⚠ Performance Fees Are Not Recurring, and Are Reported As If They WereModerate threat

BlackRock (BLK) — threat to the moat

The liquid-alternatives half already fell while everything else rose — nothing failed, the returns were simply less good.

A revenue line that went from $554 million to $1,424 million in two years1 can go back. Performance fees are earned when funds beat their hurdles; when they do not, the fee is zero, and it can be zero for years while the assets sit there.

2025 performance fees: the two halves ($m)$695m, from $308mPrivate markets$558m, from $680mLiquid alternativesOne doubled and one fell in the same year; nothing failed, the returns were less good
A line that went from $554m to $1,424m in two years can go back, and half of it already did.

The liquid alternatives half already demonstrated it, falling from $680 million to $558 million in 20252 while everything else rose. Nothing failed. The returns were simply less good than the prior year.

The structural issue is worse in private markets, because of how the fees crystallise. Carried interest is typically earned on realisations, and realisations depend on exit markets — the ability to sell a company, refinance a loan or float an infrastructure asset. When those markets close, as they did across 2022 and 2023, the underlying assets may be performing perfectly well while the fee that depends on selling them does not arrive.

This matters for how the company is valued. At $1.4 billion, performance fees are close to 6% of revenue and a considerably larger share of the growth. An investor extrapolating the last two years is extrapolating a period in which BlackRock made two large private-markets acquisitions into a favourable environment.

The number to watch is the base fee rate on alternatives rather than the performance fee. Base fees are what survives a bad cycle, and they are the reason the acquisitions were worth making even if the carry never arrives on schedule.

References
  1. ReportedA revenue line that went from $554 million to $1,424 million in two years can go back
    BlackRock, Inc. Form 10-K, FY2025, MD&A — total revenue $24,216M against $20,407M in 2024; base fees and securities lending $19,179M against $16,100M, including securities lending revenue of $705M against $615M; performance fees $1,424M against $1,207M, of which private markets $695M against $308M and liquid alternatives $558M against $680M; technology services and subscription revenue $1,981M against $1,603M, an increase of $378M "reflecting the sustained demand for Aladdin technology offerings and approximately $210 million of revenue related to the Preqin Transaction"; distribution fees $1,355M; advisory and other revenue $277M; annual contract value growth of 31% including Preqin and 16% excluding it; employee compensation and benefits $8,446M — FY2025 · publ. February 2026 · source ↗
  2. ReportedThe liquid alternatives half already demonstrated it, falling from $680 million to $558 million in 2025 while everything else rose
    BlackRock, Inc. Form 10-K, FY2025, MD&A — total revenue $24,216M against $20,407M in 2024; base fees and securities lending $19,179M against $16,100M, including securities lending revenue of $705M against $615M; performance fees $1,424M against $1,207M, of which private markets $695M against $308M and liquid alternatives $558M against $680M; technology services and subscription revenue $1,981M against $1,603M, an increase of $378M "reflecting the sustained demand for Aladdin technology offerings and approximately $210 million of revenue related to the Preqin Transaction"; distribution fees $1,355M; advisory and other revenue $277M; annual contract value growth of 31% including Preqin and 16% excluding it; employee compensation and benefits $8,446M — FY2025 · publ. February 2026 · source ↗
Sources
Generated September 23, 2026