NEW YORK: BlackRock Inc is throwing its weight behind an early push to bring exchange-traded funds (ETFs) to money market investors.
The asset management company, which helped hasten the widespread adoption of ETFs, is seeking regulatory approval for two new funds, the iShares Government Money Market ETF and the iShares Prime Money Market ETF, according to filings with the Securities and Exchange Commission.
BlackRock’s rollout would significantly expand an experiment that started in September, when the Texas Capital Government Money Market ETF became the first to target traditional funds, which have seen their assets swell to a record US$6.6 trillion.
That fund, which is still the only one of its kind, has about US$43mil in assets.
ETFs have steadily taken over vast parts of the securities business in part because they’re easier to shift in and out of rapidly, making them a draw to individual investors.
In the case of the money market funds, however, that liquidity comes at the expense of a protection provided by traditional funds. Unlike those, the ETFs aren’t required to maintain a stable net asset value of US$1, meaning investors can be exposed to some downside risk.
It still remains to be seen whether the potential appeal of ETFs will carry over to money market investors, who are primarily looking for a safe way to earn a higher return than traditional savings accounts.
When launching its fund, Texas Capital said that the increased liquidity of an ETF would appeal to institutional investors by allowing them to buy and sell the shares throughout the day. — Bloomberg
