Deutsche Bank's DB Advisors hosted its second quarterly conference call yesterday, entitled, "Today's Money Market Environment and the Importance of Transparency." Head of Americas Institutional Liquidity Management Kevin Bannerton and Head of Liquidity Portfolio Management, Americas, Joe Benevento discussed current market events, such as the GSEs, regional banks, and ABCP, but the presentation focused on "Money market transparency," or "Providing investors with additional disclosure regarding money market fund holdings so that they can make more informed decisions about the risk characteristics of a fund."
Benevento told listeners, "Any asset with contingent or headline risk seems to have trouble funding in the short-term market." On GSEs, he says, "Without question, you're going to see agency spreads widen" and "shortening portfolios." Finally, on ABCP, he says, "What we're witnessing this year is a lot of tiering and sorting and a recovery in this market.... Transparency is driving tiering and pricing. Just as our customers are asking us for detail, we're asking ABCP [issuers] for details."
Bannerton says its clients are asking for: more tools to understand risk, a need for evidence of greater surveillance, more confidence in managers, standardization, and a user friendly format for categorizing holdings. The company is the first to partner with Clearwater Analytics to attempt to build an industry standard for fund holdings reporting and risk analytics. (See our article "DB Advisors, Clearwater Going Live With Fund Transparency Initiative".)
Deutsche says the solution must be free and web-based, "leveraging the expertise of various stakeholders." Examples of attributes investors might want to see included: sector, security, maturity and CP breakdowns, fund sizes, credit quality and maturity, repo collateral, NRSRO distributions, country allocations, program sponsors, ABCP credit and liquidity support, and performance. DB adds that initially it will be disclosing holdings twice a month, because they "don't want to put their portfolio at a disadvantage" by revealing it too frequently. To listen to conference call replay, click here.
