This month, Crane Data's Money Fund Intelligence newsletter interviewed Robert Deutsch, Managing Director and Head of Global Liquidity for J.P. Morgan Asset Management. J.P. Morgan is the world's largest manager of money market funds, running almost $360 billion in U.S. domestic and approximately $200 billion in "offshore" US Dollar, Euro, Sterling, Yen, and RMB liquidity funds. Deutsch discussed client concerns, regulatory issues, ultra-low yields, and more in our Q&A. We excerpt some of the highlights below.
Deutsch tells MFI, "This financial crisis has challenged every investor and manager of money funds. It was the most challenging environment we had ever seen, and there are still the unresolved regulatory issues to be addressed. In addition, the challenges for our clients continue. They are trying to evaluate counterparty risks in a more in-depth way than ever before and that is a fairly challenging thing to do. They are updating their investment guidelines, many of which haven't been updated substantially in quite a while."
On regulatory changes, he says, "We are very supportive of what the SEC is doing. We think they are on the right track. We did submit our own letter, as well as supported the ICI position. We pointed out in our letter a couple of things that we think should be different than what the SEC proposed. We are supportive of having liquidity standards, but they suggested potentially having two liquidity standards, one for retail funds and one for institutional funds. We think that is a very bad idea.... I think having two standards can create confusion and more complexity than is needed in the regulation."
On the regulatory reform timetable, Deutsch says, "Our expectation is that the President's Working Group will release their paper this month, and the SEC will release its rules and specifics in the first quarter of 2010.... Call it [the SEC's changes] kind of a 'Phase One' release and tightening of guidelines. But we also understand beyond that there will be further discussion around broader issues; one of the things that will be discussed and debated will be the stable $1 dollar NAV vs. the floating NAV. We are very interested in that debate and engagement. We think it's very important to maintain the stable dollar net asset value for money market funds."
Look for more excerpts from our extensive interview in coming weeks. For a full copy of the article or the most recent issue of MFI, e-mail info@cranedata.us.
