This month's issue of Money Fund Intelligence, our flagship monthly newsletter, profiled Utendahl Capital Management's UCM Institutional Money Fund. We interviewed veteran money fund portfolio manager and CIO Jo Ann Corkran and Sales Director Terry Prince about the challenges of running a money fund in today's market, and the opportunities available to funds affiliated with a minority-owned business. (Chairman John Utendahl started the firm after working at Solomon Brothers and Merrill Lynch.)

Corkran tells us, "Usually the main challenge is trying to keep a competitive yield ... but you have to think principal protection first, then liquidity, then yield. People tend to forget those things when times are good. You look at all the funds that have the same total expense ratio.... You don't want to force yourself to be in the top 10th percentile.... You want to show up on the screens, but you don't want to have to do the thing that makes you go out of your way to get an extra basis point."

"But recently the biggest challenge has been trying to stay one step ahead of the next thing that's going to be in the headlines.... Even if it represents minimal credit risk, it could still represent a significant amount of risk. If I'm an assistant treasurer somewhere, there's no upside for me to be involved in a fund that has any indirect subprime. Even though there's no actual credit risk, it's just easier for me to write the letter to my boss that says we have zero exposure."

Terry Prince says of UCM's distribution strategy, "We're on 4 different portals right now, and we are looking to expand.... But our history has proven that the direct sale is the most effective. That is partly because of lack of brand awareness. People aren't going to pick us ... unless they hear the story behind the investment strategy or the story behind our minority- and women-ownership structure. Those are the things that make people want to buy our fund, and those are the things they hear when we get into a direct conversation."

Does the minority-owned label help? Prince says, "It does. It's been a help when prospects say, 'We only do business with our credit banks.' Before I talk to a company, I try to research whether they have a supplier diversity initiative or another program similar to that. If they do, I'll try to steer the conversation towards that topic."

Prince adds, "The silver lining in all this market turmoil is the shift in investor focus towards quality. It's good for us because that's really how Jo Ann and her team manage the fund. We might not be the #1-performing fund. But to have the quality story that we have, that's compelling right now." (Contact Pete Crane to request a copy of the full MFI article.)

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