This month, Money Fund Intelligence speaks with Invesco's Greg McGreevey, CEO of Fixed Income; Lyman Missimer, head of global cash management; and Tony Wong, head of global cash management research. We ask the three about recent initiatives, pending regulatory proposals, and a number of other money fund-related issues. Excerpts of our interview follow.
MFI: Tell us a little bit about Invesco's history with money market funds. Missimer: Invesco has deep roots in the money fund space dating back to 1980 when we established our first money market portfolio. As a business, we leverage the strength of Invesco as an independent and global investment firm with a diversified base of assets, of which money markets constitute approximately 12%. There's a commitment to the space from the highest levels of Invesco's management, including Karen Dunn Kelley, Senior Managing Director for Investments, and CEO Marty Flanagan. Both Karen and Marty are very engaged in money market industry policy and leadership.
Wong: Our main differentiator has been and continues to be our long-term approach to the money market business. We have a clear vision for a future in this industry that is grounded in our investment philosophy, client focus and organizational strength. Our investment philosophy and process have a reputation in the industry for being conservative -- in the positive sense of the word -- being careful and judicious. We embrace that. It's something our clients appreciate and have come to expect from us.
MFI: What have you been focusing on? McGreevey: I came on board recently to build on Invesco's existing and very solid foundation in the fixed income arena in order to pursue opportunities in a number of key areas where we believe we have a leadership position. Cash in clearly one of these areas. Part of our strategy moving forward will be to grow and support these areas in order to take them to the next level. Missimer: We're very conscious of what our shareholders want -- they've been very clear -- to stay out of trouble and to stay away from headline credit risk to the extent possible by continuing to manage using the same proven style we've employed for more than 30 years.
McGreevey: We are dedicated to this business. We absolutely believe that we have the right team and the right focus to continue driving investment performance. I believe that we can lever the 30 years of tremendous experience that we have in the money market business. We have a leadership position that we want to maintain and grow through our dedication to help clients meet their cash management needs.
MFI: What's been your biggest challenge? McGreevey: These have been challenging times for money market funds, particularly in the second half of 2011 with the Eurozone debt crisis, the downgrade of U.S. debt and the persistent ultra-low interest rate environment. But our long-term approach to short-term investing, grounded in principles of safety, liquidity and yield, have kept us well-positioned to address these challenges. The main concern more recently has been possible additional regulatory reforms in the money market industry.
Missimer: Invesco prides itself on direct and regular communication with clients, and during these challenging times we have put particular emphasis on supplementing this with additional communications to help clients understand if and how the most recent headlines and economic news affect them. For example, in response to European concerns, in June of 2011 we began publishing and distributing exposures by country for all of our prime money market funds. We have been upfront and transparent with our clients.
MFI: You guys have never had any bailouts, correct? Wong: You are absolutely right. There has been no loss; no credit support agreements; no capital injections; no liquidity bailouts. I think this is a testament to how we look at this space and the efficacy of our proven investment process. With the shortest-term asset class, we take a very long-term approach focusing on safety and liquidity. That is something that we live by and breathe each and every day. We have a dedicated team on credit for the space as well as on the portfolio side.
Missimer: We've always drawn clear lines between credit and portfolio management where credit would make decisions without undue pressure from the portfolio management team. This allowed them to make unbiased, independent decisions on whether we should buy a credit and for how long. I believe that process kept us out of trouble during the worst of times. That's always been a staple of our investment process and I think a lot of our peers have moved to that kind of model since 2008.
MFI: Can you talk about fee waivers and low rates? Missimer: As the Fed indicated in the last FOMC meeting, it intends to keep the target interest rate low well into 2014. So this will clearly continue to be a challenging environment for our industry. A lot has been said about fees being squeezed and expense ratios dropping in the industry. While we are closely monitoring the trend, we are confident our structure is less sensitive to these pressures. Over the past five years, the expense ratios for our funds have been below the industry average. Because our clients are largely institutional, we haven't had to waive as many fees. (Look for more excerpts in coming days, or e-mail info@cranedata.com to request the full Invesco interview.)
