This month in Money Fund Intelligence we interview Charlie Morrison, senior vice president and leader of the Money Market Group for Fidelity Management & Research Company. With taxable and municipal money market funds totaling over $460 billion, Fidelity Investments is by far the largest money fund manager. Below, we excerpt from the interview.
Morrison tells MFI, "Historically, the biggest challenge has always been protecting the NAV and providing liquidity. We clearly take that to heart, and we have never wavered since we started in this business. The most significant challenges in the current market are the impact of very low rates on fund yields, and obviously, continued pressure in the credit markets."
He says, "One of the things that we have been very careful about is making sure that, not only do we want our shareholders to be comfortable with us but we want to be comfortable with our shareholders. It is very important to make sure that you've got some stability in your customer base, particularly when dealing with what is considered a highly liquid asset class. We have always pushed against hot money.... It's to the benefit of all of our customers if we have stable assets in the funds.
On Fidelity's keys to success, he says, "This business is a franchise business for us and it has been for many years. We've had a very long-term commitment in terms of providing whatever resources are necessary to manage money market funds in the most effective way.... We take this business very seriously, and have populated our portfolio manager, trader and analyst positions with some of our most experienced fixed income professionals. You can see that in the returns that we have been able to generate over the years, and obviously in the stability of fund NAV's and the liquidity that we have provided to our shareholders."
Morrison continues, "I am extremely proud of the work that our research team executed over the past year. In combination with our portfolio managers and traders, the team navigated our funds through the most difficult market any one of us has ever experienced. The decision making throughout the year was exceptionally strong and clearly kept us out of harm's way.... I firmly believe that it was a solid investment process and clear-headed decision making that allowed us to maneuver through 2008 so well. The past year clearly provided an opportunity for us to differentiate ourselves in an industry where, generally speaking, it is difficult to do so."
Regarding possible changes to money funds, he says, "Generally speaking, our industry has performed well over the past year, despite significant challenges. Yet we are thinking about ways to make it even that much stronger.... We think the industry ought to focus on creating an environment, on its own, that supports the stability of money market funds and safety for our shareholders.... Rule 2a-7 has served the industry well for many years, but reviewing it following the events of last fall certainly makes sense at this point."
