The Treasury Management Association of New York's annual New York Cash Exchange conference featured a talk by Reserve founder and chairman Bruce Bent entitled, "All Money Funds Are Not Created Equal". Bent introduced himself to the audience, "I'm the guy who invented the money fund?" Referring to recent "interesting times" in the $3.5 trillion money fund business, he asked, "Are we having fun yet?"
Bent explained the importance of cash to Reserve, which has grown from $50 to $125 billion in assets over the past 14 months, and to all companies. "The essence of our all our lives is cash. No matter what industry you're in, and even if you're a charity, you need cash." He explained, "The management of cash is unique" and "antithetical" to stock investing. The tenets, he said, are "sanctity of principal, liquidity and a reasonable rate of return". A money fund "should bore you into a sound night's sleep" he told the NYCE crowd.
Citing a focus on performance, he said, "[People think that] the driving force in a money fund is yield -- it's not." He jokingly suggested that the test should be "knocking on doors at 3 a.m. to ask if you're sleeping". A lot of imposters claimed to be "just like a money fund," said Bent. But he added, "You is or you ain't, and there's a lot of ain'ts."
Bent urged more disclosure, though he doubted regulatory changes are needed for money funds. "People have questions. People have concerns," he said. Reserve, he says, has been disclosing daily portfolio holdings. Bent dismissed concerns about insider trading or revealing proprietary strategies to competitors by releasing money fund portfolios. He paraphrased Warren Buffett, saying, "If you don't understand it, don't invest in it."
Though Reserve didn't invest in SIVs, Bent defended the assets. He cited the diversified nature of asset-backed commercial paper as a major plus, saying, "To say that all SIVs are bad is wrong, and all subprimes are not bad." He added, "Suddenly you had an abandonment of a lot of products, [some of which were] really good products." Bent said of losses taken by some advisors, "I think a lot of this stuff will be recovered." Finally, he told conference attendees, "I don't think the world is coming to an end."
