This month Money Fund Intelligence interviewed UBS Global Asset Management's Rob Sabatino, Head of US Taxable Money Markets, and Ryan Nugent, Portfolio Manager for Municipal Money Market funds. We also discussed distribution topics with Joe Abed, Managing Director and Head of UBS's Money Market and Short Duration Business, and with Tom Cameron, Executive Director & Head of Short Duration Distribution. We excerpt from the article below, and we will continue the interview in tomorrow's Crane Data News.
We asked, "What's been the biggest challenge in managing a money fund?" Sabatino told us, "The greatest challenge has been managing our shareholder's expectations. There is a delicate balance between risk and reward, especially in a low interest rate environment.... In the current environment the majority of investors are more concerned about safety and liquidity.... But given the low interest rate environment, which we expect to continue for quite some time, I think it's going to represent a bigger challenge going forward, especially when clients return to a focus on yield," he added.
Nugent said, "On the municipal side, the challenge is finding things to invest in that pass our rigorous credit standards. There used to be a greater range of quality securities for us to purchase -- banks were in much better condition. But now, it seems everyone is chasing the same, much smaller pool of high quality securities out there. Since we are not willing to reduce our credit and liquidity standards, it has been difficult to get fully invested at times."
Sabatino also tells us, "Asset flows have a significant impact on managing a portfolio. We try to maintain a close relationship with all of our shareholders, and we utilize our sales force in order to do that. It is necessary to actively monitor and control the shareholder concentration to mitigate some of the risk ... especially given the rise of portals. Asset flows could become more volatile now than in the past. We manage our funds to meet stress tests in terms of potential outflows and liquidity needs."
We asked, "What are the factors driving your growth? (UBS has more than doubled its money fund assets since October 2007.) Abed told us, "We were helped by a growing market, but we've basically doubled our market share in the institutional space. We didn't do it like some of our peers, who attracted hot money with higher yields by temporarily waiving fees, or worse, by taking more risk in the portfolios. We've done it profitably the whole way through, and we've been very conservative in our portfolio management the entire time, not trying to play the yield game or chase hot money. It's been the very steady growth of a stable base of assets, not concentrated in any way or any market segment."
Look for more of Money Fund Intelligence's UBS profile tomorrow.
