This month Crane Data's flagship Money Fund Intelligence publication interviewed Calamos Investments' Senior Portfolio Manager and money fund industry veteran Frank Rachwalski, who has been managing money funds for over three decades and oversees the Calamos Government Money Market Fund. Below, we excerpt from Rachwalski's comments about recent market turmoil, events in the government investment space, and the past and future of money market mutual funds.

He first told MFI, "We are glad we made the decision to go with a government fund. It gave an added layer of protection.... If you go back to 2007, you were not getting paid to be in non-government funds. The yield relationship between an institutional government fund and an institutional prime fund was only three to five basis points. Forget it, it is not worth it. You are better off in a government fund. It is the flight to quality instrument."

We asked, "How is the government agency market doing?" Rachwalski says, "The biggest thing is that all markets suffered dislocation. There are wider spreads between bid and ask. It even affected the short government market. What's been very helpful to providing a bid to government securities is that every other money fund has been emphasizing agencies, because they are safe."

Are you buying Treasuries in the fund? "I love the government but not that much, especially if they essentially guarantee Fannie, Freddie and Home Loan." Did they guaranty Home Loan too? "They're part of the same barrel.... They didn't place them in receivership, but there is essentially a U.S. Government backstop." Are there any agencies that people are avoiding? "The one that comes to mind is Federal Agriculture Mortgage Corp. It's an unusual one. You're not quite sure how to treat that one, and it trades a little worse than Home Loan."

What's the portfolio look like in general? "It's rated triple-A by Standard Poor's and Moody's, which places some restrictions on exposures per issuer. You can't go any higher than one-third of assets in any one issuer. But we've been typically running about 25 to 30 percent in most of the agencies, and the rest is repo," says Rachwalski. Does 2a-7 limit diversity to agencies? "It does not. It's the rating agencies that require you to have diversification by issuer in government money funds.... 2a-7 will let you hold an unlimited quantity of any agency."

On his history, Rachwalski, tells us, "I started with Kemper in 1973. We were about a year after Reserve Fund.... We realized that it was a good vehicle to offer, it had a lot of attributes. After we started we were up to $40 billion at one point. It was called Kemper Money Market Fund originally.... Money funds all started out at a buck per share, and we did amortized cost. If my recollection is right, prior to that [the first money fund], in a mutual fund if you kept what they called 'cash investments' of 60 days or under, you could carry them at book value. So there was some precedent for allowing money funds to do that technique."

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