Below, we excerpt from the article, "Goldman Sachs Marks 30 Years In Money Funds," which is featured in the April issue of Crane Data's Money Fund Intelligence. The current issue of MFI writes: This month, we interview Goldman Sachs Asset Management's Dave Fishman and James McCarthy, Co-Heads of GSAM's Global Liquidity Management Team. Below, our Q&A discusses the advisor's philosophies and strategies, as well as changes in the current market environment.
Q: How long has GSAM been involved in running money funds? How long have you been involved? Fishman says, "Goldman Sachs has been in the money management business for 30 years: in fact, our global liquidity team celebrates the anniversary in May. Goldman Sachs was in the money market fund business even before it established its asset management business, so liquidity management is at the core of GSAM's enterprise, and remains one of its largest components. Assets under our liquidity team's management have risen from just $2 billion in 1981 to $244 billion this year, approximately a third of GSAM's total AUM [as of March 31, 2011]."
McCarthy adds, "Our portfolio management team has an average of 15 years of investment experience, encompassing both strong bull markets and deep bear markets. In fact, this year also marks the 15th anniversary of a pivotal point in our growth, when we launched our offshore business, taking a major step in the long-term project to expand our global footprint."
Q: Over the years, where have you seen the biggest changes in GSAM's business? Fishman responds, "We think of this global expansion as the biggest change, though it's more of a long-term evolution. It fits with Goldman Sachs' firm-wide commitment to following growth around the world. At GSAM, we believe a global approach enhances our portfolio management capabilities, in terms of flexibility and risk management, as well as our ability to deliver services to more clients."
"Our global reach is reflected in the comprehensive range of onshore and offshore fund strategies we offer -- from government, commercial paper and tax exempt funds, to our separately managed account capabilities. Increasingly, we are partnering with firms around the world to serve clients beyond our largest and most mature market in the US, and we have expanded the range of currencies in which we can provide liquidity," he says.
Fishman adds, "In addition, Kathleen Hughes joined recently as our head of global liquidity sales and distribution, based in London, and we have grown our European team. We've also made significant progress in the Asia Pacific region, with ventures in China and Australia. We expect this global expansion to continue rapidly over the next three to five years."
Q: What have been the main constants? McCarthy tells MFI, "Over the years we have identified core principles that have seen us through periods of recession and extraordinary market upheaval, and obviously most recently the global financial crisis. First, we view cash as its own asset class. We believe investors should approach cash management just as they would any other investment strategy: by creating a diversified portfolio that balances the investor's specific goals and risk tolerance. Liquidity maintenance and preservation of principal are the foundations of our investment approach. The financial crisis highlighted that liquidity was not properly priced, and now we believe the market should reflect the appropriate premium."
Q: What are your investors concerned about these days? Fishman answers, "In our view, the risks currently facing investors are as great as they've been in the 40 or so years of the money market funds industry. Over the past couple of years, and even in the past couple of months, the global marketplace has been driven by unpredictable and in some cases cataclysmic events: the credit crisis, the Eurozone's sovereign debt crisis, political upheaval across the Middle East and North Africa and the largest earthquake on record in Japan. Our clients are understandably worried about what they're going to see in the newspaper tomorrow. So the short answer is, investor concerns are twofold: they're worried about everything, and they're worried about whether they're adequately protected."
He adds, "Against this backdrop, investors want to give the responsibility of actively managing these risks to industry professionals with the capacity to analyze risks as they arise, and the flexibility to respond swiftly. Our clients value our global reach, which enables us to take a far nimbler approach to investing internationally."
Q: How do you help investors to address these concerns? McCarthy says, "One of our key objectives in creating funds over the years has been to give investors the opportunity to make informed decisions about their exposures in overseas markets. To that end, GSAM created two distinct US commercial paper funds, with one offering exposure to foreign commercial paper and/or foreign bank obligations, and the other focusing on US domestic issues. The aim was to provide investors products that cater to their risk tolerance and comfort level, which has become particularly relevant against the backdrop of sovereign risk and fragile European markets."
