At the Association of Corporate Treasurers Cash Management conference in February, the corporate attendees reported that when they have surplus cash, they held 43% in bank deposit accounts, and 36% in money market funds. 

The continuing attraction of money market funds is also shown by how BlackRock’s Institutional Euro Assets Liquidity Fund has surpassed €1 billion of assets under management, less than a year since its launch in April 2013. BlackRock believe that “this growth of this money market fund demonstrates institutional investors’ willingness to look at alternative ways of seeking returns in this current low yield environment.”

Financial institutions and corporations use money market funds to manage their cash as they offer stability, daily liquidity and diversification benefits. Current yields in European money markets are low, driven down by forces, including prolonged ultra-low interest rates, a diminishing supply of investible short-dated money market instruments, decreasing bank appetite for cash balances, and sovereign and bank ratings downgrades. 

BlackRock’s Euro Assets Liquidity Fund

BlackRock’s Institutional Euro Assets Liquidity Fund is unrated by external ratings agencies, meaning it has more flexibility to seek higher yields in these current conditions. The fund can to step away from the inflexible requirements imposed by ratings agencies on AAA-rated money market funds - such as a 5 per cent issuer limit - and is able to extend the duration on investments the portfolio team believe offer value. The fund has the same robust risk management and investment approach, and undergoes the same extensive internal stress tests, as BlackRock’s rated money market funds.

Bea Rodriguez, Head of Portfolio Management for Cash Management at BlackRock, said: “We are living in a world where interest rates and the supply of eligible issuers remain low, and institutions seeking yield are increasingly looking to their investment managers to provide solutions. This Fund is specifically designed to help institutions adapt to this challenging market, and provide the returns that investors are after in a flexible and transparent manner.”

(BlackRock’s Euro money market range includes the ICS Euro Liquidity Fund (€12.4bn assets) and ICS Euro Government Liquidity Fund (€1.1bn AUM) which is the largest vehicle of its type in the market and remains available to both existing and new investors.)