Fed sets fee structure for BlackRock mortgage bond purchases
BlackRock will oversee certain liquidity facilities, according to a report
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BlackRock Inc. will earn less than $8 million a year in fees for its role assisting the Federal Reserve with its purchases of commercial mortgage-backed securities, one of the new programs the central bank is rolling out to backstop an economy under threat from the coronavirus outbreak, according to details of the arrangement released on Friday.
Under BlackRock’s contract with the Federal Reserve Bank of New York for the bond purchases, it will earn a quarterly fee equal to an annualized 2 basis points on the first $20 billion of assets under management and then 1.25 basis points on the next $30 billion of assets. It will earn no fee for amounts above $50 billion under management.
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That amounts to a maximum annual fee of $7.75 million paid to BlackRock for the bond purchases. The firm managed more than $7 trillion at the end of last year and generated more than $14.5 billion in revenue.
The New York Fed said earlier this week that it hired BlackRock to manage purchases of commercial mortgage-backed securities and to oversee certain liquidity facilities.
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“BlackRock was selected on a short-term basis to serve as an investment manager after considering their expertise in trading and analyzing agency CMBS in the secondary market, and robust operational and technological capabilities,” the Fed said.
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BlackRock will also oversee the secondary market corporate credit facility, which will purchase corporate bonds and exchange-traded funds.
The New York Fed said the firm will not earn any other fees or income, including from securities lending, in connection with the facility’s purchase of ETFs.