What are institutional liquidity funds

The range encompasses triple-A rated money market funds denominated in Euro, Sterling, Canadian Dollars and US Dollars. They are mutual, or pooled, funds that invest in high quality short-term money market instruments enabling investors to access a highly diversified and liquid portfolio.

Triple-A rated money market funds are managed within rigid and transparent guidelines to offer preservation of capital, liquidity and competitive yields. There are two share classes available, Distributing and Accumulating shares. Distributing shares offer a stable net asset value (NAV) with an unchanging price per share. Income is accrued daily and can either be paid out to the investor as a dividend or reinvested in the fund at the end of the month. Accumulating shares operate under the same investment guidelines as the Distributing shares but the NAV appreciates daily to reflect accrued income.

Why are the institutional liquidity funds a good choice for capital preservation?

  • As required by the rating agencies, the range invests primarily in first-tier securities, which include commercial paper, certificates of deposits, floating rate notes, time deposits and fully collateralised repurchased agreements.
  • The range benefits from BlackRock’s expertise in credit research – only selecting securities for the fund which have been analysed and approved by the BlackRock team of credit analysts.
  • As funds are rated by Moody’s and Standard & Poor’s the portfolios are scrutinised on a weekly basis to ensure that the mark-to-market price could withstand a full account redemption.
  • The range offers strong diversification by maintaining a broad portfolio of high quality securities.
  • The funds are required to maintain a maximum weighted average maturity (WAM) of 60 days and are managed with very high levels of short term liquidity.

In what types of securities do the range invest?

The range uses a variety of short-term money market instruments  of very high quality and liquidity [there is no guarantee that an instrument will always remain of high quality/liquidity], they include:

  • Asset Backed Commercial Paper
  • Bonds (Corporate and Government)
  • Certificates of Deposit
  • Commercial Paper
  • Floating Rate Notes
  • Government Guaranteed Debt
  • Repurchase Agreements
  • Supranationals
  • Time Deposits
  • Treasury Bills

Capital growth / income variation:

Investors in these Funds should understand that capital growth is not a priority and values may fluctuate and the level of income may vary from time to time and is not guaranteed.

Financial Markets, Counterparties and Service Providers:

The Funds may be exposed to finance sector companies, as a service provider or as counterparty for financial contracts.   Liquidity in the financial markets has been severely restricted, causing a number of firms to withdrawn from the market, or in some extreme cases, becoming insolvent.  This may have an adverse affect on the activities of the fund.

Interest Rate Risk

The fund invests in fixed interest securities such as corporate or government bonds which pay a fixed or variable rate of interest (also known as the ‘coupon’) and behave similarly to a loan. These securities are therefore exposed to changes in interest rates which will affect the value of any securities held.