The following is excerpted from the November issue of Crane Data's Money Fund Intelligence.... This month, Invesco commemorates its 30th anniversary in the cash management business. Its STIC Prime Fund was launched on Nov. 18, 1980, and it remains one of the industry's largest institutional money market funds. The company, which manages over $69 billion in "cash" assets, has since expanded its lineup to 19 money funds in four currencies. We discuss the investment manager's current efforts, and we look back at money fund history with Karen Dunn Kelley, CEO of Invesco Fixed Income, Lyman Missimer, Head of Global Cash Management and Municipals, Tony Wong, Head of Short-Term Investment Grade Credit Research, and Bill Hoppe, Executive VP of Invesco Distributors.
Q: How did Invesco get into the money fund business? Hoppe tells us, "Many years ago when interest rates were significantly higher, (what was then known as) AIM was approached by some people in the banking business.... At the time, expense ratios were in the 35-45 basis point range.... So, ultimately, we got started in the business for institutional investors who wanted a safe product at a more affordable price. We grew the business by creating classes of the funds to accommodate a pricing structure different units of banks and brokerage firms needed, and it has expanded from that point."
Q: What's the biggest challenge today vs. historically? Missimer answers, "We've been living by our famous three tenets of safety, liquidity and yield, and we've stuck with those through thick and thin. In the last few years, we've certainly seen a much more challenging world from a credit standpoint. From a yield standpoint, the challenge has been finding the appropriate securities to buy and finding creditworthy counterparties. The business has evolved and changed. We have had difficult times and easy times. But we've stuck with what we have been doing since 1970 and it has served us well.... We'll stay focused on what we do best, which is providing a creditworthy, stable product for our customers."
Dunn Kelley adds, "From the firm level, we have always looked at cash as an asset class.... We've really put a tremendous amount of effort into the cash business from the entire firm.... We've historically provided our customers what they need to manage their cash and have always tried to be very responsive to them."
Wong says, "The way Karen and the founders of AIM had set it up, the money market product was to be about safety and liquidity. We have always managed on this very steady and intrinsic philosophy of reinforcing those two points before yield. As industry practices and regulatory standards have evolved through the years, and even with the most recent iterations, these changes have typically affected us less than the marketplace. We've always managed in a style that is focused on those things before yield. We really feel the marketplace is moving toward how we have historically managed, so it has had less impact on our shop."
Q: Is it true that Invesco has never had a bailout? Dunn Kelley responds, "That is absolutely correct and it is something that quite frankly we are all very, very proud of as we look at how we've managed the business over many different cycles.... I think when you have an independent, highly qualified expert staff -- their perspective and their sharpness are different from somebody who looks at credit as a relative value."
