BlackRock Hits Record Cash in Q2
BlackRock reported its Q2 2022 earnings and hosted a conference call with analysts late last week, which mentioned money markets and cash a few times. (See the earnings release here and Alpha Street's earnings call transcript here.) CFO Gary Shedlin says, "On an equivalent day count basis, our effective fee rate was up approximately 0.3 basis points benefiting from the elimination of discretionary money market fund fee waivers and higher securities lending revenue. As a result of significant global equity and bond market declines during the quarter, including the impact of excess related dollar appreciation, we entered the third quarter with an estimated base fee run-rate approximately 5% lower than our total base fees for the second quarter. Finally, with cash becoming a more attractive asset class as rates rise, BlackRock's cash management platform generated $21 billion of net inflows in the second quarter, benefiting from the investments we have made to build this business in recent years. Net inflows were driven by U.S. government mandates and included inflows from Circle as we became the primary manager of their USDC cash reserves. In a rising rate environment, BlackRock is well-positioned to grow market share by leveraging our scale, product breadth, technology and risk management on behalf of liquidity clients." CEO Larry Fink comments, "BlackRock's cash management platform reached record AUM levels in the quarter and generated $21 billion of net inflows. Surging short-term rates, flattening yield curves and now an inverted yield curve has made cash not just a safe place, but now also a more profitable place for investors to wait as they evaluate how to optimize their portfolios for the future. Even during low-rate environments, we invested in our cash business and have grown our share positioning us well to benefit from the resurgence of client demand as rates rise. BlackRock's diverse cash management offerings, including governments, prime, municipals, [and] ESG strategies allow us to serve all our clients' cash allocation needs." He adds, "Another area that has been increasingly interested with our clients is digital assets. BlackRock has been studying the ecosystem, particularly in areas that are relevant to our clients, including Stablecoins, crypto assets, tokenization [and] blockchains. Last quarter, we announced our minority investment in Circle, a global internet payments company and issuer of USD Coin, a stablecoin that is one of the fastest growing digital assets in the world. As part of our relationship, we became their primary manager of their USDC cash reserves with assets invested entirely in short-term US Treasuries."
