A 25-basis-point fall in a cash fund’s yield is not a 25-basis-point cut to its manager’s fee. A basis point is one hundredth of a percentage point. The same unit can describe two different prices: the return earned by the customer and the charge earned by the business managing the money.
That distinction matters when explaining how monetary policy reaches listed asset managers. There are several steps between a change in short-term rates and a change in company profit. The fund’s investments reprice, customers decide where to keep cash, and the manager collects fees after any waivers and distribution costs.
Fact: the fund is an investment, not a bank deposit
The SEC’s Investor.gov guide to money-market funds describes funds investing in liquid, short-term debt instruments, cash and cash equivalents. Their yields generally reflect short-term interest rates. They are mutual funds, distinct from money-market deposit accounts, and are not insured by the Federal Deposit Insurance Corporation.
That gives the first link in transmission. As investments mature or reprice, the income available to distribute can change. A fund’s existing portfolio, expenses and the timing of replacement investments matter. One policy announcement does not establish the yield every fund will display that day.
There is also a separate business behind the fund. Customers own fund shares; shareholders in the listed manager own an interest in the management company. A dollar of customer investment income is not a dollar of that company’s revenue.
Fact: Schwab reports a separate fee measure
The Charles Schwab Corporation (NYSE: SCHW) provides a useful historical comparison in its 2025 annual filing. Its Schwab money-market funds had average client assets of $652.798 billion and generated $1.783 billion of revenue in 2025. The reported average fee was 0.27%, the same rounded rate as in 2024.
These are annual business measures, not a fund’s current customer yield. The table separates the amount managed from revenue and the average fee. It does not support replacing the fee with the federal funds rate when estimating revenue.
Historical disclosure · 2025
Assets and fees measure different things
Average client assets
Schwab money-market funds
Average fee
Annual reported measure
Interpretation: follow the balance as well as the rate
Consider a hypothetical manager with $100 billion of average assets and a retained annual fee of 0.20%. Before operating costs, that produces $200 million of annual revenue. Suppose the customer’s yield falls from 4% to 3.75%, while assets and the retained fee remain unchanged. Manager revenue in this simplified calculation remains $200 million.
Now change the assumption. If average assets fall by 10%, to $90 billion, at the same fee, annual revenue falls to $180 million. If assets remain $100 billion but the retained fee falls to 0.18%, revenue also becomes $180 million. The result looks identical; the cause and the evidence needed to explain it differ.
These are arithmetic examples, not estimates for Schwab or another company. They assume stable balances throughout the year, a single fee and no other income. Real revenue depends on daily balances, product and share-class mix, contractual charges, waivers and payments to intermediaries. Profit requires a further deduction for the costs of running the business.
Fact: low yields can reach fees through waivers
Federated Hermes, Inc. (NYSE: FHI), whose listed security is Class B common stock, explains another channel in its 2025 annual filing. Very low yields can leave some funds unable to cover operating expenses, leading to voluntary yield-related fee waivers. Intermediaries may share part of the effect through lower distribution expenses.
The company reported no such yield-related waivers in 2023–2025. That does not mean it charged every contractual fee: competitive and other waivers are separate. Nor does a modest rate decline establish that yield-related waivers will return. The filing says the relationship is not directly proportional.
Who could benefit?
Interpretation: Schwab could benefit from retaining or attracting money-market balances where the resulting fees exceed the associated costs. The condition is actual balance retention and fee economics over subsequent quarters. A lower customer yield alone supplies neither result, and movement between products within Schwab can affect other revenue lines too.
BlackRock, Inc. (NYSE: BLK) has a substantial cash-management business. Its 2025 annual filing reported approximately $1.1 trillion of cash-management assets at year end. The category includes money-market funds and other products, across several currencies. It should not be treated as one US-dollar fund.
Interpretation: BlackRock could benefit if customers retain cash-management mandates and the associated fees produce a positive contribution after costs. Company-wide materiality depends on that contribution alongside its other businesses. The asset total establishes scale, not an earnings forecast or a claim that all assets earn the same fee.
Who’s at risk?
Interpretation: Federated Hermes faces a conditional fee risk if yields become low enough to require additional yield-related waivers. To judge its size, compare the lost revenue with any reduction in distribution expense. Gross waived fees alone would overstate the profit effect where intermediaries absorb part of the cost.
Schwab and BlackRock also face a balance risk if customers move money elsewhere or into products with different fees. The relevant horizon is the period over which average assets and product mix change. A movement from one internal product to another requires checking both sides before declaring a company-wide loss.
Speculation: three paths after a rate decline
Customers might accept a lower yield and retain balances for liquidity. They might choose longer-duration investments. Or competing cash products might change their rates in a way that leaves relative demand largely intact. These are scenarios, without assigned probabilities; none follows automatically from a quarter-point decision.
The useful next evidence is a reconciliation of average cash assets, net flows, retained fees, waivers and distribution costs. This article uses dated annual disclosures to explain mechanisms; it does not describe current fund yields or predict the next quarter. Rising balances with stable retained fees would weaken a simple revenue-loss story. Greater waivers or lower balances would challenge a favourable one.
General information about financial disclosures and policy transmission, not investment advice.
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