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More Enhanced Cash Woes: BlackRock Cash Strategies Gets Downgraded. In another case of an enhanced cash fund meltdown, and of mistaken identity by the media, today's Wall Street Journal writes "BlackRock Cash Fund Is Downgraded For Suspending Certain Redemptions". The rapidly shrinking (now $1 billion) BlackRock Cash Strategies Fund was downgraded by Moody's because it "has been unable to honor all the redemptions in cash, according to a letter to investors," says the WSJ. The fund, however, is not a "cash" or "money market" fund, but an enhanced cash or ultra-short bond portfolio. Reuters broke the story Friday, quoting BlackRock's letter to shareholders, "In addition, announcements related to similar products managed by other investment managers led to numerous redemption requests earlier in December". Moody's downgraded the pool from AAA/MR1 to Ba/MR2 (money funds have AAA/MR1+ ratings), saying, "BlackRock Cash Strategies is a privately placed institutional short-term investment vehicle, not subject to Rule 2a-7 of the Investment Company Act of 1940.... [The] downgrade actions follow BlackRock's recent decision to suspend daily fund redemptions, except in the case of redemptions-in-kind." BlackRock Cash Strategies continues to post a $1.00 NAV and that "all 22 clients in the fund have remained invested thus far" says the Journal. "Enhanced cash", or private placement "3c-7" funds, have been under duress since GE Enhanced Cash liquidated for $0.96 per share in mid-November and since Columbia Strategic Cash portfolio suspended redemptions on December 7. At least two other smaller 3c-7 distributors, Federated and SunTrust, have taken losses to exit the sector and pay investors their full $1.00 a share.
