Fidelity Investments and Charles Schwab Corp. are blocking clients from investing in money-market ETFs on their trading platforms. This unusual move affects three exchange-traded funds offered by BlackRock Inc.
and Texas Capital, which track money-market securities such as Treasury bills and government-backed debt. Schwab, which manages trillions in money-market assets, recently filed plans to launch its own government money-market ETF. A spokesperson said the decision aligns with Schwab’s policy of only offering its own affiliated money-market mutual funds.
Similarly, Fidelity, with $1.5 trillion in money-market fund assets, extends its policy to restrict third-party money-market mutual funds. The restriction has surprised investors, as platforms like Schwab and Fidelity typically do not limit access to ETFs.
Schwab and Fidelity restrict BlackRock funds
Mike Younkman, CIO at Ankerstar Wealth, expressed disappointment over the sell-only mode imposed on Texas Capital’s MMKT fund, leading his firm to shift client assets back into short-term bond ETFs. Jeremy Ingram, CEO and CIO at Beacon Harbor Wealth Advisors, also noted the unexpected nature of the move. Texas Capital and BlackRock have expressed surprise and disappointment at the restriction.
Texas Capital emphasized the importance of their fund for cash management, while BlackRock highlighted the flexibility and choice their iShares money-market ETFs provide. Despite the Federal Reserve’s recent pause in rate hikes, money-market funds continue to attract significant investor interest due to high short-term rates, with assets reaching over $7 trillion. Texas Capital’s fund, the first ETF to follow the SEC’s Rule 2a-7, has seen limited inflows this year.
BlackRock’s prime money-market fund has attracted $43 million since its February launch, and its government offering has seen an $8 million net inflow. The move by Schwab and Fidelity reflects a broader trend within financial institutions to centralize investment products and simplify their platforms, potentially in response to increasing regulatory scrutiny and market competition.
