Today, we excerpt from Crane Data's latest monthly Money Fund Intelligence "Profile," which features Reich & Tang, manager of the Daily Income Money Market Funds. Reich & Tang, a subsidiary of Natixis Global Asset Management, has been managing cash since 1974, making it one of the oldest money fund managers in existence. We asked President & CEO Michael Lydon about the company's "white-labeled" money funds, about its FDIC-insured sweep program, and about the cash investment marketplace in general.
Q: How long has your company been running money funds? A: Reich & Tang has been managing money market assets for 35 years. Cash management has always been our primary business, and we will continue to remain true to our core competency. We currently offer a full family of money market funds and a FDIC-insured Deposit Product together with debit card and check writing services. We specialize in providing financial intermediaries with quality service and flexible cash management alternatives they can offer to their client base.
Q: What's the biggest challenge managing your money funds? A: Our biggest challenge today is the low interest rate environment, which has forced us to waive expenses like most other fund sponsors. Reich & Tang has been able to withstand this problem because of growth in our other business lines, namely our FDIC-insured product and separately managed accounts. Our biggest challenge historically has been to maintain our conservative, credit focused philosophy. During periods of strong growth, investors tend to put yield first, which Reich & Tang has never done. We believe liquidity, safety, and credit quality is important in all market environments, regardless of the interest rate environment. During periods of uncertainty, like the last few years, investors have gravitated to our ideals.
Q: The marketplace has seen some asset managers exiting the money fund business. What is driving the merger trend? A: Plenty has changed in the money fund business since September of 2008. There is newly perceived investment risk, uncertainty regarding the regulatory environment, and the realization that rating agencies can no longer be relied upon when it comes to security selection. Once you consider these issues, along with the current rate environment and necessary fee waivers, the economics no longer make sense for many asset managers still running money funds. A "fund merger" is an excellent option for asset managers who do not wish to maintain a money fund as part of their family of funds.
Reich & Tang has been able to merge an existing money market fund, normally used as a fund family's exchange vehicle, into one of our Daily Income Fund portfolios. This strategy allows the asset manager to maintain its recordkeeping and client servicing relationships while we provide them a cost-effective, money market fund solution. The asset manager can focus on its core business and continue to offer a money fund option to its shareholders, often at a lower expense ratio. All in all, it is an equation that makes a lot of sense. Also, from a brand consistency standpoint, it certainly doesn't hurt that the Daily Income Fund is such a generic name.
Look for more excerpts from the Reich & Tang profile in coming days, or e-mail Kaio to request the latest Money Fund Intelligence.
