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BlackRock Acquires BofA's $87 Billion Cash Assets, Strengthens Cash Distribution Relationship

Nov 04, 2015 03:55 AM EST | By Jean-Claude Arnobit
BlackRock Inc., Bank of America Global Capital Management, assets under management, acquisition
BlackRock Acquires BofA's $87 Billion Cash Assets, Strengthens Cash Distribution Relationship
(Photo : Andrew Burton | Getty Images News)

BlackRock, Inc. has announced in a press release that it has agreed for Bank of America Global Capital Management to transfer its investment management responsibilities of approximately $87 billion of assets under management to BlackRock.

The transaction combines BlackRock's expertise in global cash management and product suite with BofA Global Capital Management's strength in client relationships.

BlackRock adds in the press release that the transaction will result in a high quality, global liquidity investment solutions platform that will be accessible to a broader client base.

Through BofA Global Capital Management, clients have access to suite taxable and tax-exempt money market funds, a U.S. dollar offshore fund, and customized separate account strategies.

Tom Callahan, the co-head of global cash of BlackRock, said in the press release that their partnership with BofA provides "tremendous growth opportunity for their cash management business."

"This partnership allows us to further leverage our global scale, comprehensive product suite, and best-in-class risk management capabilities to serve a new universe of clients," he said.

Michael Pelzar, the president of BofA Global Capital Management, adds in the press release that they selected of BlackRock after "careful considerations" of the needs of their clients.

"BlackRock is a best-in-class liquidity solutions provider with a demonstrated ability to deliver on clients' needs for liquidity and yield," he said.

Bloomberg adds that BlackRock's transaction comes as the industry faces the challenge of low-interest rates since the 2008 financial crisis.

The Federal Reserve Bank is still debating on whether they will be raising interest rates by the end of the year.

Bloomberg adds that banks are also facing Basel III requirements, which makes holding large cash deposits more expensive.

Managers are also restructuring their money-market funds to comply with the new regulations the U.S. Securities and Exchange Commission has set.

Bloomberg adds that these regulations force institutional prime funds to adopt a floating share price.

Callahan told Bloomberg during an interview that large cost of the compliance "favors scale players."

"The large compliance cost across the whole industry makes the cost of business substantially higher," he said.

Upon closing of the transaction, BlackRock expects its global cash management platform to grow to about $370 billion assets under management, according to the press release.

The figure is based on current asset levels.

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