BlackRock, the asset manager 49 per cent owned by Merrill Lynch, is set to be signed up as the manager of the $75bn superfund being put together by the top three US banks.
The appointment of BlackRock, one of the world’s leading bond managers, is seen as an important vote of confidence in the plan, which met with initial scepticism from some banks and investors.
Larry Fink, BlackRock’s chief executive, has become a strong advocate of the plan and his team gave by far the best pitch for the business, according to a person close to the process.
The fund, which is backed by the US Treasury, plans to buy assets from cash-strapped structured investment vehicles (SIVs) to head off the threat of firesales.
Some of the SIVs are struggling to renew their main commercial paper funding because investors are concerned about the vehicles’ subprime mortgage exposure.
Forced sales of assets by the SIVs would further depress the prices of asset-backed securities and bank debt.
The plan was leaked five weeks ago, when it was still at a very early stage, leaving it vulnerable to critics who complained that key details had not been worked out. But there has been growing support for the proposal since the banks – Citigroup, Bank of America and JPMorgan Chase – agreed to important changes 10 days ago.
These included raising the fees for selling to the fund to up to 1 per cent of assets. This will allow the fund to pay more to the banks that will provide back-up liquidity and to the managers.
Some critics saw the plan as a bail-out of Citigroup, which manages SIVs with $80bn of assets and is using its stretched balance sheet to help fund them.
The appointment of BlackRock should increase confidence that the prices the fund pays for SIV assets will be set independently of the banks, people close to the plan said.
Interest in the fund has grown amid hopes that the fund could help prevent dislocation in the market for bank debt as well as asset-backed securities.
Almost half SIV assets are bank debt where prices are already under pressure, raising concerns about banks’ funding costs.
The lead banks are expected to start syndicating the bank facilities in the first week of December and the fund could be up and running by early January.
BlackRock declined to comment.
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