BlackRock's latest quarterly earnings report release says, "Cash management AUM increased to $283.7 billion. Cash management AUM increased for only the third time in the last eight quarters. Net new business totaled $1.8 billion, with net inflows of $10.4 billion from U.S. institutional clients largely offset by net outflows of $7.6 billion from retail and high net worth investors, and the effect of the reclassification of a $0.9 billion exchange-traded fund as fixed income. Merger-related outflows totaled $0.6 billion or 1% of acquired cash management AUM. Yields remained at or near historic lows as economic weakness, accommodative monetary policy and regulatory uncertainty continued to prevail."
On yesterday morning's conference call, Chairman Larry Fink commented, "On cash, we had new flows for the first time in 8 quarters. I think what is going on is because of now a longer view of low rates, especially in light of a second round of quantitative easing by the Fed, the persistence of low rates is probably going to continue. Banks who were aggressive at the beginning of the year and last year were aggressive in taking down deposits, have become less competitive and the money market industry is now offering a competitive product related to bank deposits. I think that trend will continue going into 2011."
He added, "So I think we're going to see a shift in flows, and we're certainly seeing that already in the fourth quarter where we're seeing increased liquidity flows in the first two weeks.... I think that's another big change in the dynamic ... for the last two years where as a large player in the money markets.... Some of the major headwinds are behind us."
When asked about low rates and fee waivers in the Q&A, Fink answered, "I don't think QE2 is focused at all on the short end.... Institutional, I don't believe there are any fee waivers. On the retail side, we have some, but they're small." Since the second quarter they haven't seen any change, BlackRock added.
In other news, we hear rumors that the President's Working Group on Financial Markets may finally release its long-awaited report on money market mutual funds Thursday. No word yet from Treasury, but we'll keep you posted. Word should come via the www.financialstability.gov website. (See our previous Crane Data News articles, "Money Funds Poised for Release of President's Working Group Report" and "Money Funds Await PWG Report, Rule 2a-7 Changes Pushed Into 2010."
The original June 17, 2009, report, entitled, "Financial Regulatory Reform: A New Foundation, had as a goal to "Reduce the Susceptibility of Money Market Mutual Funds (MMFs) to Runs." It said, "The SEC should move forward with its plans to strengthen the regulatory framework around MMFs to reduce the credit and liquidity risk profile of individual MMFs and to make the MMF industry as a whole less susceptible to runs. The President's Working Group on Financial Markets should prepare a report assessing whether more fundamental changes are necessary to further reduce the MMF industry's susceptibility to runs, such as eliminating the ability of a MMF to use a stable net asset value or requiring MMFs to obtain access to reliable emergency liquidity facilities from private sources."
