Both BlackRock and Schwab, the 4th largest and 7th largest managers of money market mutual funds, released first quarter earnings earlier this week, and releases, conference calls and coverage shed some light on the major issue of the day for MMFs. Yesterday, BlackRock's Q1 Earnings Call contained a few quotes on cash. (See Seeking Alpha's earnings call transcript here.) CFO Gary Shedlin said, "BlackRock's cash management platform saw $6 billion of net inflows, as we continue to grow our cash business, leverage scale for clients and deliver innovative distribution and risk management solutions through a combination of Cachematrix and Aladdin."
CEO Larry Fink comments, "After more muted growth in 2018, we are seeing renewed demand for fixed income securities. BlackRock generated $80 billion of fixed income inflows across active and indexed products.... Performance in our active fixed income strategies remain strong with 83% and 85% of assets above benchmark or peer median for the three-year and five-year period. We are constantly innovating across our platform to meet client needs and delivering growth for shareholders."
He explained, "For example, in cash management where we generated $6 billion of inflows in the quarter, we are leveraging our Cachematrix technology to improve convenience and transparency for our clients. We are also innovating on the types of cash management strategy we offer to clients and last week we launched a Liquid Environmentally Aware Fund or LEAF as a prime money market fund with an environmentally focused strategy."
Fink added, "The fund will use 5% of its net revenues to purchase and retire carbon offsets and direct a portion of proceeds to our conservation efforts. Increasingly, clients want sustainable strategies that provide financial returns and target a measurable social or economic impact. BlackRock's goal is to make those strategies more accessible to more people." (See our April 10 Link of the Day, "`Moody's Rates BlackRock LEAF Aaa-mf.")
Charles Schwab's Q1'19 earnings release quoted CFO Peter Crawford, who commented, "Our unwavering focus on championing our clients' goals translated into strong first quarter financial performance as well as business growth, indicating the Schwab financial formula continues to operate as intended. Overall, revenues rose by 14% year-over-year to a record $2.7 billion. Net interest revenue grew 33% to a record $1.7 billion largely due to higher interest-earning assets stemming from the transfer of sweep money market funds to bank and broker-dealer sweep as well as client cash allocations."
He added, "Additionally, our net interest margin expanded to 2.46%, up from 2.12% a year earlier, following the Fed's four rate hikes in 2018. Asset management and administration fees decreased 11% to $755 million, mainly as a result of lower money market fund revenue as we executed on sweep transfers. Trading revenue declined by 8% to $185 million largely due to client first quarter trading activity that was strong but below last year's then-record pace."
Crawford also said, "During the first quarter, we continued to emphasize effective balance sheet management. While clients sorted through their invested and transactional cash allocations, we transferred $11.6 billion from sweep money market funds to bank and broker-dealer sweep. This activity contributed to consolidated balance sheet assets of $283 billion at quarter end. A small amount of the $14.4 billion in sweep money market fund balances outstanding as of month-end March remains to be transferred; we expect to complete those transfers by the end of April."
Finally, in other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary Tuesday, which tracks a shifting subset of our monthly Portfolio Holdings collection. The latest cut, with data as of Friday, April 12, includes Holdings information from 59 money funds (up from 78), representing $982.4 billion, compared to $1.239 trillion on March 29. That represents 30.5% of the $3.225 trillion in total money fund assets tracked by Crane Data. (For our latest monthly Money Fund Portfolio Holdings numbers, see our April 10 News, "April Money Fund Portfolio Holdings: Treasuries Jump, Repo Plunges.")
Our latest Weekly MFPH Composition summary shows Government assets again dominated the holdings list with Repurchase Agreements (Repo) totaling $359.1 billion (declining from $443.8 billion on March 29), or 36.6% of holdings, Treasury debt totaling $319.1 billion (down from $442.9 billion), or 32.5%, and Government Agency securities totaling $182.4 billion (down from $212.8 billion), or 18.6%. Commercial Paper (CP) totaled $50.0 billion (down from $56.5 billion), or 5.0%, and Certificates of Deposit (CDs) totaled $45.8 billion (down from $49.6 billion), or 4.7%. A total of $14.7 billion, or 1.5%, was listed in the Other category (primarily Time Deposits) and VRDNs accounted for $12.3 billion, or 1.3%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $319.1 billion (32.5% of total holdings), Federal Home Loan Bank with $125.8B (12.8%), RBC with $51.7B (5.3%), Federal Farm Credit Bank with $41.5B (4.2%), BNP Paribas with $39.9B (4.1%), JP Morgan with $24.4B (2.5%), Fixed Income Clearing Co. with $20.8B (2.1%), Mitsubishi UFJ Financial Group Inc with $20.6B (2.1%), Credit Agricole with $16.1B (1.6%), and Natixis with $16.0B (1.6%).
The Ten Largest Funds tracked in our latest Weekly Holdings update include: Fidelity Inv MM: Govt Port ($107.1 billion), Goldman Sachs FS Govt ($95.7B), Wells Fargo Govt MMkt ($72.3B), Goldman Sachs FS Trs Instruments ($58.5B), Fidelity Inv MM: MMkt Port ($56.3B), Morgan Stanley Inst Liq Govt ($55.4B), Dreyfus Govt Cash Mgmt ($51.1B), State Street Inst US Govt ($44.2B), First American Govt Oblg ($41.8B), and Dreyfus Treas Sec Cash Mg ($29.5B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
