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Providing cash and liquidity management solutions

BlackRock considers cash management a unique investment discipline requiring a distinct skill set to effectively hedge against risk and deliver on a client's individual liquidity needs. While our investment strategy is conservative by nature, we strive to deliver competitive, consistent returns over time.

Over multiple interest rate cycles and varying market conditions, BlackRock has managed cash portfolios for corporations, banks, broker-dealers, foundations, insurance companies, public funds and others. As a leader in this asset class, BlackRock has $921 billion (as of 12/31/24) in global liquidity assets across multiple currencies. With one of the most experienced teams in the industry, BlackRock is able to offer clients an investment approach that has been tested through time and a variety of solutions designed to meet the needs of today’s cash investor.

What are money market funds?

Everyone has a need for cash, but cash can mean different things to different people.

Short-term investing 101

A money market fund (MMF) is a type of mutual fund that invests in cash, cash equivalents and short-term debt securities. Think of MMFs as a cash management investment solution intended to offer portfolio diversification, liquidity and operational ease.

Go long on the short end

Every day investors evaluate fixed income, equity and alternative investment strategies for their portfolios. In addition to these strategies, we encourage investors to take a holistic approach to their cash and short duration investments.

The Bid

Falling for cash

As interest rates decline, investors are reassessing their cash portfolios and considering the impact of monetary policy shifts over the next 12 months. Beccy Milchem, Global Head of Cash Distribution at BlackRock, emphasizes the importance of actively managing cash and shares insights on the benefits of putting cash to work for investors worldwide

The Bid podcast /
The Bid podcast /
Falling For Cash
What do terminal rates mean for cash management?

With expectations of central banks lowering rates this year, we see an opportunity for investors to actively manage their operational, core and strategic cash balances in an environment still rife with economic risks and uncertainty.

Comparing bank deposits to money market funds

After a sustained period of rising interest rates, we've reached a juncture where rates are at their peak, often referred to as “Terminal Rates.” This, combined with events in the first quarter of 2023, further reinforces the value of diversification in cash investing.

Segregation of liability

This document provides information about the way in which the funds in BlackRock Liquidity Funds (the “Trust”) are held.

Spotlight on cash

Cash remains attractive amid a potential shift in rates. Money market funds will typically position their duration a little longer heading into a rate cut environment and will tend to outperform alternatives for overnight liquidity as a result.

Money market minute

Still time for prime

In recent months, various prime institutional money market funds have announced plans to liquidate or convert to government money market funds before new amendments to Rule 2a-7 become effective in October of 2024.

Despite operational challenges to maintaining these products after these amendments become effective, BlackRock remains committed to offering prime money market funds in the U.S. as we believe they can offer several potential benefits to a well-structured cash portfolio.

Money market funds are not a one-size-fits all solution.

We believe assessing and segmenting cash needs across strategies, including prime money market funds, can be beneficial to many cash investors.

For one thing, prime money market funds offer the potential for a yield pickup over government money market funds because they purchase a broader universe of securities than government money market funds, while still maintaining high levels of liquidity and stability.

And unlike government money market funds, prime institutional money market funds utilize a floating net asset value. As a result, factors like interest rate changes can affect a prime institutional money market fund's floating net asset value and, in turn, can potentially amount to a compelling total return depending on an investor's time horizon.

Also, prime money market funds maintain holdings across a range of issuer and security types, meaning they may offer broad diversification benefits, in addition to a potential yield differential, compared to bank deposits.

Finally, by purchasing commercial paper and other similar debt instruments, we believe prime money market funds can help support the real economy.

In our view, the primary reasons for investing in money market funds are stability, liquidity and yield.

To this end, prime institutional money market funds' floating net asset values provide a clear view into their credit quality and interest rate sensitivity.

Also, minimum daily and weekly liquidity thresholds serve as a barometer of a fund's ability to meet redemptions.

BlackRock plans to continue managing prime money market funds in adherence with the newly defined daily and weekly liquidity thresholds set by the Securities and Exchange Commission.

BlackRock seeks to continue operating within strict controls to manage risk and remains committed to prime money market funds to help offer utility and value to cash investors.

Primed for money market fund reform

Prime institutional money market funds seek strong returns through purchasing diverse securities and utilizing a floating net asset value1, while maintaining high levels of liquidity2.

Utility and value proposition

By purchasing commercial paper3, and other similar debt instruments, we believe prime institutional money market funds can help support the real economy.

High visibility

Prime money market funds floating net asset values provide a clear view into their credit quality and rate sensitivity, while minimum daily and weekly liquidity thresholds help funds meet redemptions.

Liquidity in the wake of falling rates

[00:00:06.24] In the current economic environment, which is characterized by potential rate cuts, interest rates remain relatively high and we believe there are opportunities for money market fund investors.

[00:00:15.92] When rate cuts are priced into the market and there is an inverted yield curve, active short duration positioning can help ensure that money market funds continue to offer competitive risk-adjusted returns.

[00:00:27.44] Additionally, monetary policy loosening may lead to increased liquidity in the financial system, which typically creates ample supply of high-quality short-term securities.

[00:00:39.92] During periods of economic volatility, we believe that active cash management is critical to clients overall investment strategy.

[00:00:48.28] All investors have a cash need.

[00:00:50.68] It is important to effectively manage liquidity across different rate cycles to take advantage of same-day liquidity, diversification, operational ease and active duration management.

[00:01:01.84] Money market funds invest in high quality debt securities, which provide relatively stable and low risk opportunities to earn returns on cash reserves.

[00:01:11.32] Although rate cuts might lower the yields on short term investments, money market funds hold a mix of securities with varying maturities.

[00:01:19.72] Their ability to blend shorter and slightly longer dated securities can help balance yield and risk, and adapt to changes in the interest rate environment with more flexibility.

[00:01:30.20] Money market funds generally closely reflect central bank rate changes due to their direct investment in short term securities.

[00:01:36.96] However, a lag often exists between rate cuts and the decline in money market fund yields due to the mix of maturities in their portfolios as securities mature and are replaced by lower yielding ones, money market fund yields adjust over time.

[00:01:52.72] As the broader economic environment evolves, clients should review their specific goals and investment time horizons, and seek money market investments that provide liquidity, stability, and opportunity for yield.

[00:02:02.16] that provide liquidity, stability, and opportunity for yield.

[00:02:04.48] These qualities may help to optimize cash returns and build more resilient portfolios to more effectively navigate market fluctuations.

Opportunities for money market fund investors

Active short duration positioning can help ensure that money market funds continue to offer competitive risk-adjusted returns.

Utility of cash

During periods of economic volatility, we believe that active cash management is critical to clients' overall investment strategy.

The lag effect

Money market funds generally closely reflect central bank rate changes due to their direct investment in short-term securities.

Understanding repurchase agreements

The repurchase agreement (repo) market is one of the largest and most actively traded sectors in the short-term credit markets and is an important source of liquidity for money market funds (MMFs).

BlackRock Liquid Federal Trust Fund

BlackRock Liquid Federal Trust Fund allows investors to enjoy the familiarity of a government money market fund while seeking to do more with their cash.

Seeking to optimize your cash portfolio with a tailored solution

Unlike commingled mutual funds, separately managed accounts are segregated mandates comprised solely of one client’s assets. The investment strategy of the account is driven by the specific objectives and risk tolerances of the account owner, often dictated by their investment guidelines.

Understanding variable rate demand notes

Variable Rate Demand Notes (VRDNs) are a critical asset class in the short term municipal market, representing the majority of the securities that comprise municipal money market funds in the U.S.