promise of private credit is not that there will be no defaults, it's that detailed credit work is going to be rewarded and that lenders will be in a better position to maximize recoveries. We continue to see good flows. We had strong gross subscriptions of $1.1 billion in the fourth quarter in HLEND.
Redemptions were 4.1%, which was higher than recent quarters but in line with the broader industry. I think a mix of factors affected the Q4 flows. There's generally elevated seasonal redemptions. There was media attention, some profit taking.
And then I think forward expectations on lower base rates also plays in. But still, most BDCs posted positive flows. In our Preqin survey data, we see the structural pipeline for private credit fundraising and deployment as intact. In the Preqin data, over 80% of investors plan to maintain or increase their allocations to private credit in the next 12 months.
It's just becoming a more standard part of overall fixed income allocations to provide income and diversification.
Your next question comes from Ben Budish with Barclays.
Maybe just following up on Dan's question. Just curious if you could provide a little bit more color on your expectations for the wealth channel more generally in 2026. HLEND, obviously, some good, if not better than average trends in Q4. What's the latest you're hearing from advisers? For GIP, I know there was some press indicating that there were maybe some challenges getting a product off the ground. So just curious if there's anything you can share there.
And then I think in the prepared remarks, you talked about model portfolios using private markets. So anything you can share in terms of what those products might look like, what we should expect in terms of timing would be helpful.
Sure. I'll give that one a go. I'd start with the framing that, again, at our Investor Day, we discussed how our platform was going to target $400 billion in gross fundraising from 2025 through 2030. We raised over $40 billion in private markets in 2025. And we're entering '26, I think, with strong momentum, very excited about the integrated public private capabilities that now include GIP, HPS and Preqin. In private wealth and retail channels, we currently have the flagship private credit BDC HLEND, as you mentioned, been raising about $1 billion a quarter.
And we have semi-liquid strategies in senior secured loans, junior capital and broadly syndicated loans. In '40 Act interval and tender offer funds, we have multi-strategy credit and private equity solutions that combine for about $1 billion in AUM under the tickers CREDX and BPIF. And in Europe, we recently launched multi-alternative solutions products using the LTIP vehicles, which stand at sort of $600 million plus in AUM, generally offered through private banks and retirement plans. Looking ahead, as Larry mentioned, we're bringing an H Series of vehicles to the market for private wealth and retail channels over the course of '26. The H Series is going to give investors access to key private markets building blocks, direct lending, junior capital, real assets, triple net lease, private equity solutions.
And at our Investor Day, we set out a goal to grow the private markets to wealth series of products to at least $60 billion of AUM by 2030. So I think you'll see here in the near term, a real asset strategy coming to market in the U.S., European direct lending to European private wealth clients and following with triple net lease and other strategies in the U.S. later this year.
Ladies and gentlemen, we have reached the allotted time for questions. Mr. Fink, do you have any closing remarks?
Thank you, operator. I want to thank all of you for joining us this morning and for the continued interest in BlackRock. Our results in 2025 validate the power of our integrated platform and the strength of our positioning with clients. We enter 2026 with differentiated momentum and opportunities ahead for us.
I think we're well positioned to deliver for our clients and in turn, create longer-term value for our shareholders. Everyone, have a very good first quarter and enjoy the winter.
This concludes today's teleconference. You may now disconnect.