BlackRock Inc.'s cash-management business has agreed to manage about $87 billion in assets for Bank of America Corp. clients as it builds scale in an industry grappling with money-market fund regulations.
The deal will involve merging Bank of America money funds and separate accounts into BlackRock's offerings, the New York-based firm said in a statement. This will bring BlackRock's cash-management business to about $372 billion in assets.
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BlackRock is expanding its cash-management business as the industry faces the challenge of persistently low interest rates since the 2008 financial crisis. Banks are also dealing with Basel III requirements, which make it more expensive to hold large cash deposits. And managers are restructuring money-market funds to comply with new regulations from the Securities and Exchange Commission that force institutional prime funds to adopt a floating share price.
COMPLIANCE COSTS UP
"The large compliance cost across the whole industry makes the cost of business substantially higher,” Tom Callahan, co-head of global cash management at BlackRock, said in an interview. “It favors scale players."
(More: Goldman Sachs starting two money market funds, changing others to address new rules)
Bank of America clients currently have access to taxable and tax-exempt money-market funds, a U.S. dollar offshore fund and customized separate account strategies.
Terms of the deal, which is expected to close in the first half of next year, weren't disclosed.
BlackRock's ties with Bank of America stretch back to 2006 when the asset manager bought Merrill Lynch's investment management business. BlackRock managed $4.5 trillion in assets as of the end of September.
