BlackRock (NYSE:BLK) has been on a tear recently. Its stock currently tips the scales at over $220 a share, a level the company's only exceeded a precious few times so far this century. Will that number go even higher when the company reports its 4Q and full-year 2012 results later this week? That greatly depends on one big factor, namely...

Exchange-traded fund fees
Such a run-up in share price isn't typical for asset management companies, as for the most part, they're a fairly unloved -- albeit lucrative -- asset class. Especially since the depths of the financial crisis, from which some of the publicly traded financials active in the segment, like State Street (NYSE:STT), UBS (NYSE:UBS), and Legg Mason (NYSE:LM), are still underwater from their early 2008 stock prices.

BLK Chart

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What's made the difference lately with BlackRock is the sharply increasing popularity of exchange-traded funds; the company just so happens to be the world's top manager of such investments through its big iShares family. Last year, new flows for exchange traded products worldwide hit a record level, totaling $263 billion.

BlackRock was well poised to take advantage of this; iShares grabbed $85 billion of this, or almost one-third of the total. It was particularly dominant in Europe, where it took 56% of all new flows from the continent, or a cool $18 billion-plus.

The company is deriving an increasing percentage of revenue from fees for managing this army of funds (600+ of them at last count). In 3Q, it took in just over $600 million in iShares fees, a good $67 million higher than in the same period the previous year. This was due mostly to a rise in fees for the fund manager's fixed-income offerings; the take from this segment leaped 43% on a year-over-year basis. This boosted the take from iShares to 30% of the firm's overall base fees, up from the 27% of 3Q 2011.

Time for a cut or two
So, on the surface of it, things look promising for BlackRock's 4Q in terms of fees -- after all, more flows means a bigger cut of the total, right? Er, not necessarily. A few competitors started shaving the fees of their ETFs last year, and the rest of the gang has been forced to trundle along. Early chopper Charles Schwab (NYSE:SCHW), for instance, took the razor to each of its 15 titles -- to the point where two of those funds boasted the lowest annual expense ratios in the business, at 0.04% each.

BlackRock closed its eyes and reluctantly endured a minor session at the barber shop, snipping fees at some of its key funds. Meanwhile, in what seems like a compensatory move, it later announced slight increases on a raft of foreign-market offerings.

But the trimming of American funds only affected six titles out of the many hundreds the company operates, and this effort might be too half-hearted. In contrast to the trajectory of its stock price, the firm's fund unit has been losing market share over the past half-decade. In 2008 that figure stood at 48%; at the end of last year, it had dropped to 41%. Meanwhile, slicer-and-dicer Vanguard has roughly doubled its share to nearly 20% in the same time frame.

Fun with funds
These numbers really matter for BlackRock, because iShares (well, the fixed-income end of it, anyway) is the part of the business that's showing the strongest growth.

The company lives and dies by the fees it takes in, and those from some of its core asset management areas -- such as the "active" equity segment, its largest -- aren't advancing much, or at all. Active equity saw a 14% year-over-year slump to $1.3 billion in the first nine months of last year, which wasn't sufficiently offset by gains in the fixed-income (+5% to $865 million) and multi-asset class (+7%, $718 million) categories.

All told, total base fees for the period slumped 1% to just under $6 billion, from 1Q-3Q 2011's $6.03 billion. That's not a scary slump, but it's a slump nevertheless. And since those fees typically form almost 90% of BlackRock's total revenues in any given period, the company needs to lift them higher if it's going to keep that share price rally going.

That's why those fee numbers are going to be so critical in the company's upcoming results. If BlackRock can come close to or exceed that 40%-plus growth of fixed-income ETFs -- or any other category, for that matter -- despite the fee crunch in the business, that'll be a strong signal for more bulls to stomp after the shares. If not, maybe another visit to the barber shop for a fee cut or two will be in order.

Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends BlackRock. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.