BlackRock’s (BLK) iShares performance has been a good news/bad news story in 2012. The good news is that it grew its iShares AUM by 8.75% YTD ($50 billion), including $23.5 billion in net client fund funds. However, the bad news is that BlackRock’s iShares Q2 AUM declined by over $24 billion vs. Q1 2012 levels and that net fund flows were only $6.2 billion in the quarter. The worse news is that although iShares still has 41% ETF market share, its market share declined by 1.4% and Vanguard’s gained 1.7% in the first half of 2012. At least BlackRock’s iShares’s 41% market share is still more than double Vanguard’s 18% market share. BlackRock’s recent iShares fee reduction announcement will help it arrest its market share decline.

Despite the fact that BlackRock has performed better than its competition during the first half of 2012, we are disappointed that it has not been able to replicate the spectacular record of growth it achieved from its 1999 IPO to 2009, when it closed its $13.5 billion acquisition of Barclays Global Investors from Barclays PLC (BCS).

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