Today, we excerpt from the latest fund "profile" in our May issue of Money Fund Intelligence.... This month, we interview Deutsche Asset & Wealth Management's Joe Sarbinowski, Global Head of Liquidity Management, Global Client Group & Managing Director, and Joe Benevento, Global Head of Cash Management & Managing Director. We discuss the latest developments in the liquidity markets, get an update on the company's Variable NAV Money Fund, and review offshore and other money fund related issues. Our Q&A follows. [Note: Watch for coverage of SEC Chair Mary Jo White's speech this morning at the ICI GMM later today or Friday.]
MFI: How long have you been involved in the cash markets? Sarbinowski: In August, I will have been at the firm for 25 years, so I can provide the institutional memory. We have been in the liquidity management business since the late 1970's, initially doing private, white-label broker-dealer cash sweeps. In the '80s, we were also running [cash] for our own wealth management trust and securities services custody businesses. So the business has really evolved over that period of time. We cater to a wide spectrum of clients -- everything from wealth management, institutional, and, of course, sweep clients. We've evolved over the many years and now we are at this point united under one brand, Deutsche Asset & Wealth Management. Benevento: It's been about 23 years in the industry for me.
MFI: What are you focused on now? Sarbinowski: We continue to have deeper discussions with our clients, educating them about what is going on in the market. Education of our clients is paramount, and I think that's one of the reasons why clients have really come to appreciate us. We have a lot of experience, and providing them with our global perspective makes us uniquely positioned. Additionally, the low rate environment has been pervasive for many years now. There are clients who, while they love the money market funds for working capital and ease of use, are also saying 'Hey, what is my risk-return tradeoff if I do some customized solutions with you folks?' That's been a trend we've been working on and which continues to this day.
Intermediaries are very important. You want them to be prepared so that way they can assuage any client concerns quite readily. Also, it's our job to make them familiar with the different options in the market. We have an insured deposit sweep service, which continues to grow, and we have other asset wealth management products on our platform that we talk to clients about. So the ideal client is not only able to buy money market funds, but able to buy a whole suite of services that fit their needs. Education and offering solutions are the two big areas of focus on the client side.
Benevento: Of course, the Federal Reserve [has also been a priority] this year. We are at a turning point, where QE is tapering. So watching that Fed balance sheet and seeing how the market reacts as the Fed exits, even though it is gradual, at some point will become a factor here. So we are spending a lot of time working on rates and the Fed in general.
MFI: Can you talk about the VNAV MMF? Sarbinowski: We are very proud to say that "VNAV", as we call it, the Variable NAV Money Fund, achieves its 3rd anniversary this month. We launched it in April 2011, so we now have a 3-year successful track record of managing it.... We've been able to attract outside money, and it's part of every conversation we have, harkening back to my comments about education. We've proven that it can operate T+0, achieve a AAAm-rating; and can be NAIC-1 rated. We also have periods, such as the European sovereign debt crisis a couple years ago, as well as the U.S. budget crisis, where we've gone through some strains in the market. And, as the whole industry has done, we've proven that money market instruments perform as you would expect them to perform. They've performed rather admirably.
Benevento: One thing we've noticed about the portfolio is, as you've stated in the past, the asset class inherently has very little volatility. But in general this fund has been very stable in NAV. It has moved up and down slightly to the third decimal place, and recently we've been able to put that and add the fund to one of the Bloomberg screens so investors can see the pricing on the portfolio historically since inception. You'll see that, even during some challenging times, the portfolio really hasn't moved much as far as NAV. [Note: Contact us for the full article or look for more excerpts in coming days.]
