BlackRock Cash Management

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What are money market funds?

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

Comfort in times of stress, an opportunity for growth.

After all, there is always a need for cash and for cash management, many investors rely on money market funds.

What are money market funds?

Money market funds are mutual or pooled funds that seek to invest in high-quality, short-term debt instruments, helping you to achieve the opportunity of liquidity with a low level of risk.

How do they seek to deliver this? Let's find out.

In general, there are three core objectives of money market funds: stability, liquidity, and yield.

Stability. To seek the stability of principle, the funds may invest in highly-rated short-term bonds such as Treasury bills, certificates of deposit, and repurchase agreements. The types of eligible investments will differ depending on the type of money market fund.

Liquidity. Short-term money market funds may trade and settle on a same day basis, seeking to provide you with convenient access, operational ease, and liquidity.

Yield. There is a spectrum of types of money market funds. You can choose to have a more conservative exposure, such as to only government risk or to a broader pool of money market securities, such as short-term debt from highly-rate issuance. You can also opt for funds that seek to drive positive social outcomes.

So, whatever cash means to you, we know that cash management matters and money market funds are a cash management solution.

What are money market funds?

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

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.

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 /
Are you leaving cash on the table?

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; though, a lag often exists between rate cuts and the decline in their yields due to the mix of maturities in their portfolios.

Client reporting

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