Michael Lydon, CEO of Reich & Tang, recently sat down for an interview with 21st Century Television, an independent produced, sponsor-funded business show. R&T's press release explains, "Watch and listen as Mr. Lydon shares his insights into the deposit, liquidity, and cash management markets, how Reich & Tang is navigating the historically low interest rate environment, and the value the firm provides to banks, broker-dealers, RIAs, and institutions. Host Donald Trump Jr., asks Lydon about new products, growth potential, Reich & Tang's rebranding initiative, and where the money fund industry is headed. Below, we excerpt from the interview.
On creating new products to gain more yield, Lydon says, "If your customer is looking for additional yield and you do want to go out on the curve, that does come with some risk. If you look at our customers and who we serve, we're really looking in the shorter-term, preservation of capital and providing liquidity for our customers. So it's a matter of does the product fit your customer."
On R&T specializatiokn in deposit liquidity and cash management solutions, he comments, "It means they (clients) get 100% of our focus. We are in the cash management business; we don't do other products such as stocks or equity funds. So it gives us the ability to drill down and address their needs for that short-term cash product."
Lydon explains, "Certainly banks, broker dealers, and institutional investors [can benefit the most from R&T's services]. If you look at banks, we're providing liquidity management for those banks; we're providing funding for those banks. In the broker-dealer space we are providing sweep products. So to the extent that customer wants a money fund or a competitive yielding FDIC insurance product, we offer both as their sweep vehicle. For institutional investors, we can provide the money funds, or perhaps if they are looking for a more competitive yield, we can go to our insured deposit products."
He tells Trump Jr., "Recently we acquired the HighMark funds from Union Bank of California, and I think that was a clear example of where we have value in the industry. HighMark certainly wanted to focus on their core competencies, which were outside of the money fund space; they looked at R&T as a specialist that could deliver on providing that preservation of capital, that conservative approach to money management. We were an ideal fit. We were also up against some of the larger competitors in the industry and High Mark chose us over some very good competition."
Lydon says of R&T's size, "We're certainly a mid-tier player, and being in that mid-tier gives us the ability to invest more savvy than larger players. We are not forced to buy the market when we have heavy inflows of customer cash coming in. So that flexibility, that nimbleness, I think gets us in a place where we can make sure we still stay conservative by very competitive yields.... We are in a very challenging rate environment and I think the best way for us to grow is to continue to look at opportunities to acquire other money fund providers. In our space, if you're not of a certain size it is challenging. So the best thing that we can do is to continue to grow our company through some acquisitions."
He continues, "Certainly in our FDIC insured deposit space through our sweep products with our brokers, we see tremendous growth there. We believe we're bringing tremendous value and our ability to specialize and focus is something that the broker dealer community is really starting to take notice of."
On launching new funds, Lydon adds, "In the money fund space we're staying course. Clearly we have a conservative approach. We've been in this business for 40 years and we've been successful staying away from troubles in that space. So I think we are going to continue [along] the same line. New product development is going to come more from our bank products and our insured deposit products.... I think because we've had some success in recent years, we've started to evolve, so we are not the same company that we were."
He comments on transparency, "We were one of the first to publish daily holdings. We put it out there on our website for everyone to see. We took another pretty big step and showed everyone what's on our buy list. So not only do you know what's in our funds, but you also know what we could potentially buy. For the institutional investor that is very important. That level of transparency gives them comfort that they know what they are buying."
Finally, Lydon states, "The yield environment has been very depressed. The bank products are giving us that ability in providing that additional yield to the customer. So if you look at government funds, for example, you see a shift from government funds into these insured deposit products. We see tremendous growth in our bank products over the years."
