BlackRock, big funds seen winning US bailout job

Large US asset managers with strong fixed-income records, such as BlackRock Inc, PIMCO and Trust Company of the West...

Large US asset managers with strong fixed-income records, such as BlackRock Inc, PIMCO and Trust Company of the West, are seen as favored to oversee the US government’s $700-billion financial rescue fund.

For these and other firms in the race, the main attraction would be a chance to make reputational, rather than financial, gains as the fees for managing the assets are expected to be low.

“In order to manage fixed-income products very well, you generally need scale. That’s why in the fixed-income space it’s very difficult to break in, because you need the size,” said Roger Smith, an analyst at Fox-Pitt, Kelton.

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In an attempt to clean up the worst financial disaster since the Great Depression, the US Congress has legislated a move to let the government buy illiquid mortgage assets from banks and other financial institutions.

To handle these purchases, the Treasury is hiring money managers as well as appointing an adviser to oversee the overall program. On Monday, the Treasury named Neel Kashkari, assistant secretary for international economics and development, as head of the program.