BlackRock, the fifth largest manager of money funds in the U.S., released its quarterly earnings Monday morning and hosted a conference call. The release says, "AUM growth during the quarter consisted of $8.9 billion of net inflows in long-term products and $51.2 billion of investment performance and market appreciation, net of adverse foreign exchange movements, which was partially offset by $2.9 billion of disbursements in advisory portfolios and $39.6 billion of net outflows in cash management products."

The release continues, "Cash management AUM was $306.5 billion at quarter-end, down $42.7 billion. The declines were roughly in line with the industry, which lost $463.6 billion in average assets, or 11%, during the quarter. BlackRock experienced net outflows of $39.6 billion, with net inflows in euro and Sterling-denominated funds overwhelmed by withdrawals in U.S. dollar-denominated funds offered. Yields remain at record lows, and money market funds continue to face AUM pressure from higher yielding investment alternatives. We expect this pressure to continue until we see a meaningful change in the rate environment."

The company's release adds, "Distribution and servicing costs paid to Bank of America/Merrill Lynch, The PNC Financial Services Group, Inc. and other third parties decreased $27 million primarily due to a lower level of average cash management AUM and an increase in fee waivers for cash management funds resulting in lower levels of distribution fees."

Crane Data's Money Fund Intelligence XLS shows the company losing market share in the cash space. Outflows were $18.5 billion, or 9.1%, to $184.1 billion in March 2010 vs. a 5.5% decline for industry assets. Over the first quarter, Crane Data shows BlackRock money fund assets declining by 17.0% vs 12.4% for money funds overall. For the past 12 months, BlackRock's U.S. money funds (now including the BGI totals), have fallen precipitously, down $80.9 billion, or 30.5% vs. 22.2% for money funds as a whole.

On the conference call, CEO Larry Fink says about "cash, "Obviously, the industry has seen record amounts of outflows.... This money is not moving in total out the risk curve. Much of the liquidity money is moving out from mutual funds into bank deposits. Banks are offering rates for overnight anywhere between 40 and 50 basis points, which competes very handsomely [with money funds]. As the Federal Reserve begins its tightening faze, which we believe will be the latter part of this year, we will start seeing a rebalancing back into money market funds."

He also says during the Q&A, "We believe the money fund business will change. We believe there's a great need for a liquidity bank. We are in favor of it despite some poor reporting. We've always been in favor of the liquidity bank. We do also believe that there's going to be a need for some capital associated with the money market funds and/or, as the SEC has proposed with the shadow NAV, much greater disclosure in terms of where the real NAV is.... There's going to be a lot of dialogue over the next 6-12 months in terms of how we build structure and confidence in the money fund business, but it's going to change and it's probably going to have more expenses associated with it."

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