This month's Money Fund Intelligence continued its series of money fund manager and fund profiles, interviewing Fifth Third Portfolio Manager John Hoeting, who gives his thoughts on the challenges faced by a mid-sized money fund complexes, investment strategies in the current environment, and reactions to the recent SEC proposals to modify money fund regulations.

Q: What has been the big challenge in managing your money fund? Hoeting says, "The challenge for me is selling our conservative high-quality story. It's also about differentiating ourselves versus bank products. As an investment advisor with a bank sponsor, probably my biggest competition is my own bank and deposit products.

Q: Would the new SEC proposals cause any issue with your current portfolio? He responds, "No. We do not buy second tier securities. On spread duration or WAM, three of our four funds are rated and the fourth one is managed as if it is rated. So the 60 day limit is already in place. We've been managing to the spread duration ever since it was introduced. Because we max out the non-putable floaters at the more conservative 397 days, spread duration will not become an issue. So, from a PM perspective I don't see any problems with the recommendations as stated."

He adds of the proposal, "It wasn't a whole lot different than anticipated. I'd like to hear more on the illiquid securities [ban]. With 144A or private placements, it's pretty clear-cut. But with 4(2) registered commercial paper, which has almost become the norm by many issuers to be liquid CP by advisers, this could become a bigger issue."

But regulation is still a huge challenge, he says. "What's coming down the pipe? What impact is that going to have? Is it going to result in wholesale consolidation? You put that with the zero interest rate market that we are in, and you could see a complete change in the industry. Can the players in the industry outlast the zero interest rate market on top of what's coming with the regulation? From a fee structure standpoint, it is going to get more intense. I would say that in the money market industry, a new mandate was created -- everyone wants high yield with no risk, not just with little risk."

To read the entire interview, see the July issue of Money Fund Intelligence or e-mail for a copy.

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