BlackRock released an Update recently informing clients of the strike times for floating NAV funds. The letter reads, "We are excited to share with you some important updates related to the requirement for institutional prime and institutional municipal money market funds to adopt a per share floating net asset value no later than October 14, 2016. As previously communicated, certain BlackRock money market funds will be designated as institutional and will transact based on a per share floating net asset value. Today, the Board of Trustees of our institutional prime and institutional municipal money market funds listed below approved the following net asset value strike times to become effective on or about October 11, 2016. The determination of these NAV strike times was made in an effort to provide investors with the most flexibility to help meet their ongoing liquidity needs."
BlackRock is the latest in a string of major money fund managers to announce "strike times" for FNAV funds. Our May 6 News reports on First American's FNAV strike times, and our May 5 News, "Federated: Variety of Strike Times; Wells: Reform's Investor Impact," reports on Federated's cutoff times. In our April 27 News, we wrote, "Goldman on Disclosures, Strike Times; BNY, TRP, NTRS Waivers Drop," and in our April 8 News, we wrote, "Market Share: Few Gainers in Down Month; Invesco Sets Strike Times." Also, our March 3 News, "JPM Details Fund Updates, Cutoffs, Gates in Filing; Linton Comments," discusses JPMAM's FNAV strike times. Finally, our Feb. 22 News, "Wells Finalizes MMF Lineup, Strike Times; ESMA, European MMF Update," reviews Wells Fargo's announcement.
The BlackRock update sets strike times for 4 Prime Institutional funds and 1 Municipal Institutional fund. Specifically, BlackRock TempFund and BlackRock Cash Prime will have 3 strike times -- 8am, 12pm, and 3pm daily. BlackRock Cash Institutional will strike once at 5pm, while both TempCash and MuniCash will strike once at 3pm.
The letter says, "Trading deadlines for each of the funds will change to the times detailed above, with the exception of BlackRock Liquidity Funds MuniCash, which will continue to have trading deadlines of 2:30 p.m. E.T. for subscription orders and 1:00 p.m. E.T. for redemption orders. Each of the Funds will be able to accept payment for subscription orders up to the federal funds wire deadline (normally 6:00 p.m. E.T.)."
On "Order Placement," BlackRock comments, "Today, subscription and redemption orders may be placed in these Funds in either units or dollars. After implementation, to accommodate the new operational requirements of the Funds surrounding the per share floating NAV, subscription orders in the Funds can only be placed in dollars, whereas redemption orders can be placed in either units or dollars."
It adds, "The changes detailed above will go into effect on or about October 11, 2016. Additional information about how to purchase and redeem shares of these Funds will be provided in the coming months. We hope the availability of intraday liquidity will assist you with your cash management needs, and ease your transition to the new operational landscape brought on by money market fund reform."
BlackRock concludes, "We are proud to serve a variety of clients who use money market funds for many different reasons. We believe our platform is reflective of the types of clients we serve and the varying needs which drive their use of these investment vehicles, both now and in the future."
In other news, Fitch Ratings issued the release, "U.S. Money Funds' Liquidity Profiles Vary Ahead of Reform." It states, "Liquidity levels of U.S. institutional prime money funds vary ahead of upcoming reforms, suggesting some funds will need to increase their liquidity cushions, according to a new report from Fitch Ratings. While 60% of prime funds maintain high weekly liquidity levels of 40% or higher, others have a low buffer relative to the 30% regulatory threshold which may be insufficient in light of liquidity-based triggers introduced by the Securities and Exchange Commission (SEC)."
Fitch Senior Director Greg Fayvilevich explains, "While many institutional prime money market funds have already started to increase their liquidity levels, some funds may not have enough of a liquidity cushion if cautious investors redeem their cash on the fear that the fund may fall below the new threshold."
The release continues, "The reforms coming into effect in October provide the funds that breach regulatory liquidity limits the ability to impose liquidity fees on redeeming shareholders or gate the fund to redemptions. These reforms as well as recent disclosure requirements have focused investors' attention on institutional prime funds' weekly liquidity levels. In response, the funds have been increasing their liquidity to alleviate investors' concerns about access to cash if regulatory liquidity thresholds are breached. While average weekly liquidity for prime money funds has been increasing, there are still some funds that may need to add liquidity as a buffer to unexpected redemptions."
Finally, Standard & Poor's Global Ratings issued a release entitled, "U.S. Corporate Cash Hoard Masks Increased Debt Burden, Report Says." It explains, "Cash is on the decline and debt is decidedly on the rise for 99% of rated U.S. corporations, says a new report from S&P Global Ratings titled "U.S. Nonfinancial Corporates' Record $1.84 Trillion Cash Holdings Mask A Massive $6.6 Trillion Debt Burden."
It explains, "Corporate America's most lucrative layer--the top 25 of S&P Global Ratings' universe of over 2,000 rated nonfinancial corporations--collectively hold $945 billion in cash and maintain an enviable cash-to-debt ratio of 153%. This top 1% include familiar names such as Apple Inc., Google Inc., and Microsoft Corp. However, this group's success masks a decade-low cash-to-debt ratio of 15% (an aggregated $900 billion in cash and $6 trillion in debt) for the vast majority of firms in the U.S.... In prior years, S&P Global Ratings identified the practice of "synthetic cash repatriation," in which U.S. companies issued debt as a proxy for bringing back overseas cash earnings."
S&P adds, "The top 1%'s immediate concerns center on what to do with their growing cash pile. In contrast, the bottom 99% are more focused on new financing needs and upcoming debt maturities.... We also believe that these companies' significant cash holdings directly benefit from the accommodating credit markets, and more limited access would likely have curtailed shareholder returns."
