This month's Money Fund Intelligence revisits OppenheimerFunds, which we previously profiled in our October 2007 issue (following their entry into the institutional money fund marketplace). Below, we interview members of the company's Cash Strategies team and managers of Oppenheimer Money Market Fund and Oppenheimer Institutional MMF. Excerpts from our Q&A with Senior Vice President, Director & Portfolio Manager Carol Wolf, VP & PM Chris Proctor, and VP Jesse Levitt follow.
First we asked, "How has Oppenheimer been weathering the storm and now the yield drought? Proctor responds, "We have enjoyed strong relative performance during the credit crisis and in this current low interest rate environment. We think the reason for this is because we continue to stick to our investment process that has been in place since Carol took over the group. The investment process is a formal delineation of responsibilities that we have between portfolio management, trading and credit. This is set up so that there isn't excessive risk taking from any one group in the pursuit of performance."
He continues, "We admit that operating in this rate environment remains very difficult. We've seen outflows, like others, in our retail funds. Our institutional base has remained steady over this time." On the tumultuous environment, Proctor adds, "It does give you opportunities. But we don't change our investment process because of a blip up in LIBOR.... The general investment strategy we employ is one where we take advantage of our approved credit list, the names that we like, while we try to maintain flexibility for when rates increase, as they did recently."
We then asked, "How long have you all been running money funds? Wolf answers, "We've been running funds for over 30 years. It began back with the Daily Cash Accumulation Fund and the Centennial Funds in the '70's. I have been in the money market business since the mid-'80's.... Chris has been with Oppenheimer for 2 years, but he has 20 years of money market experience. I have a team of 11 people, and they average 12 years of money market experience."
Proctor says, "We have $12.2 billion in cash assets that fall under our Cash Strategies umbrella. There are four different types of assets. We run 2a-7 funds, about $8 billion there and we run some separate account money, both 2a-7-like and also non-2a-7 out to 3 years. Probably the fastest-growing segment that Carol manages is the collateral for the funds which is managed with Agencies and Treasuries. That's the cash collateral for derivatives contracts in the commodities funds. Oppenheimer's overall mutual fund assets are currently about $163 billion."
MFI asks, "What's your biggest challenge? Wolf says, "I think the biggest challenge today is the 30% liquidity bucket imposed by the amendments to Rule 2a-7. Supply is falling and everybody is looking [to put] 30% of their portfolio in that short period. This keeps yields very, very low in the 7 day and under space.... We've seen consolidation in the banking and in the asset-backed commercial paper sector, so a lot of issuers that we previously invested in are no longer issuing. In the past [the challenge] was credit, and it still remains credit. Knowing what it is that you are really buying.... Knowing what the asset-backed paper structures are is something that has always been one of our strengths."
Levitt adds, "On the distribution side, the historically low yield environment has made it increasingly difficult to draw new money fund investors. Alternative investment options have become more attractive, and as multiple money fund yields continue to cluster together, there becomes a greater emphasis on differentiating yourself by other means." Look for more excerpts from our interview in coming days, or e-mail info@cranedata.us to request the full article.
