BlackRock, Inc. reported earnings for the second quarter of 2009 this morning and discussed some issues involving money market funds in its conference call. Chairman and Chief Executive Officer Laurence D. Fink, and Chief Financial Officer, Ann Marie Petach, hosted a teleconference call for investors and analysts. They told listeners, "Investors began to pull out of cash and seek higher returns," and "In the second quarter, clients began to ask 'Do we have too much cash?'" BlackRock's release is available here.
The company's press release says, "Liquidity flows industry-wide reflected low money market rates and investor willingness to redeploy to higher return assets. During the quarter, we had $7.5 billion of net outflows in cash management products, including $10.7 billion of outflows from U.S. investors and $3.2 billion of inflows from international investors. Notwithstanding fee waivers on selected money market funds to avoid negative yields, we had $11.4 billion of net outflows in government and tax-exempt funds, which were partially offset by $3.9 billion of net inflows in prime money market funds and other products. We expect volatility in market conditions to drive continued volatility in cash management flows. Our portfolios remain conservatively positioned to serve the liquidity needs of our clients."
BlackRock ranks fifth among money market mutual fund managers with $238.7 billion in assets as of June 30, 2009. The company, which recently had its Merrill Lynch Institutional funds change their names to FFI (Funds for Institutions), has seen money fund assets decline by $16.6 billion, or 6.5%, over the past 12 months. Overall money fund assets have increased by an average of 8.3% during this period. During the second quarter of 2009, BlackRock saw money fund asset decline by 3.3% vs. a decline of 6.0% for the overall money fund universe, according to our latest Money Fund Intelligence XLS.
The company cited "unusually large outflows in our retail platform" as a factor in the decline. During the Q&A, Petach said, "Our fee waivers have stayed very steady" in response to one question. Fink responded to a question, "We are in favor of more self regulation and more reserves. I think you're going to see consolidation as capital charges are required.... We need to make sure the money market fund industry is competitive with deposits." Fink added that he believes capital is required for funds to compete with FDIC insurance.
The teleconference and webcast replay will be available by 1:00 p.m. on Tuesday, July 21, 2009. To access, dial (800) 642-1687 and enter the Conference ID Number 18871845. To access the webcast, visit the Investor Relations section of www.blackrock.com.