Yesterday, speaking at Barclays Financial Services Conference in New York, BlackRock CEO Larry Fink blasted the "prolonged low rate environment," saying, "This low rate environment is destroying the valuations of pension funds. I believe low rates [are] creating greater fear with our savers and with our pensioners. I'm not going to say low rates [are] additive to the economy, but low rates [are] an aggravator to the economy as we witnessed in Japan. I believe this low rate [environment] is reflective of the lackluster investor confidence.... All this is causing is greater pension fund and retirement gaps, which I believe will become the largest problem in our country in the next 10 years."
In other news, a press release entitled, "Federated Investors, Inc. Acquires Approximately $4.4 Billion in Assets from Fifth Third Asset Management, Inc.," explains, "Federated Investors, Inc., one of the nation's largest investment managers, and Fifth Third Asset Management, Inc., an indirect wholly-owned subsidiary of Fifth Third Bancorp, have reorganized approximately $4.4 billion in assets from four Fifth Third money market funds into four existing Federated money market funds with similar investment objectives. The transaction is not expected to have a material impact on Fifth Third Bancorp's results." (See our April 6, 2012, Crane Data News piece "Federated To Acquire (The Rest of) Fifth Third Money Market Funds".)
Federated President & CEO J. Christopher Donahue comments, "Federated is a leading provider of liquidity management services, and we regularly work with organizations of many types and sizes as they evaluate their cash management needs. This transaction builds on Federated's long-term relationship with Fifth Third by providing their clients with access to Federated's diverse range of products, experienced money managers, proven credit processes and extensive customer-service capabilities. We will continue to consider and evaluate future opportunities for similar agreements with banks, insurers and broker dealers."
Finally, Moody's Investors Service issued a statement entitled, "London - Moody's says consolidation of MMFs is credit positive overall, though not without risks." It says, "The consequences of the 2008 global financial crisis and the regulatory changes that have followed have increased the pace of money market fund (MMF) consolidation particularly in Europe over recent years, says Moody's Investors Service in a new Special Comment published today. Overall, the rating agency believes that the consolidation trend is credit positive for MMF investors and fund or asset managers, although there are some credit negatives associated with MMF consolidation."
Moody's release continues, "The challenges that have boosted the pace of MMF consolidation in Europe (and more generally in the US over the last 10 years) include portfolio credit deterioration of sovereign, corporate, public finance and structured finance issuers, increased fund redemptions, liquidity challenges, low yields, and contracting supply of eligible securities. The credit-positive effects of consolidation stem from the fact that MMF acquisitions or mergers typically result in (i) the newly merged fund's lower expense ratio (costs are spread over a larger asset base); (ii) expansion of distribution channels and client relationships; (iii) increased assets under management (AUM) and improved economies of scale; and (iv) potentially more resources in terms of credit research."
Finally, they add, "Moody's believes that the pace of MMF consolidation will continue, due to ongoing mergers and acquisitions of asset managers, economies of scale considerations, historically low interest rates pressuring fees, tightening regulatory regimes, product line rationalisation and resulting business exits for some managers."