WSJ: Fink Says Fed Is Hurting Savers
The Wall Street Journal writes, "BlackRock Profit Rose 23% in 3rd Quarter, Helped by Actively Managed Funds," which reviews BlackRock's recent quarterly earnings results. The Journal quotes BlackRock's Larry Fink, "`I am a believer that inflation is more than transitory." They write, "As the Federal Reserve weighs a pullback of its easy-money policies, Mr. Fink said he hopes the Fed will let short term rates rise slightly in the process, giving savers a little more yield. 'Low rates world-wide are really hurting savers.'" The Journal tells us, "Near zero interest rates cut into what BlackRock stood to earn on securities lending when the company lends out shares of companies sitting in its funds for extra revenue. The low rates have led to plunging yields in money-market funds. BlackRock saw net outflows from that cash-management business line in the latest quarter. The company continues to waive charges on money-market funds -- which invest in short-term debt—to keep investor yields above zero. The Treasury Department slowing of short-term borrowing to avoid hitting the debt ceiling has shrunk the pool of Treasury bills that money-market funds typically invest in, compounding the funds' challenges." During BlackRock's Q3 earnings call, CFO Gary Shedlin comments, "Third-quarter base fee and securities lending revenue of $3.9 billion increased 22% year-over-year, reflecting the positive impact of market beta on average AUM and 13% organic base fee growth despite higher discretionary money market fee waivers and strategic pricing investments over the last year. Sequentially, base fee and securities lending revenue was up 5%.... [L]ower discretionary money market fee waivers more than offset the negative impact of diversion equity beta primarily associated with the accelerating decline in emerging markets during the current quarter. During the third quarter, we incurred approximately $130 million of gross discretionary yield support waivers. Lower discretionary yields support waivers in the current quarter were linked to the Fed's technically -- technical adjustment to the IOER and RRP in June, as well as outflows from U.S. government money market funds during the current quarter." He adds, "BlackRock's cash management platform experienced net outflows of $12 billion driven primarily by redemption from the U.S. government and offshore Sterling prime money market funds in line with the broader U.S. money market fund industry. BlackRock's diverse cash management offerings position as well to serve clients' needs and you'll hear more from Larry about how we're expanding our ESG cash offerings to enhance our competitive positioning even further." Fink says on the call, "We recently repurposed one of our money market funds to seek positive social outcomes by supporting a diverse trading ecosystem. BlackRock will also be contributing 5% of our management fees, net revenues from the funds to support students in historically black colleges and universities and predominantly black institutions. This fund is already growing more than 40% -- 20% to 4.5 billion since its conversion in July."
