Below, we except from the April issue of Money Fund Intelligence, which "profiles" Joe Lynagh of the T. Rowe Price Group. Lynagh, who had managed TRP's tax-exempt money funds, took over the taxable funds from his predecessor, veteran James MacDonald, in January 2009. The fund management team overseas about $22 billion in money market funds, including the $6.7 billion T. Rowe Price Prime Reserves and the $6.4 billion T. Rowe Price Summit Cash Reserves, as well as separately managed accounts for its stock funds.
Lynagh tells us, "Fund management is and has always been about security selection. We maintain a very rigorous credit selection process. It's always been internally done. We certainly will reference the rating agencies, but we don't rely upon them. Anything that I buy in a money fund has to be scrubbed and scrutinized and approved by our credit analysts. Our investment process is such that I can't touch anything without it having first been reviewed by the credit team."
On T. Rowe's success in the money markets, he says, "Success requires that you be able to repeat an investment process consistently. You create an investment process that is attentive to the product's mission, that you can replicate and which will deliver yield, all the while being able to deliver that yield at an attractive expense ratio. So when I think about T. Rowe Price, it's really the culture in terms of how we run things and how we approach it."
"Success is not only in terms of your asset flows or how big you've gotten, but it's also about, especially in the current environment, whether you have been able to dodge bullets that others have taken.... We've been very fortunate. We've got a lot of really good people who have kept us out of the trouble that has really hit some of our peers hard," says Lynagh.
We asked, "Can money funds recover [from Reserve]?" Lynagh answers, "I definitely believe that they can and will recover. I think it will be a different environment though. Investors will be asking different questions, or maybe have slightly different priorities. I think managers will be a little more careful on how they are running their fund, and will maybe rethink the place of this product, within a larger investor profile."
Finally, he adds, "The good thing about the ICI recommendations is that the industry taking a hard look at itself and admitting that maybe there are some changes that need to be made here. What we all thought was perhaps common practice, is perhaps not the way everybody was doing it." To request a full copy of the interview, e-mail Pete.
