While it was recorded over a month ago, we just noticed a video interview on the Wells Fargo Advantage Funds's Institutional Cash Management website with Executive V.P. and veteran Portfolio Manager David Sylvester. In a Q&A session run by Wells Key Account Manager Pete Syslack, Sylvester discusses media coverage of, shareholder perceptions on, and the outlook for growth in money market mutual funds.

Sylvester says, "The media has sometimes painted funds that are cash-like funds, but not truly money funds, that encountered difficulty as money funds. Of course, we know that no money fund has had difficulty with its $1.00 NAV." He criticizes some of the press coverage during the crisis, explaining, "A news story is really only as good as the sources, and sometimes the sources ... have a different agenda." He cites coverage of monoline insurers, which frequently quoted hedge funds betting against the companies, as egregious.

Syslack also asks Sylvester about a [Crane Data] prediction that money funds would grow to $7 trillion by 2012. He answers, "Seven trillion is an awfully big number. However, money funds have surprised us in the past with their growth. We've doubled assets since 2000 despite a contraction ... and low rates.... I think investors are attracted to money funds for their proven safety and the managers' ability to manage in good times and in bad. I don't think $7 trillion is impossible to achieve."

When asked about fund managers that chase yield, Sylvester responds, "When I talk to shareholders, what they talk to me about is a stable NAV. They talk about liquidity, and then they talk about yield. But if you look at the agenda of any investment conference, most of the topics are enhancing yield. I think the danger of looking too much at yield, from a portfolio management standpoint, is that you're out of synch with what the shareholder's really want. What they want is stability and safety."

At the time of recording, Sylvester liked banks, which have "direct access to the central bank's" balance sheet, and Fed funds and LIBOR-based floaters. He also notes that government funds, of which Wells has the largest (Wells Fargo Govt MM Inst), have just "a relatively modest yield giveup to prime funds." Finally, Sylvester also mentions Muni funds, noting the yield pickup available in AMT paper. Click here to watch the full video.

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