BlackRock will offer services to the Fed as primary dealer
The Federal Reserve has hired BlackRock to manage its purchase of bonds, mortgage-backed securities and ETFs in an attempt to ease the economic and financial consequences of the coronavirus pandemic.
The move, as reported by the Financial Times, is reminiscent of the Fed’s decision during the 2008-09 Global Financial Crisis, during which the asset manager was brought on board to manage assets from Bear Stearns and American International Group, a role it has been granted without a formal tender process on both occasions.
New York’s branch of the Fed cited the firm’s “robust operational and technological capabilities”, while highlighting the engagement as “short-term” while the Fed organises new facilities.
BlackRock will offer services to the central bank as primary dealer for the expanded mortgage-backed security purchasing programme, as well as investment manager in primary and secondary market corporate bonds purchases.
For the first time, the Fed will include ETFs as part of its secondary market programme, with up to 20% able to be invested into a single ETF, according to details of the programme.
This could see the asset manager benefit from fees, if the Fed were to buy its own ETFs.