NEW YORK (Reuters) – BlackRock Inc (BLK.N), the world’s largest asset manager, took in less cash last quarter as investors moved into lower-cost bond funds, and it made less money lending out stocks.

The BlackRock logo is seen at the BlackRock Japan headquarters in Tokyo, Japan, October 20, 2016. REUTERS/Toru Hanai

The company, manager of $6.8 trillion in assets, missed analysts’ estimates for quarterly sales and profits on Friday, despite attracting $151 billion in new money, as much of that cash moved into lower-fee fixed income funds and accounts used to store cash.

The company’s revenue for the three months through June 30 fell 2.2% to $3.52 billion from a year earlier, affected also by some fee cuts the company has made and lower fees for attaining performance targets.

“While lower fee rates is a headwind that will likely continue, we believe BlackRock is happy to accept modest pricing declines in order to take large amounts of market share,” said Kyle Sanders, analyst at Edward Jones, which maintains its buy rating on BlackRock shares.

Lower demand to borrow stocks also hurt fees. The borrowers are typically hedge funds that want to “short” those shares, selling the stocks and hoping to buy them back later at a lower cost.

“I can’t control that; that’s more environmental,” said BlackRock Chief Executive Larry Fink in an interview.

Shortseller Andrew Left of Citron Capital said in a recent investment letter that, because of the market rally, “it has been an extraordinarily challenging environment to be a short seller.” The benchmark S&P 500 overcame an escalation in the U.S.-China trade fight to close the first six months of this year up 17%, the best first-half performance for the index since 1997.

Investors did pour more money into BlackRock’s actively managed funds aimed at beating the market over the low-fee passive-investment products. The company also reported 20% growth in its business unit that licenses software and other technology to other financial companies.

“The trend going into the second half is very positive,” Fink said. “Things we can control … were exceptional. It was probably one of our finest quarters in years of flows, in terms of engagement, and more importantly, when I talk about BlackRock, no organization has a combination of passive, active and technology.”

Meanwhile, BlackRock said its iShares-branded ETFs took in $36.10 billion of new money, up from $30.69 billion in the preceding quarter.

Net income attributable to New York-based BlackRock fell to $1 billion, or $6.41 per share, from $1.07 billion, or $6.62 per share, a year earlier. The company cited expenses related to recent acquisitions and a higher effective tax rate. Total expenses rose nearly 4% to $2.25 billion. (

Analysts had expected a profit of $6.50 per share, according to IBES data from Refinitiv.

Shares of the company were up slightly in early trading.

Reporting by Trevor Hunnicutt in New York, C Nivedita and Bharath Manjesh in Bengaluru; Editing by Jennifer Ablan and Steve Orlofsky

Our Standards:The Thomson Reuters Trust Principles.

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