NEW YORK (Reuters) - BlackRock Inc BLK.N, the world's biggest asset manager, reported smaller demand for its funds on Monday as investors fled risk, overshadowing a better-than-expected quarterly profit, and its shares dipped.

FILE PHOTO: The BlackRock logo is seen outside of its offices in New York City, NY, U.S., October 17, 2016. REUTERS/Brendan McDermid/File Photo

The company wrestled with difficult market trends during the quarter, including an industrywide slowdown in the demand for its hottest product, exchange-traded funds (ETFs) that track markets.

BlackRock’s iShares-branded ETFs took in $17.8 billion during the quarter, down from $34.6 billion in the first quarter. The company also cut fees on some ETFs to increase its market share.

“Broadly, we’ve seen a weakness in flows this past quarter driven by investor de-risking and less investor risk appetite in the marketplace,” said Morgan Stanley analyst Michael Cyprys.

Cyprys said the company’s growth is “going to have ups and downs, and this is one of the downs,” but added that investors “have an opportunity to buy in on the weakness.”

BlackRock stock traded down as much as 1.8 percent before rebounding to trade down 0.2 percent.

Yet even with the slower-than-usual growth in demand for the funds, which are relatively cheap to manage as they gain in size, revenue rose more than 10 percent to $2.9 billion.

Net income attributable to the company rose to $1.07 billion in the second quarter, up more than 25 percent, as weaker, yet still positive, demand for index funds helped plump up margins and the company settled into a lower tax rate.

Operating income, a measure of profits after some expenses including employee pay, rose 16.4 percent to $1.4 billion in the quarter from the same period in 2017.

The company’s effective tax rate was 24 percent, down from more than 30 percent in the year-ago period, before a major U.S. tax cut was passed.

“The most important thing we’ve been proving is the strength of our diversified business model,” which includes not just funds but also, increasingly, technology services, said Chief Executive Larry Fink in an interview.

BlackRock earned $6.62 per share, compared with $5.20 a year earlier. Excluding items, it earned $6.66 per share, while analysts expected $6.55, according to Thomson Reuters I/B/E/S.

Strong earnings growth, particularly in the United States, was clouded during the quarter by rising tensions between America and its trading partners. Fink warned that it is unclear “where we’re going with trade,” adding that “you saw a lot of international investors pull out of the market because they’re questioning what does this all mean in regard to trade and globalization.”

Fink also told Bloomberg Television that markets could fall 10 to 15 percent if tariff wars become full-blown.

BlackRock ended the quarter with $6.29 trillion in assets under management, down from $6.32 trillion in the preceding quarter.

Investors pulled $22 billion from the company’s stock funds and deposited $26 billion into its fixed-income products, according to the earnings release. Overall flows, excluding funds where investors park cash temporarily, were $14.50 billion, the lowest since the second quarter of 2016.