BlackRock Inc. has agreed to purchase an $87 billionmoney-market fund business from Bank of America Corp. as it buildsscale in an industry grappling with new regulations.

The deal will involve merging Bank of America money funds andseparate accounts into BlackRock's offerings, the New York-basedasset manager said Tuesday in a statement. This will bringBlackRock's cash-management business to about $372 billion inassets.

BlackRock is expanding the business as it contends with interestrates that have remained near historic lows in the wake of the 2008financial crisis. Managers are restructuring money-market funds tocomply with U.S. Securities and Exchange Commission (SEC) rules that forceinstitutional prime funds to adopt a floating share price.Banks are also dealing with Basel III requirements, which make it more expensive to hold bigcash deposits.

“The large compliance cost across the whole industry makes thecost of business substantially higher,” Tom Callahan, co-head ofglobal cash management at BlackRock, said in an interview. “Itfavors scale players.”

For Bank of America, being a smaller player in money marketfunds made little sense when its clients could be given access tothird-party products. The Charlotte, North Carolina-based firm soldmost of its stock and bond mutual fund business in 2010 toAmeriprise Financial Inc. for about $1 billion. Ameriprise gained$189 billion in assets in the deal.

“The transaction is consistent with Bank of America's ongoingefforts to simplify our business, in this instance by outsourcingcertain product manufacturing functions to an industry leader,”Susan McCabe, a Bank of America spokeswoman, said in a statement.“Rather than manufacture liquidity solutions in-house, the bankwill focus on delivering best-in-class liquidity products solelyfrom third-party providers.”

Terms of the deal, which is expected to be completed in thefirst half of next year, weren't disclosed. BlackRock's ties withBank of America date to 2006 when the asset manager bought MerrillLynch's investment-management business. BlackRock managed $4.5trillion in assets at the end of September.

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