New ETFs from BlackRock take aim at $6 trillion money market industry

BlackRock’s gigantic ETF business has expanded into a new trillion-dollar category. The asset manager on Wednesday launched two money market ETFs — iShares Prime Money Market ETF (PMMF) and iShares Government Money Market ETF (GMMF) . Typically a sleepy corner of the investment world, money market funds have surged in popularity since the Federal Reserve began hiking interest rates in early 2022. The industry had more than $6.8 trillion in assets in the week ended Jan. 29, according to the Investment Company Institute. Of that total, roughly $5.6 trillion was in government funds, and $1.1 trillion in prime funds, which invest more in corporate short-term debt . “We think the time is ripe to be able to innovate in the money market space with the ETF wrapper,” said Steve Laipply, global co-head of iShares fixed income ETFs for BlackRock. Both funds will look similar to traditional money market funds in their category. The government money market fund will hold mostly short-term government debt like Treasury bills, while the prime fund can hold somewhat riskier items like commercial paper in addition to government debt. Prime funds typically have a higher yield than government funds. The BlackRock funds each come with an expense ratio of 0.2%, putting their cost to investors in the same ballpark as the biggest traditional money market products. The ETFs are too new to have official yields, but those should be around 4% if they are in-line with similar products. BlackRock isn’t the first firm to try out this concept. Texas Capital launched a government money market ETF ( MMKT ) in September. That fund has about $50 million in assets and has light trading volume relative to other ETFs, according to FactSet. The Texas Capital fund sports a seven-day yield of 4.42%. Like the Texas Capital ETF, both of the BlackRock funds will abide by SEC regulation 2a-7, which qualifies them as money market funds. It remains to be seen which types of investors will embrace money market ETFs. While ETFs offer intraday liquidity for investors, some financial advisors and their clients may prefer the long-term track records and simplicity of traditional money market funds, many of which are designed to trade at $1. The entrance of BlackRock in to the space could be a beacon for other industry players to jump in with their own funds, given the company’s scale and reputation. BlackRock oversaw about $11.6 trillion in assets as of Dec. 31, 2024.