BlackRock, Inc. (BLK) Q4 2023 Earnings Call

BlackRock, Inc. (NYSE:BLK) Q4 2023 Earnings Conference Call January 12, 2023 7:30 AM ET

Company Participants

Laurence Fink - Chairman and Chief Executive Officer

Martin Small - Chief Financial Officer

Christopher Meade - General Counsel and Chief Legal Officer

Robert Kapito - President

Adebayo Ogunlesi - Global Infrastructure Partners, Founder and Chief Executive Officer

Conference Call Participants

Craig Siegenthaler - Bank of America

Michael Cyprys - Morgan Stanley

Michael Brown - KBW

Brian Bedell - Deutsche Bank

Brennan Hawken - UBS

Patrick Davitt - Autonomous Research

William Katz - TD Cowen

Operator

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 2023 Earnings Teleconference. Participants for today's call will include Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Martin S. Small; President, Robert S. Kapito; General Counsel, Christopher J. Meade and Global Infrastructure Partners, Founder and Chief Executive Officer, Adebayo Ogunlesi. [Operator Instructions]

Mr. Meade, you may begin your conference.

Christopher Meade

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 lists 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 Larry.

Laurence Fink

Thank you, Chris, and good morning to everybody, and Happy New Year. Thank you for joining us today to discuss BlackRock's fourth quarter and full year results. We're also very excited to announce our agreement to acquire Global Infrastructure Partners, and I'd like to welcome all our new partners from GIP and their Chairman and my friend and founder Bayo Ogunlesi is here with me, alongside with Rob and Martin, we're all here today to answer your questions after our prepared remarks.

Adebayo Ogunlesi

Thank you, Larry. My fellow founders and colleagues across GIP and I are very excited about the opportunity to join BlackRock. Our combination will drive even better opportunities for our clients. All of us at GIP sharing the vision of delivering better outcomes with clients and leading critical global investments that drive economic growth. Thank you.

Laurence Fink

Thank you, Bayo. This is another truly transformational moment for BlackRock. Our firm is what it is today because we've taken a long-term view on what market forces will drive outsized growth for our clients and for our firm. We're doing that again today, guiding us always by the needs of our clients.

Growing public deficits, a modernizing digital world, advancing energy independence and the energy transition are driving the mobilization of private capital to fund critical infrastructure. Infrastructure investment is a fast-growing market. In a higher rate environment, the ability to drive operational enhancements will be critical to investment performance.

Today, we are announcing two transformational changes in anticipation of the evolution we see ahead for the asset management industry and for the entire global capital markets. Our strategic re-architecture of our organization will simplify and improve how we work and deliver for our clients. And the acquisition of GIP will propel our leadership in a fast-growing market for a hard asset infrastructure. These transformations in total are the largest at BlackRock since we acquired BGI nearly 15 years ago.

The planned combination of BlackRock's infrastructure platform in GIP will provide clients access to market-leading investments and operating expertise across infrastructure, private markets. The integrated platform will deliver clients substantial scale as the second largest private markets infrastructure manager in the world with over $150 billion in client assets. In addition, GIP will bring dedicated investment in operational improvement teams with track records of delivering deep value enhancements, which have led to impressive returns throughout its existence.

With a strong common culture of serving clients with excellence together, we will deliver for our clients or holistic global infrastructure manager across equity, debt and solutions. We will provide the full range of infrastructure sector exposures and will offer unique originations across developed and the emerging markets.

BlackRock has developed a broad network of global corporate relationships through many years of long-term investments in both debt and equity. These long-term relationships will help us lead critical investments in infrastructure that will improve outcomes for communities around the globe and generate long-term investment benefits for our clients.

I know I speak for the entire BlackRock Board of Directors, BlackRock's leadership team and all of our employees when I say we could not be more excited about the prospects of a BlackRock family with our colleagues from GIP. We similarly look forward to welcoming our new clients and deepening our relationships with those clients who already worked with both of us.

BlackRock's industry leadership comes from delivering sustained performance innovating and staying ahead of the needs of our clients. Today, we announced several organizational changes to simplify and improve how we work and how we deliver for clients. In anticipation of the major calls we are making on the future of the capital markets and the entire asset management industry. The strong senior leaders taking on new and expanded roles will keep us more tightly connected, stimulate fresh thinking and help us better deliver for all our clients.

Let me now turn on to Martin to cover our 2023 results and take you through the specifics of the transaction, our quarter before I offer further context.

Martin Small

Thanks, Larry. Good morning, and happy New Year to everyone. Before I pass it back to Larry, I'll review our financial performance and business results. and provide more detail on the GIP transaction. We plan for a longer call today so that we have plenty of time for questions. While our earnings release discloses both GAAP and as-adjusted financial results, I'll be focusing primarily on our as-adjusted results. The last two years have been a character building an inspiring time for investors, for clients and certainly for us at BlackRock. The monetary policy shock of a rapid rate rising campaign upended 10 years of asset allocation practices and spurred repositioning of portfolios into cash and money market funds at the expense of risk assets.

At BlackRock, our business is to serve clients with excellence and help them design portfolios for the future. We built BlackRock to be a structural grower by having a platform of investment, technology and product capabilities that go beyond investment outcomes. They deliver client scale, they deliver clients' business efficiency. Whether clients are making wholesale portfolio allocation changes or just executing on tactical adjustments, they're doing it all within the BlackRock platform. We've spoken throughout the year about what conditions we'd expect to bring investors out of cash and into risk assets. It's generally unfolding as we described, with greater clarity on terminal rates in the fourth quarter we saw evidence of portfolio re-risking and we expect this trend to accelerate in 2024. BlackRock is a share winner when there’s an asset in motion and clients continue to consolidate more of their portfolios with us.

In 2023, BlackRock generated $289 billion of total net inflows and delivered 1% organic base fee growth. Importantly, we finished the year with significant momentum in the fourth quarter generating approximately $96 billion of total net inflows. In November and December, we saw surge in flows resulting in 6% annualized organic base fee growth for the last two full months of the year. Full year revenue of $17.9 billion was relatively flat year-over-year. Operating income of $6.6 billion declined 2% from 2022, while earnings per share of $37.77 increased by 7%.

For the fourth quarter, revenue of $4.6 billion was 7% higher year-over-year, driven by the impact of higher markets on average AUM and higher performance fees. Quarterly operating income of $1.7 billion was up 9%, while earnings per share of $9.66 was 8% higher versus a year ago, also reflecting higher non-operating income in the current quarter. Non-operating results for the quarter included $122 million of net investment income, driven primarily by mark-to-market gains in our private equity co-investment portfolios. Our as-adjusted tax rate for the fourth quarter was approximately 24%, driven in part by discrete items. We currently estimate that 25% is a reasonable projected tax run rate for 2024, though 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 $3.6 billion was up 6% year-over-year, driven by the positive impact of market beta on average AUM, 2% organic base fee growth and higher securities lending revenue. Sequentially, base fee and securities lending revenue was down 2%. On an equivalent day count basis, our annualized effective fee rate was approximately three-tenths of a basis point lower compared to the third quarter. This was primarily due to lower securities lending revenue, underperformance of non-U.S. equity markets and client preferences favoring lower fee fixed income and cash. As a result of accelerating organic growth and global equity and bond market appreciation toward the end of the quarter, we entered the first quarter with an estimated base fee run rate approximately 6% higher than our total base fees for the fourth quarter.

Fourth quarter and full year performance fees of $311 million and $554 million, respectively, increased from a year ago, reflecting higher revenue from liquid alternatives and long-only mandates. Quarterly technology services revenue increased 7% year-over-year, and full year revenue of $1.5 billion increased 9% and reflecting the successful on-boarding of new clients and large e-Front on-premises licenses renewals in the third quarter. Annual contract value, or ACV, increased 10% year-over-year as clients increasingly partnered with BlackRock for integrated technology solutions to drive business transformation and scale. We remain committed to low to mid-teens ACV growth over the long term.

Total expense increased 1% in 2023, reflecting higher compensation, G&A and direct fund expense. We effectively managed our discretionary spend in 2023 and we'll continue to be disciplined in focusing our resources in areas with the greatest opportunity. Our fourth quarter operating margin of 41.6% increased by 40 basis points year-on-year as we continue to drive operating leverage and profitable growth after the market shock of 2022. Our full year as-adjusted operating margin of 41.7% was down 110 basis points from a year ago. The decline primarily reflected the negative impact of markets and foreign exchange movements on our 2023 entry rate revenue as well as critical investments in our people and technology.

During the year, we reorganized two of our fastest-growing businesses, private markets in Aladdin to stay ahead of our clients' evolving needs and build on our past successes in these areas. These specific groups further simplified their structures, resulting in a fourth quarter restructuring charge of $61 million, comprised of severance and accelerated amortization of previously granted deferred compensation awards. This charge appears as a single line expense item on our 2023 GAAP income statement and has been excluded from our as-adjusted results to enhance comparison to prior periods. In addition, we made resourcing decisions to free up investment capacity for our most important growth initiatives. This resulted in a onetime compensation expense of $28 million in the fourth quarter, which is included in our as-adjusted results.

Overall, these two actions impacted approximately 3% of our workforce by taking a targeted and disciplined approach to how we shape our teams and evolve our skill sets to meet changing market and technology environments, we increased investment capacity, we enhance organizational expertise, and we create opportunities for operating leverage and career growth. Looking forward, we're prioritizing investments to propel our differentiated organic growth and operating leverage. We'll aim to align investment spend with our highest conviction structural growth areas, find additional ways to variabilize expenses and generate fixed cost scale through technology, automation and optimization of our footprint through our innovation hubs.

Excluding the impact of the GIP transaction at present, we'd expect our headcount to be broadly flat in 2024. Also excluding the impact of GIP and related transaction costs, we'd expect a low to mid-single-digit percentage increase in 2024 core G&A expense. Most core G&A growth should come from continued investment in technology as we look to operate more efficiently and better serve our clients. One of our biggest long-term advantages has been scale. Our ability to add significant assets managed with excellence without growing expenses linearly. Our platform strategy has delivered scale and operating leverage over time and we're committed to delivering a premium operating margin.

Our capital management strategy remains consistent. We invest first either to scale strategic growth initiatives or drive operational efficiency and then return excess cash to our shareholders through a combination of dividends and share repurchases. In 2023, we returned over $4.5 billion to our shareholders through a combination of dividends and share repurchases. Share repurchases have been a consistent element of our capital management strategy. Since 2013, we've repurchased close to $15 billion of BlackRock stock, which generated an unlevered compound annual return of 14% for our shareholders. Over this time period, we reduced our share count by nearly 23 million shares or 13%. For the trailing five years, we've lowered our share count by 10 million shares completing $7.8 billion of share repurchases at an average price of $563 for an IRR of over 15%.

BlackRock's Board of Directors declared a quarterly cash dividend of $5.10 per share, representing an increase of 2% over the 2023 level. At present, based on capital spending plans for the year, and subject to market conditions, including the relative valuation of our stock price, we're targeting the purchase of $1.5 billion of shares during 2024. Full year total net inflows of $289 billion were positive across active and index as well as regions, led by $156 billion of net inflows from clients in the United States, and we had 70 products across our ETF and mutual fund ranges with over $1 billion in net inflows. BlackRock generated industry-leading ETF net inflows of $186 billion in 2023, representing 6% organic asset growth led by $112 billion of net inflows into our bond ETFs.

Fourth quarter ETF net inflows of $88 billion reflected significant momentum into year-end helped by seasonal tax trades and portfolio reallocations. We saw $28 billion of net inflows into precision exposures as institutional clients use these highly liquid instruments to re-risk in the quarter. With Safe-Haven cash providing positive returns. Full year and fourth quarter retail net outflows of $8 billion and $9 billion, respectively, were primarily due to allocations out of rising rate sensitive strategies namely liquid alternatives and flexible bond funds. This was partially offset by strength in Aperio, which saw record net inflows of $12 billion in 2023.

Aperio AUM since acquisition has grown 95% to $80 billion. BlackRock's institutional business generated net inflows of $32 billion in 2023, led by active net inflows of $87 billion including the funding of several significant outsourcing mandates throughout the year. Index net outflows of $55 billion were driven by redemptions from our low fee equity strategies as several large clients adjusted their allocations or redeemed for cash needs.

Finally, BlackRock's cash management platform saw $33 billion of net inflows in the fourth quarter and $79 billion of net inflows in 2023. We're pleased with the continued strong growth in our cash and liquidity business with year-end AUM up 14% or over $90 billion year-on-year. We're leveraging our scale and integrated cash offerings to engage with clients who are using these products not only to manage liquidity, but also to earn attractive returns. Demand for private markets remain strong, with $14 billion of net inflows into BlackRock illiquid strategies during the year driven by infrastructure and private credit. We continue to expect these categories to be our primary growth drivers in the coming years.

Turning to our planned acquisition of GIP this is an exciting day for us, our new partners, our clients and our shareholders. The combination will mark a transformational change in our private market scale and growth. GIP is the world's leading independent infrastructure manager with current client AUM of over $100 billion and fee-based AUM of over $60 billion. The acquisition will create a highly complementary pro forma $150 billion infrastructure platform post-closing tripling BlackRock's infrastructure client assets. The integration will nearly double our private markets management fees to over $1.5 billion and add over $400 million in post-tax annual FRE with FRE margins above 50%.

Since its founding in 2006, GIP has successfully scaled its equity flagship series from its $5.6 billion Fund I to $20-plus billion in the most recent vintages. GIP's current team of approximately 400 employees across 11 global offices has delivered strong long-term performance for clients and is expected to generate approximately $760 million of management fee revenue in 2023.

Turning to the financial terms of the transaction, we are acquiring 100% of the business and assets of GIP for total consideration of $3 billion in cash and approximately 12 million shares of BlackRock stock. seven million shares will be paid at closing and five million shares to be paid in approximately five years, subject to certain performance measures. BlackRock will fund the cash consideration through $3 billion of additional debt which will not meaningfully change its leverage profile. Primarily through growth synergies from proprietary deal origination, larger transaction sizes, capital formation scale and multi-asset class infrastructure investment innovation we see opportunities to drive significant value creation for BlackRock shareholders.

The terms of this transaction ensure long-term continuity and strong alignment of interest among GIP and BlackRock to best serve clients employees and shareholders. A substantial majority of the consideration paid at closing and approximately 75% of nominal total transaction consideration will be paid in BlackRock common stock. GIP leadership will become meaningful shareholders of BlackRock with a shared ambition of driving One BlackRock outcomes for our clients and shareholders. 100% of carried interest and capital commitments from all existing GIP funds will continue to be owned by the GIP owners and employees. These are not economically included in the transaction perimeter and support long-term retention and incentives of GIP employees.

After closing, GIP's management team will lead our combined infrastructure platform, working with BlackRock's strong investment teams in equity debt and solutions. The GIP team will bring a talented group of investment and operational improvement professionals with a proven track record of building and running high-performing private markets businesses. Each of the GIP founders will become party to a shareholder's agreement that requires shares to be voted in accordance with the recommendation of BlackRock's independent Board at any meeting of BlackRock shareholders.

We've provided additional detail on the transaction structure and terms in a supplement posted to the BlackRock Investor Relations website this morning. We expect the transaction to be modestly accretive to as-adjusted EPS and operating margin in the first full year post close, which will exclude transaction-related costs. Given the structural growth trends of the private infrastructure market, and what we see as a best-in-class whole portfolio infrastructure investing capability, we believe the transaction will be accretive to long-term organic asset and base fee growth. These abilities can be a key source of earnings diversification and growth acceleration to meet or exceed our through-the-cycle 5% or better organic growth ambitions.

Building on strong structural growth trends over this past year, and the over $1.9 trillion of organic asset growth over the last five years, we're investing to deliver the industry's only comprehensive platform across public markets, private markets and investment technology. Having delivered differentiated organic growth and operating margin across the weakest markets in decades, we believe markets are trending to be strong for 2024 with a more risk on tone. BlackRock's a share winner when assets are in motion.

We see the pent-up demand behind over $1 trillion in money market fund flows this year poised to deliver significant opportunities across risk assets. Our combination with GIP will put BlackRock in the leadership position to drive great outcomes for clients and deliver new engines of earnings growth for our shareholders. We've built an industry leader in structural growers like ETFs, model portfolios, outsourcing and investment technology with Aladdin. We're building a private markets leader at new levels of scale and we see the best opportunities we've had in years to get closer with clients and raise significant private capital. We enter 2024 in a stronger position than ever, and all of us at BlackRock are excited about the opportunities ahead for our clients, the firm and our shareholders.

With that, I'll turn it back to Larry.

Laurence Fink

Thank you, Martin. We'll leave plenty of time for your questions later on, but I want to describe how we evaluated bringing our firms together with GIP. Why we think the timing is so opportune and how infrastructure private markets can be so beneficial to all our clients, employees and to you, our shareholders.

Infrastructure is a $1 trillion market forecasted to be one of the fastest-growing segments of private markets in the years ahead. A number of long-term structural trends support an acceleration in the infrastructure investments. These include increasingly growing global demand and upgrading digital infrastructure like fiber broadband, cell towers and data centers. Renewed investments to logistical hubs such as airports, railroads, shipping ports as supply chains are rewired, and a movement towards increased energy independence in many parts of the world, supported by de-carbonization infrastructure.

In the United States and around the world, there's a public need for greater investment in infrastructure. This growing needs creates significant investment opportunity for clients. The unprecedented need for new infrastructure, coupled with the record high government deficits means that private capital will be needed like never before. That supply-demand imbalance creates compelling investment opportunities for our clients. At the same time, corporates are looking to engage partners in new projects or partially de-risking the existing ones. These dynamics offer clients, especially those investing for retirement the high coupon inflation-protected long duration investments they need, and we believe it will define the future of asset management for the next 20 years.

Our acquisition philosophy has always been about growth, not about cost takeouts and or consolidations. Consistently, these combinations have resulted in reaching heights that neither BlackRock nor a merged partners could ever reach on their own. I truly believe that this will be the case again with the integration of BlackRock infrastructure and GIP. Transformational transactions have strengthened our firm, have strengthened our culture and bringing top talent, new skills and experience into our organization. Our culture has evolved as we welcome new teams and colleagues to BlackRock.

Today, it represents a blending of the best parts of the cultures that have come together over the years. What's made our acquisition so successful was our steadfast commitment to One BlackRock culture totally connecting to our clients with one platform, shared goals, a common Aladdin technology. And as a result, BlackRock is greater than the sum of any one part, and then that drives BlackRock's differentiating growth model. Reaching this moment is quite personal and emotional for me. Our firm's BlackRock and GIP have similar origin stories. We founded BlackRock on understanding investment risks and the factors and forces driving returns initially in fixed income and then across the equity markets and then globally.

We wanted to help long-term investors better manage their risk in their portfolios in a scaled way through technology. That is what drove our early investments in Aladdin and all the investments we made since to enhance our understanding of risk factors to deliver superior outcomes for our clients. GIP started with a similar focus in the infrastructure space. Understanding operational risks and the factors and forces driving business efficiencies like BlackRock's focused on understanding risk and fixed income GIP built an active approach to analyzing and addressing operational risk.

My partners and I had the privilege of pioneering the mortgage-backed securities market. Bayo and his GIP partners, in my opinion, pioneered modern infrastructure investing in private markets. And many of the BlackRock and GIP founders grew up in the same firms early in their careers, where we created common routes from shared experiences, most of them good, sometimes bad, and close flight relationships. The integration of BlackRock's existing infrastructure platform with GIP will result in a market-leading comprehensive infrastructure business with truly differentiated origination and asset management capabilities. GIP will be highly complementary and has limited overlap by client and investment programs for BlackRock's existing leading franchises. These include diversified infrastructure, Infradebt, Infra solutions, climate infrastructure and decarbonization partners.

BlackRock has invested originally and has invested organically and inorganically growing our infrastructure platform, which has $50 billion in AUM, having tripled since our acquisition of First Reserve in 2017. BlackRock has already demonstrated our access to some of the largest pools of capital in the world. We're winning deals like ADNOC pipeline transaction and being chosen to partner with sovereign wealth funds and governments on significant climate infrastructure strategy. We have the sourcing capabilities, but greater AUM scale will enable us to have more sizable positions. The planned combination of GIP with BlackRock will accelerate investment scale enabling us to grow faster.

BlackRock's deep relationships with clients, corporates, governments and sovereign wealth funds can accelerate investment opportunities. GIP's own lending proprietary deal flow -- leading proprietary deal flow has been supported by investment sizes, relationships and strong track record including a long history of successful JVs with large industrial partners. GIP's deals span the world and sectors. Their investments include Gatwick Airport, Edinburgh Airport and Sydney Airport. And Cypress One Data Center in the Port of Melbourne and several other major renewable platforms.

Through the future combination of BlackRock and GIP will be able to connect our clients with bigger and better opportunities while also accelerating growth, diversifying revenues and generating earnings for our shareholders. Like Rob and I, Bayo and his partners are all founders. We're excited about the opportunity to have new partners and new colleagues. I'm proud that the consideration of this transaction consists of approximately 75% of BlackRock stock. GIP founders will become among the largest shareholders of BlackRock, and we plan to have Bayo join our Board of Directors post closing of our transaction.

There is no question spiritually or financially about whether we are long-term partners. We have the same interest as significant shareholders alongside our broader shareholder base. Our One BlackRock culture has been central to our success over the last 35 years and cultural alignment has been core throughout our history of successful M&A. Here are founding to today, our firm is purpose-driven, focused on clients, focus on risk management and powered by data and technology, bringing our two businesses together result in an influx of top senior private market talent to BlackRock.

GIP founders will lead our combined infrastructure platform with teams of talented investors and business builders. They bring with them a strong investment and performance culture and a commitment to working across One BlackRock. I'm confident we'll be looking back on today as another transformational moment in the BlackRock history. In a similar way, when we could look back at our acquisition of BGI, Merrill Lynch Investment Management and our early days building Aladdin. Our ability to adapt and to evolve and to grow has generated a total return of 9,000% for our shareholders since our IPO in 1999. That is well in excess of our S&P return of 490% and representative of a business model serving all our stakeholders. I truly believe we're better positioned than ever before in our history, and I'm very optimistic on the coming years ahead and the opportunities ahead for all of us.

BlackRock was built on optimism. When we founded BlackRock, we knew clients would be at the center of everything we do. We had a deep conviction in the long-term growth and the importance of the capital markets in principle and practice, those beliefs remain core to BlackRock today. We are more connected to our clients as ever, thousands of clients on behalf of millions of individuals around the world have entrusted BlackRock with $1.9 trillion of net new business over the last five years. Thousands more use our technology to support the growth and commercial agility of their own business, years of organic growth alongside a long-term growth of the capital markets underpins our $10 trillion of client assets, which grew in 2023 by over $1.4 trillion.

In good times and bad times, whether investors are adding or reducing risk, our consistent industry-leading organic growth demonstrates that clients are consolidating more of their portfolios with BlackRock. In 2023, our clients awarded us with $289 billion of net new assets during this period of rapid change and significant portfolio de-risking. BlackRock's differentiated business model has enabled us to continue to grow with our clients and maintain positive organic base fee growth. We've grown regardless of the market backdrop and even if most of the industry has experienced outflows.

I think back to 2016 and 2018 when uncertainty and cautious sentiment impacted investment behaviors among institutional and individuals. Many clients de-risked and move to cash. BlackRock stayed connected with our clients. We stayed rigorous in driving investment performance, innovating new products, technologies and providing advice on portfolio design. Once clients were ready to move more actively step back in to stepping back into the markets, they did it with BlackRock, leading to new record flows for client flows and organic base growth at or above our targets.

As we've seen before, when investors were ready to put money back to work, they did it with BlackRock. Flows and organic base fee growth accelerated at the end of the year. We generated $96 billion of total net inflows in the fourth quarter, and we entered 2024 with great momentum. I spent much of 2023 on the road, meeting with clients around the world, and I plan to do the same thing in 2024 starting this month. Our partnership approach and the performance we deliver is resonating both in markets where we have a long-standing presence and those where our profile is just beginning and strengthening.

Companies and clients increasingly want to work with BlackRock. For companies where we are investors, they appreciate that we are a long-term consistent capital. We invest early and stay invested through cycles, whether it's debt or equity, pre-IPO or post IPO. Companies recognize the uniqueness of our global relationships, our brand and our expertise across businesses, markets and industries. This makes us a very valuable partner and in turn it enables us to be involved in their sourcing and in performance that we provide for our clients. For example, in November, our diversified infrastructure franchise invested $550 million in Stratos, a commercially scaled direct air capture facility in Texas which is expected to be the largest in the world upon completion.

Through our funds joint venture partner, Occidental Petroleum, we are providing our clients with investment access to a bespoke energy infrastructure project. This is just a latest example of our sourcing and execution on numerous distinctive deals for clients over the last 18 months. In the United States, we partnered with AT&T and GigaPower JV and invested in Jupiter Power. Beyond the U.S., examples include such investments of Brazeau in Brazil, First Air in South Korea, Acacia Energy in Australia, like Takata Wind Farm in Kenya, just to name a few. Last month, we announced an innovative partnership with Altera that we will see a $2 billion investment in the climate opportunities across BlackRock's private debt and infrastructure equity strategies. This is one of our largest ever private markets mandates. It adds on to our very strong track record investing in the transition, including in emerging markets and extend our over $100 billion transition investment platform.

BlackRock's global network of relationships, data, analytics and flexible, adaptable capital means we could source unique deals for our clients and mobilize assets and accelerate innovation and economic growth. Our active investment insights, our expertise, our strong investment performance, similarly differentiating BlackRock to the markets. We saw nearly $60 billion of active net inflows in 2023 compared to an industry outflows. Across our active franchise, BlackRock has delivered durable investment performance with 87% and 92% of fundamental equity and taxable fixed income AUM above benchmarks or peer medium for the past 5-year period.

In ETF, BlackRock generated an industry-leading $186 billion of net inflows for 2023. Our long-term leadership of the ETF industry is another testament to our global platform and our deep connectivity with our clients. BlackRock is the most scaled, diversified ETF provider in the U.S. and globally. We are bringing the ETF benefits of liquidity, of price discovery and market efficiencies and access to investors around the world. Nearly half of the 2023 iShares net inflows were from ETFs listed internationally in local markets, led by our European iShares net inflows of $70 billion. BlackRock has the #1 share of the European ETF market where industry flows were up 70% in 2023. Catalyst trends that we saw in the U.S. years ago, like the growth of the fee-based advisory and model controllers are just beginning to take root in Europe.

BlackRock takes a client-first approach to product innovation, and we continue to develop products that are suited for the new investment regime. For example, we launched 19 active ETFs in 2023, leveraging the benefits of the ETF structure to help clients reach the outcomes they seek. Some of these strategies provide access to the insights of our active portfolio managers such as Reader and Tony DeSpirito, other use an option strategy to generate income or provide greater downside protection, such as our buy right and buffer ETFs.

And in the fourth quarter, we launched a series of LightPath Target Date ETF to provide an easier way to save for retirement, especially for the many Americans who lack access to a workplace retirement plan. Just yesterday, the iShares Bitcoin ETF began trading in another landmark moment that advances ETF innovation and expand access to Bitcoin for investors. We will continue to provide more convenient and cost-effective investment access across asset classes through innovation, through risk management and technology.

Aladdin is the operating system united all of BlackRock and its fundamental and foundational to how we serve our clients across our platform. It is the key technology that powers BlackRock and it also powers many of our clients. The need for integrated data, integrated risk analytics and the whole portfolio views across public and private markets is driving the ACV growth of Aladdin. In 2023, we generated $1.5 billion in technology service revenues. Clients are looking to grow and expand with Aladdin, reflecting in strong harvesting activities with over 50% of the Aladdin sales being multiproduct.

Through its dynamic ecosystem of over 130,000 users, the Aladdin platform is constantly in the state of innovation. Investments in Aladdin AI copilots, enhancements and openness supporting ecosystem partnerships and advancing whole portfolio solutions, including private markets and digital assets are going to further augment the value of Aladdin for our clients. We led our industry by both being an agent for and adapting to change. Our best years have followed tough years. And just as we continue to innovate and evolve our business to stay ahead of our clients, we are also evolving our organization and evolving our leadership team.

As Martin mentioned, we undertook restructuring efforts that were designed to ensure we are aligning resources to our greatest growth opportunities and client needs. As part of this, a number of valued clients, valued colleagues and friends to part of the firm. We truly appreciate the contributions that they made to BlackRock and wish all of them well. We are continuing to anticipate with clients' needs and shaping BlackRock so they could be getting our insights, our solutions and the outcomes that they expect from us.

As we look ahead, the rerisking of client portfolios will create tremendous prospects for both our public and private market franchises. These are the times where investors are making wholesale changes to the way they build portfolios, and BlackRock is leading the way in helping investors build the portfolio of the future, one that integrates public markets and private markets, and it's digitally enabled. We view that these changes are a big catalyst for BlackRock, we set ourselves up to be a structural grower in the years ahead with the diversified platform we built. And the need for integration data, technology and risk management will continue to drive demand for Aladdin.

BlackRock was founded on the belief in the long-term growth of the capital markets. Our success has been shaped by a number of those calls and how we would evolve. Our client needs have always been our compass as we listen to them today, we have our eyes on themes we believe that will define the next decade of asset management. The continuum of blurring the lines across product structure, the unprecedented need for new infrastructure driving inflation protected current cash flow long-duration returns, the accelerating capital markets and asset management industry around the world.

We are positioning ourselves ahead of these transformations by making three major changes in how we work and how we deliver for each and one of our clients. First, we're creating a new strategic global product and solution business that will work across all their investment strategies, asset classes, fund structures while enabling our ETF and index business across the firm. We have always viewed ETFs as a technology that facilitates investing and just as Aladdin technologies has become core to asset management, so has have ETFs. That's why we believe embedding our ETFs and index businesses across the entire firm, and that will accelerate further growth of iShares and every investment strategy within BlackRock.

We are looking to the future, and we believe that ETF revolution that iShares lead will only continue to accelerate as BlackRock turns -- as our clients turn at BlackRock for ETFs as a preferred vehicle for investing in strategic and strategies of all types. If you can make an ETF or a Bitcoin, my Gosh, you can make an ETF or anything. Second, we are creating a new international business structure to provide a unified leadership to allow us to be simultaneously more global, but much deeper local in a fast-growing international markets. BlackRock has been a central player in the growth of the global capital markets, and this is including the developing of retirement solutions in every market around the world and bringing the benefits of ETFs to every market to assist them in growing their markets. And third, we are realigning our private markets business to further leverage the potential of GIP and to meet the growing needs of our clients for infrastructure and other private market investments.

All of us at BlackRock have a lot of hard work and a lot of exciting work ahead of us. We have a track record of quick, intense and successful integrations. We'll be more naval and aligned with clients through our new architecture and with the aim to be delivering better experiences, better performance, better outcomes for all of our clients worldwide. I see excitement and incredible amount of energy in our offices. While there's a lot of hard work to come, there really is a bright future for all of us ahead of us. Over the past few months, we've seen decidingly more positive sentiment and tone in markets and among clients that are very optimistic will carry into 2024. And once again, we look forward to beginning this next BlackRock chapter with our new partners and colleagues at GIP.

We entered 2024 with $10 trillion of our client money, we entered the year with strong growth momentum, and we entered 2024 as an organization positioned in the future for growth and prosperity. At BlackRock, we are energized by a never done attitude. And today, I really feel that we're just getting started. I see greater opportunity for BlackRock I see greater opportunity for our clients, and I see great opportunities for our shareholders today, tomorrow and stronger than ever before.

Let me open it up for questions. As I mentioned, Bayo will also participate in the Q&A. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first question comes from Craig Siegenthaler from Bank of America.

Laurence Fink

Good morning, Craig. Happy New Year.

Craig Siegenthaler

I hope everyone is doing well, and congrats on the deal.

Laurence Fink

Thank you.

Craig Siegenthaler

My question is actually on the GIP deal. So this is a high-quality business, strong track record. It's big enough to go public, stay independent, but they chose BlackRock, and they decided to take stock. So I imagine gross synergies were a driver. So my question is really on the strategic rationale. How can BlackRock's global distribution platform accelerate their growth? And do you see specific client segments, and I'm thinking private wealth, where you see low-hanging fruit?

Laurence Fink

Great question. I think it will be answered by me and Bayo. So let me once again go over the strategic rationale. As I said in my prepared speeches, and I think Bayo would echo everything I'm going to be saying. We're just beginning, I would say, a very bright investment horizon for infrastructure. And as I said, deficits matter. More and more governments are going to have more difficulties to do deficit financing. And in turn, more and more governments are even focusing on doing more public, private. I think GIP's success in the U.K. and Australia are very good examples of working with governments in terms of helping them sell assets. But at the same time, using the private sector to improve the quality of services and GIP has been a leader in that.

I believe that a lot of capital that it could be needed as we digitize everything, the need for upgrading our electrical power grids worldwide is a must. The capital associated with that is going to be enormous. In my travels around the world, more governmental leaders are talking about the need for energy independence. And they look -- if they have some form of energy, they're going to be trying to be doing more of that, but more importantly or just as importantly, the amount of capital they need to provide -- to develop more decarbonizing investments in wind and solar, to provide broader energy for their growth in their economies is very important. If we are going to decarbonize the world, the amount of capital and infrastructure is going to be very necessary. If we are going to be more and more reliant on interconnectivity worldwide, the need for the upgrading of ports is vital.

As more and more human beings grow into a middle-class lifestyle, the demand for air travel grows dramatically, the need for high-quality airports grows dramatically. And so that's just one segment. And then when you think about corporations. Corporations historically disposed of divisions to private equity. We see more corporations instead of disposing divisions, selling portions of those divisions maybe keeping a major part of that, selling parts of their infrastructure or partnering with companies in their infrastructure, like the deal we did with Occidental Petroleum for Air Capture, the transaction BlackRock did with AT&T on 5G build-out across the United States. These are just a few examples, pipelines in the Gulf region. And so the industrial logic is pretty large in our opinion, that the next 10 years is going to be greatly about the expansion of the global capital markets and infrastructure.

And so we believe the demand for capital in infrastructure will only to grow larger than larger. And as I said a few times in my prepared remarks. Having a long duration, high coupon inflation-protected asset is a very strong asset class for all of retirement funds. But importantly, as you mentioned wealth, we believe a great opportunity to providing to the wealth management products, these types of products so they can enjoy these type of long-duration assets. They're going to throw off these above what I would say, public market returns. And so I believe across the board, sovereign funds, both retirements, both in the defined contribution space and the defined benefit space, across the board, these are the preferred instruments.

In my calls with clients today, I can tell you more and more sovereign wealth funds, see infrastructure as a major growth area in their asset allocation. I'm going to let Bayo talk about BlackRock and us. I would only just say at Black -- from the BlackRock side, we only had one target. We only had one organization where we believe in their business model. It was only one organization where we believe we had such complementary skill sets. And then most importantly, it's a team of leaders under Bayo that we believed in. And we believe that will create real opportunities for BlackRock, and I'm pleased that Bayo will be joining the BlackRock board post closing. And importantly, we look forward to having the intellectual capital that GIP is bringing alongside our superb team and infrastructure.

Adebayo Ogunlesi

What I'll add to that is I think Larry is exactly right. We are about leading the golden age of infrastructure investment. And so the question for us at GIP was always how do we accelerate what we do. We're going to keep trying to do what we are doing by ourselves, but we thought that looking at it from both point of view, from the point of view of infrastructure investing, Larry is right.

We have tremendous tailwinds that are going to drive the demand for private capital infrastructure investing. On our client side, the pension funds are sovereign well funds the asset managers, infrastructure is what they want to invest in. They like the fact that infrastructure has very high yields, the average yield on our mature funds over the last 15 years annually is 8%, okay? That's in a world of zero interest rates. We generated 8% yield. They like the fact that these assets are uncorrelated to other asset classes.

Think about what's going on today. Infrastructure assets are doing very well. We have 19 companies in our flagship funds, 12 of them had double-digit asset EBITDA growth last year, five of them, single-digit EBITDA growth. The only one that didn't was because it sold assets. Compare that to the other real asset class, commercial real estate, okay? So investors love the fact that these asset classes are not correlated. They like the fact there's a lot of downside protection, right? Because they provide essential services, okay? And so these are all sort of congruence that we thought how do we accelerate what we're doing. And the marriage with BlackRock is a marriage made in heaven. Rob Kapito said this is a deal where one plus one equals four. I'm not sure whether it's three or four, but I know Rob is directionally correct, okay? When we look at the two businesses, they're very complementary.

BlackRock has built a terrific infrastructure business. They've tripled the size of it over the last years that they've owned it. But they make mid-market or mid-cup investments. We make large cup investments. We have a terrific infrastructure debt business. It's mostly investment grade, ours is mostly below investment grade. We have capital solutions business that we don't have. So if you put these two businesses together, we can go to clients, large cap clients, mid-cap clients, offer them a complete array of solutions. You want investment-grade debt, we've got. You want high method investment grade debt, we've got it, okay? And so we think this will allow us to accelerate the rate at which we can provide investment opportunities for our clients. And look, it's always nice to think you're right. The proof of the pudding is what people say when you call them.

And as Larry mentioned, he and I have been on the phone with our clients. And this is what they've said. This is a fantastic transaction. One, for us as clients two, for BlackRock and three for GIP. Now I wish I have known that put BlackRock ahead of GIP because then going to ask for a higher price, but it's all worked out very well. And I think the other thing people should recall is -- and I hope Martin and Larry don't mind me saying this. We are taking 75% of the consideration in stock. The initial offer from BlackRock was actually a low model stuff, okay? We like the fact that BlackRock thinks their stock is undervalued. And the fact that we are taking 75% in BlackRock stock tells us we also think it's undervalue.

And the final thing I'd say is we actually looked at -- Larry talked about how the call will be very different. I think that's absolutely true. But we've also looked at what BlackRock has actually done when it has acquired businesses. Interesting congruent, iShares or BGI, three trillion assets when they bought it today, 10 billion. Okay. So now it's 3.5 okay. Okay. So that's actually a little bit scary. Infrastructure, they triple the sites. So it's clear to me the supplemental message is we have to at least double the size of our infrastructure portfolio going forward. I hope that answers your question.

Operator

Go next to Michael Cyprus with Morgan Stanley.

Michael Cyprys

Hey, good morning. Happy New Year. Congratulations on the transaction. Just curious what are the plans for integration. If you could talk about that a bit? And any particular lessons that you take away from other private market transactions, acquisitions that we've seen across the industry as you think about driving success here?

Martin Small

Thanks, Mike. Happy New Year. We have a really strong track record of successful integrations at BlackRock. And we believe this transaction will prove to be another success. I think Larry and Bayo spoke very much about the common cultures, the shared vision, the opportunities, the growth with clients. We know that GIP shares the same laser focus on clients and values that we do rigorous investment process in us and the structuring of the transaction was also done to reduce strain on teams and help facilitate the transition into new leadership in a more diversified platform. Some of the organizational changes that we also announced today are going to help us be more nimble and aligned with our clients.

We've reorganized businesses for the future with the aim of delivering better experience performance and outcomes for clients. The thing I'd add is Larry talked about in his prepared remarks, our integrated operating platform, track record and integrations. We have built our private markets business with substantial inorganic activity going back all the way to the early 2000s and we built a lot of the existing infrastructure business that we have today, also through inorganic transactions that have been successfully integrated. So we've been doing this for 10 years in the infrastructure space and look forward to accelerating it with Bayo and his partners and the entire GIP team who have substantial experience in business building and alternatives.

And the last thing I'll say just about integration is I think in many ways, this is a less complex integration in that these are highly complementary platforms that Bayo just talked you through in terms of some of the differences in investing acumen and solutions on the equity side, on the debt side. And so in many ways, we have limited amounts of overlap, both in clients as well as in the characteristic of our investment solutions. In many ways, that makes the integration, I think, nimble and easier to position with clients and more agile for us to bring the platforms together.

Laurence Fink

Let me just add one thing. Bayo and I are going to be on the road a lot. And we are going to -- with the combined organization, we have an amazing story. And we are going to be telling everyone the story from the corporation sides to governments. I just got an e-mail from a big government and saying, okay, there are things we could do more. So that was a nice e-mail that I just received. But I do believe our key is making sure our clients and the investors that have invested in BlackRock and GIP that they understand the merits of the combination and that they think this is even better for them. And our job is to make sure that everybody sees it and we execute that way. But we are very excited about this, and I look forward to being on the road with Bayo.

Operator

We'll go next to Michael Brown with KBW.

Michael Brown

Maybe I'll just condition to the organic growth outlook here as we think about 2024. Obviously, there's been a lot of optimism around the acceleration of the fixed income flows and with what seems to be a more visible interest rate trajectory. So I had to hear about maybe some of your early conversations you're having with institutional clients regarding allocations and what they're -- and how you expect that to progress through 2024? And when you think about the fixed income inflows, where should we think about where that money will kind of shift from? Is it from the money market funds? Or is it kind of the ownership of direct securities moving into funds or from bank deposits? Just love some commentary on that.

Martin Small

Great, Mike, it's Martin. I'll start just on some of the organic growth outlook and then Rob will talk a little bit about your specific fixed income. In 2023, obviously, we delivered $289 billion of total net inflows and 1% organic base fee growth. We continue to have conviction here in our 5% base fee target over the long term. We've reached it on average over the last five years and met or exceeded it in six of the last 10. And importantly, I think the way our shareholders evaluate us, years marked by significant market volatility, 2016, 2018, '22, '23, we generated positive organic base fee growth. And these last two years, no doubt have been more challenged on base fee growth through tough markets, but we've continued to generate positive growth while the industry has seen decay. We don't aim, as you know, to be the fastest grower in any quarter or any year. We aim to deliver more consistent and durable organic growth through market and over the long term. I would note we saw excellent momentum to finish the fourth quarter.

As I mentioned in my remarks, in November and December, we generated an annualized 6% organic base fee growth rate, and that, to me, suggests that we can trend towards our 5% through the cycle target as rates stabilize and the market is more constructive. This is some of the best organic base fee growth momentum we've seen since 2021. I do want to flag two things. The first of which is I'd particularly flagged that iShares in Europe is really well positioned, and I think it's going to be a bigger part of the organic base fee growth story over time. European ETF industry flows are up 70% year-on-year. European iShares had almost 50% flow market share. And a lot of the long-term trends that propelled the U.S. industry to high growth rates are taking hold in Europe. So I think it's just the beginning. We also see this combination with GIP and the potential for higher management fee growth in illiquid alternatives as bolstering, diversifying our overall organic base fee growth trajectory.

So I'll give it to Rob on fixed income.

Robert Kapito

Yes. So I'll just add just two things, Mike. I wake up every morning salivating about the $7 trillion that's sitting in money market accounts that's waiting to move. And in order for it to move, you have to have a wide plate of products. That's what we have been developing in client solutions. A lot of this is going to come from money that's flowing into model portfolios, which we are the leader in. And a lot of it is going to come from digital wealth, which is a $17 billion global market. It's growing at 15% and ETFs are becoming the investors' preferred vehicle with access to investments. And then lastly, as we blend the active and passive business together, we're going to see a lot of active fixed income portfolios move into an ETF wrapper. We're the leader in ETF wrappers as well. So I think there's a huge, huge runway for fixed income and really the wind is right behind our back for that.

Operator

Your next question comes from Brian Bedell of Deutsche Bank.

Brian Bedell

Great. Thanks. Good morning. Happy New Year. Maybe just to ask about the infrastructure, another angle of this. Just your outlook for fundraising over the next one to two years, given your -- the products that you have and your thoughts around the growth in that $760 million of fee-related revenue. And maybe just the timing of it, I think you have -- you said it a successful fund of 2019, that was a $22 billion fund. So are you in the market now for a fund or will soon be and do you expect to exceed that? And then also just the -- in that retail channel, the desire to create democratized infrastructure products for retail investors that have some liquidity features?

Martin Small

Thanks. I'll start, and then I'm sure there'll be some additional color. First of all, clients continue very much to increase their allocations to illiquid alternatives in private markets. These are the client needs that drove our acquisition of eFront. They're the moves that bring us here today with GIP. And the moves that we've made organically and inorganically to build market-leading alternatives capabilities. At BlackRock, our alternatives client assets now total $330 billion, including liquid credit. Our private market to liquid alternatives have reached $166 billion in assets with about $140 billion in fee-paying AUM. And private credit, private equity solutions and infrastructure were the main drivers of Q4 and full year flows with $4 billion and about $14 billion, respectively.

Since 2021, we've had excellent momentum in our private markets fundraising. We've raised approximately $96 billion of gross capital across our platform, and we continue to see good momentum with clients. We're building on vintages and strong track records, so we can scale successor funds. We expect our primary growth drivers, as I said, over the next three to five years to be infrastructure and credit private equity solutions, where we've built great franchises. We continue to see terrific opportunities. Larry and Bayo have really talked about what some of these are.

But I do think BlackRock has a durable competitive advantage that's been built through our public markets, relationships with global corporates, our advisory work with sovereigns in the public sector around the world as well as our technology capabilities of the year and bringing together a lot of this public and private sector long-term objectives, officially moving capital to key drivers of industrial transformation. That's often when BlackRock at its best. So we're very optimistic and energized by our capital formation opportunities. particularly with our new partners at GIP. And I think as Larry and Bayo said, they're both going to be traveling a lot. So I'm looking forward to how those sessions, I think, will help us grow together. But importantly, I think really bring innovative solutions to corporates, through partnerships and unique public-private opportunities for us that will help grow our illiquid alternatives base and assets.

Laurence Fink

GIP is in the final stages of raising a very large fund, which because it's in the stages of raising the money that we cannot talk about it. So stand by. But it's in the late stages of fundraising.

Robert Kapito

The other thing is that we are very good at structuring product for the individual investor, the wealth investor, and I'm looking forward to working with Bayo's team to figure out how our teams can get together and democratize those investments because, as Larry mentioned before, this is such a perfect retirement product long duration, good yield, equity upside, it's going to open up new areas of growth that we have not tapped yet.

Operator

Next question comes from Brennan Hawken of UBS.

Brennan Hawken

Good morning. Thanks for taking my question. Happy New Year. So curious, a question on the deal here. is this a deal that you would consider transformational? Or is this more indicative of a desire to continue to add more all its capabilities going forward? And then one, just sort of a little bit more granular, the roughly $400 million in FRE is based on 2024 forecast from what I can understand. Can you give maybe an indication about where GIP's FRE was for 2023?

Martin Small

Thanks, Brennan, for the question. It's Martin. First of all, this is unassailably a transaction that we consider transformational. Most definitely, our clients feel its transformation. The volume of e-mails, I can see on Larry screen suggests to me that it's transformational. And it's what we've talked about is transformational transactions. It's transformational in terms of the capabilities that BlackRock has and can offer to clients and it's transformational in terms of the financial and earnings impact to the firm.

So those two axes are how we've always measured transformational in terms of our capabilities and in terms of the financial impact, and on both fronts, this is definitely a transformational transaction. GIP has generated really strong performance as well as FRE growth. I'm not going to comment on the 2023, it will let the 2024 speak for itself. But we continue to see great growth opportunities in terms of being able to expand fee paying AUM across the illiquid alternatives platform with the infrastructure as a priority as well as growing base fees in a way that adds to our 5% organic growth objective through the cycle.

Laurence Fink

Let me just add on some of our small and large transformational deals. Transformational deals could be as large as a BGI transaction. But if you remember, everyone, when we did that transaction, most people hated it. They did not see the merits, did not see the marriage of active and passive, did not think cultures can merge, did not understand ETFs as a technology. And as Bayo was saying earlier, what we bought BGI was under $300 billion in iShares assets, and now it's over $3.5 trillion. In the past 10 years, we acquired First Reserve when it had about $3 billion, and it's more than tripled its assets in a number of years in terms of infrastructure.

Just recently, we acquired Aperio and the assets are up 95% since we acquired Aperio. And then just as importantly, in technology buying EBITDA-Front, we made a statement that good portfolio analytics are going to become very important, not just public market analytics. And we are now the leading technology platform, both in privates and publics. And you dovetail all of this is it's all wrapped around our global view of where the global capital markets are doing. The technology needs for markets and the movement. And I do believe all of this is going to be playing out. As I said in my prepared remarks, I truly believe infrastructure and Bayo reconfirm that infrastructure is at the very beginnings as the great need of capital and because of the type of asset it is, the demand for this type of investment is really going to be strong. And we believe, and this is what our statement is, we believe the next 10 years is going to be a lot about infrastructure. And this will become more and more of a major component of the entire private markets ecosystem.

Operator

The next question comes from Patrick Davitt of Autonomous Research.

Patrick Davitt

Hi, good morning, everyone. Happy New Year. How's it going? You guys have been pushing this idea that the $7 trillion in money funds will start to rotate into risk assets for a while now. But the historical data we can see from past Fed cycle does not really show that, at least from what we can see. And it looks like last year's flows maybe came more from the bank deposits than risk positions. So what are you seeing maybe that we can't see that suggest this cycle will be different? And if rates really are higher for longer, can't both money funds and bonds win with $17 trillion still sitting in bank deposits?

Robert Kapito

Yes. So it's Rob here. So the answer is it's going to be dependent upon rates and alternative investments. So I think history shows when the cycle stops, that's when people first start to re-risk. We saw about $40 billion come out of money market funds to us as people re-risk and then there's market volatility and it stops. So I think we have to get to what people will feel is the end of the cycle in rates, and then people will look. The benefit for us is then when they re-risk, they usually come into more precision investments, which are higher fee type investments and yield really matters. So I think if you look at it, there's a blurring between the bank deposits and the money markets, all dependent upon rates. But once that cycle stops and it's been a start and stop over the last year, at least, especially in the fourth quarter, but that's how we look at it.

Operator

Your next will be our last question comes from Bill Katz from TD Cowen.

William Katz

Good morning, everybody. Thank you, Larry. Happy New Year to you and the team. Congrats on the transaction. Sorry, my phone cut out a little earlier today, the hazards of working from home. So I missed a little bit of the Q&A earlier on. Maybe for Martin, perhaps just a little technical question at this point. As you sort of model out the modest accretion as you look forward, I was just sort of wondering, how do the economics on the performance fees work? It looks like you're keeping about 40% of the incremental opportunity.

Wonder if you could just give us a sense of what kind of returns GIP has put up over time? And how does that flow down to performance fees? And then I would presume that as part of the guidance that this new fund that they're in the market for now that Larry is so intimate is going to be coming shortly would be part of the economics. And then when you say greater than the 50% FRE margin, can you sort of give us a little more sense on that? Can you [indiscernible] to back into the fee rate as well as the absolute margin?

Martin Small

Thanks, Bill. I'm sorry, your phone wasn't working. So it's great to hear from you. Happy New Year. So as we said, we expect the transaction to be modestly accretive to EPS and operating margin in the first full year post close. We expect it to be accretive to long-term organic asset and base fee growth over time. We are adding -- we expect to be adding pro forma $400 million plus of post-tax margin accretive FRE as a result of the transaction. The transaction is structured so that we're crying 100% of the assets and business of GIP. So all of the future management base fees will be within the transaction perimeter. And that's where we derive our estimates for the 2024 and beyond FRE growth in the business.

In terms of thinking about the fee rates, the fee rates are relatively comparable overall to the BlackRock illiquid alternatives, but think north of 100 basis points in terms of how you're modeling that out. As you noted in the deck that we posted to the Investor Relations website, the transaction is that GIP owners and employees are keeping 100% of the carried interest for existing GIP funds and future funds will be 60% to the GIP teams and 40% to BlackRock. I'm not going to talk about fundraising or future funds, but we would expect those performance fees to come on in later years, not in the near term, given the trajectory for how vintages come on. And we'd expect improvement in the fee-related earnings growth over the next two years.

Operator

Ladies and gentlemen, we have reached the allotted time for questions. Mr. Fink, do you have any closing remarks?

Laurence Fink

Thank you, operator. I want to thank everybody for joining our -- joining us this morning and for your interest in BlackRock. Our fourth quarter and full year performance is a direct result of our steadfast commitment to serving clients and evolving for our long-term needs of our clients. Our acquisition of GIP and the organizational changes will be transformational and accelerating our growth ambitions and delivering value for our clients and for our shareholders.

Hopefully, everyone could hear that we are incredibly excited about the opportunities ahead of us. the opportunity of having partners like Bayo and his team, and we believe we have never been in a stronger position to grow with the global capital markets and to grow and being a very large client serving firm and helping our clients meet their future needs. Everyone, have a very good quarter and try to enjoy it as much as possible. Thank you.

Operator

This concludes today's teleconference. You may now disconnect.