BlackRock, the nation's 4th largest manager of money funds with $258 billion in assets, released its quarterly earnings and hosted a conference call yesterday, and the company made a number of comments on the liquidity and money market business. BlackRock said on the call, "On our cash and liquidity business, we are very proud of our team.... I think 2008 clearly tested every every liquidity firm."
They continued, "There are huge survivors and huge losers. Many firms have announced large, either purchases of assets out of their funds [or] huge losses associated with some of their portfolio decisions.... I would say very loudly BlackRock navigated our positions very well. I think our performance in the 4th quarter with asset growth in our liquidity business truly indicated our clients' willingness to work with us. I think the strength of the overall BlackRock platform continued to shine."
They continue, "We are very excited about the continuation of our liquidity business. We believe it's going to continue to be a large driver of our business. We are continuing to build our third party distribution channels in liquidity in the United States, and we are looking to continue to build our international liquidity business. We believe there are great growth opportunities internationally."
"On the other hand, let's be honest, the liquidity business in 2009 is going to be challenged because of low interest rates. Low interest rates are going to put pressure on the liquidity business, at least in the retail business. [With the] institutional business, we are not seeing any pressures to date," said BlackRock.
Finally, one question asked about the Group of 30 report (see Crane Data's Jan. 19 News "Group of Thirty Recommendation Poses Threat to Money Market Funds") and potential regulatory changes. BlackRock said, "We are a loud and large believer in capital reserves," though they admit that "ICI is probably against this." They continue, "We believe the money market business, which is essentially a shadow banking business, should be treated like a banking business, with capital charges associated with it, or reserves associated with it. We believe it's going to force even greater consolidation in the money market business."
Note: See also ignites' article, "Critics: Proposal Would Mean the End of Money Funds", which discusses the Group of 30 proposal.
