Today, we reprint the second half of our October Money Fund Intelligence "Fund Profile," which interviews SunGard Vince Tolve and Bob Ward. MFI: What is your biggest differentiator ... and your biggest challenge? Ward: SunGard is in a very unique position in the portal space as it is not a bank or a fund manager. Although we do operate as a broker-dealer to help service our customers' needs, we do not take receipt of cash or securities. This allows us to offer a completely independent, direct and fund-agnostic platform, providing our customers with the technology and information they need to make informed investment decisions in a secure, online and transparent environment.
Tolve: We are also not just a stand-alone portal, but one key component of a much larger integrated treasury ecosystem. By combining the SGN Short-Term Cash Management portal with our AvantGard Treasury solutions, SunGard can bring even more value to our customers in terms of operational efficiencies. Ward: The biggest challenge we face as we move forward is the extended low interest rate environment. However, money market funds will remain an important asset class for institutional investors.
MFI: What are your thoughts on the future of the portal market? Tolve: We believe the future will continue to be bright for money market funds and the portal business in general. We are investing resources in mobile technologies, enhanced compliance and research functionality, as well as expanding into new markets outside the US. By leveraging our global presence, we can achieve this much faster than a smaller stand-alone portal provider. We are also focused on adding value with our SunGard Global Services business, which offers consulting expertise in helping customers meet new regulations, improve risk management, and optimize their technology and process infrastructures.
MFI: Do you have any thoughts on the future of money market funds? Ward: Omnibus trading is an interesting one for us as we have never provided an omnibus model via SGN. All accounts on SGN are set up directly at the fund's transfer agent in the customer's name and not in the name of an intermediary bank. This model not only promotes transparency and improves communication between the fund and the shareholder, but also has the potential to spread counterparty risk across the funds. After the events of 2008, many customers came to us looking for a model that helped them accomplish those two goals.
Tolve: Maintaining a direct account in the name of the actual shareholder has some significant benefits.... As mentioned earlier, not only is the counterparty risk diversified by settlement occurring with the fund families on an individual basis, the direct model also adds protection from a business continuity perspective. In an extreme circumstance, imagine an investor lost internet connectivity and therefore could not access the portal to enter orders; and because of the disaster, could not reach our traders to trade via phone. Since the accounts are registered in the customer's name, the client could still access their cash by going to the fund directly to place an order.
Ward: The direct model also has notable benefits to the funds themselves, as the portfolio managers have clear visibility of the investors’ flows in and out of the funds. This transparency enables the fund manager to make more informed investment management decisions around cash forecasting, liquidity and maturity structure, which benefits the fund but more importantly, all shareholders of the fund.
Tolve: Lastly, it's very important to our customers, many of which are large multinational corporations, to have a rapport with the fund managers themselves as money market fund investment is a piece of a much larger banking relationship. At SunGard, we appreciate that these relationships are critically important and strive to promote direct communication between the fund and the shareholder while automating the execution, compliance and settlement side of the cash management process.
Ward: As for regulatory reforms in the U.S., we have seen some significant change driven by regulators as well as voluntary industry initiatives that have increased the liquidity, transparency and credit quality of money market mutual funds for all investors. We are encouraged by some of the additional reform activity in other countries to help make offshore funds more consistent and transparent. Note: Crane Data provides Portfolio Holdings information to SunGard's portal.
