Bloomberg wrote on Friday, "BlackRock Money Market Fund Prepares for Negative Yields. The article says: "BlackRock Inc., the world's biggest money manager, told investors in a $1.4 billion-euro ($1.8 billion) liquidity fund that it will take measures to maintain the fund's stable share price after interest rates in Europe turned negative. Blackrock wrote to investors giving 14 days notice of its intention to switch on the Reverse Distribution Mechanism for the ICS Europe Government Liquidity Fund, the New York-based firm said in an e-mailed statement today. BlackRock said the only alternatives outside triggering the mechanism would be to close or wind down the fund. The move follows the European Central Bank's decision to cut the deposit rate to minus 0.20 percent this month, helping drive yields on money market instruments lower and making trading conditions tougher for managers. Record-low yields on government debt have already led some money-market funds to waive fees to keep returns positive. "The 14 days' notice helps to signal to our client base really that negative yields are here to stay," Bea Rodriguez, BlackRock's head of cash management in Europe, said.... "It is the only realistic solution," said Blackrock's Rodriguez. "It's not particular to us, we are really just catching up on this. It's more operationally intense to put this mechanism in place but it's the only way of being able to keep the fund open." BlackRock runs two other euro-denominated liquidity funds -- the 19.4 billion euro Institutional Euro Government Liquidity Fund and the 1.2 billion euro Institutional Euro Asset Liquidity fund." The article continues, "Blackrock said in the statement that it expects money-market funds to still be able to provide returns in line with short-term euro yields and act as a valuable alternative to investors to hold their operating cash. "To most people, whether you have 100 shares at 99 cents or 99 shares at a dollar doesn’t matter, but in money fund land, it raises the specter of breaking the buck -- anything that implies that you're losing money becomes a big deal," Peter Crane, president of money-market researcher Crane Data LLC, said in an interview. "They would much rather find a way to keep the value of the shares stable and yet to cover those negative yields."" See also, Bloomberg's editorial "BlackRock Money Market Funds Refuse to Lose Value". Reuters broke the story Friday with "Blackrock moves to protect net asset value of money market fund", writing, "Global fund manager BlackRock said on Friday it had written to investors in one of its money market funds to tell them it planned to trigger a clause aimed at protecting the value of the fund's assets. The move, called a Reverse Distribution Mechanism, will allow the firm to rebalance the net asset value of the fund so that it remains stable even though yields elsewhere may be negative."
