This month, Money Fund Intelligence interviews FIS SGN's Vice President of Product Management Mike Vogel and FIS SGN's Short-Term Cash Management Product Manager Matt Borchardt. We discuss the online money market fund trading portal's history, their latest developments and overall market issues. Our Q&A follows. (Note: The following is reprinted from the September issue of Money Fund Intelligence, which was published on September 6. Contact us at info@cranedata.com to request the full issue or to subscribe.)
MFI: Give us some history. Vogel: FIS is a leading provider of technology and solutions for merchants, banks and capital markets around the world. We focus on scale and have an extensive portfolio of solutions to help our clients connect and securely manage their operations. FIS continues to grow both organically and through acquisitions including SunGard in 2015 and our most recent acquisition, WorldPay, which closed in July 2019, bringing us to 55,000 employees in 48 countries.
Borchardt: Our FIS SGN Short-Term Cash Management (STCM) Portal started with a SunGard acquisition in 2002 and we have been growing and expanding it ever since with a mission to serve treasury managers by adding efficiency in any way possible. Today, STCM provides access to 257 funds and other investments across 45 fund families processing over $4T in transactions each year.
MFI: Tell us about the Treasury workstation market. Vogel: We have a joint solution with our own FIS treasury management systems, Quantum and Integrity, bundled with STCM to help provide a seamless experience for our treasury users. Along with our FIS solution, STCM is connected to most other Treasury workstations for integrated trade submission. We are fortunate to have FIS treasury systems in house which helps give us a detailed level of understanding of what today’s Treasury professional needs to be more effective and productive. Our treasury clients, like all FIS clients, want systems that are always on, resilient and secure and our product roadmaps across FIS are aligned to meet these demands.
Borchardt: Our joint product teams are continually improving and enhancing our integration as client's trading, regulatory and reporting needs change, most recently adding fully automated cash sweep trades directly from Quantum to STCM. The automated cash sweeps simplify end of day processing and provide yield pick-up over leaving remnant balances in their custody account. We also have more great collaborations with Quantum and Integrity on tap that will really improve the daily life of our Treasury Managers. We can't announce [these] yet, but [will be] rolling some out in the near future.
MFI: What about FIS's money fund lineup? Borchardt: In the U.S., we offer money market funds, short-duration bond funds, FDIC-insured deposit products, and private liquidity funds. Globally, we offer all EU post-Reform fund categories -- Public Sector CNAV, Prime LVNAV, Short Term VNAV, and Standard VNAV -- across 7 currencies. We're also always ready to expand our offerings based on client demand or market shifts, like adding ESG funds, more diverse short-term investment products and a few others that are in development.
MFI: What are your big challenges? Vogel: Technology changes are always an undercurrent in our industry, and they’re accelerating every day. Treasury managers continue to increase their expectations of data and information to be available and at their fingertips, real-time and 24/7 across platforms. Regulatory changes are constant and unavoidable, creating multiple challenges the last few years with U.S. and EU Reform driving significant changes.
Borchardt: Domestically, the Federal Reserve obviously weighs heavily in the near term with their latest rate cut and the potential for more to come, fueling fears surrounding an inverted yield curve. Those fears will also likely impact the M&A deals that have swelled balances over the past couple of years. This could result in corporates retreating into their shell while they wait to see what is going to happen.
In Europe, EU Reform and continued negative rates have caused a lot of clients to flee the EUR Funds and be much more uncertain of the status of their funds in general. The new fund structure in Europe took quite a while to settle in, and like Prime funds in the U.S., it may take a while before client monies start returning to fluctuating NAV products. Within STCM, we have had success easing client concerns on FNAV funds in Europe streamlining reconciliation through Quantum and Integrity position integration. Brexit is another concern we are preparing for with our clients. We plan to be ready for whatever ultimately happens and ensure no service interruption as a result. The Brexit process has also led to a large asset expansion in mainland Europe, increasing our client and fund provider presence further into the EU.
MFI: Are you done with European money fund reforms? Borchardt: From a functional perspective, our reform-related updates were completed along with the industry in Q1 this year. But as our users have grown more comfortable with the changes and developed their internal processes with particularly the EUR LVNAV and VNAV funds, they have identified additional features that would make their process easier to manage. We are in the process of implementing follow up enhancements. As I'm sure you are aware, it took time for the fund companies to coalesce around a 'standard implementation' of EU Reform measures making it a bit of a moving target. So clients were also hindered in their ability to pre-plan their processes.
MFI: Talk about your options beyond money funds. Borchardt: In the U.S., we have short-duration bond funds, private liquidity funds, and FDIC-insured deposit products to go along with our money market fund offerings. Outside the U.S., we have diverse set of offerings around the standard MMFs post-reform, along with short-duration bond funds, and we have been working toward adding deposit products in that market as well.
MFI: Are you looking at ESG? Borchardt: Absolutely. We have already on-boarded several ESG-specific funds in the U.S. and Europe. We think ESG is a market that is on the verge of expansion, and the funds profiled recently in Money Fund Intelligence are part of our plans. We’re also exploring additional angles on this theme in the form of veteran owned/operated funds and minority owned. However, those are still in the exploratory stage. We stay in almost daily contact with our fund families to keep up to date on their plans and to make sure we are on the front edge of that movement.
MFI: Talk about your investors. Vogel: STCM has a broad base of global clients, including treasury and investment specialists at over 400+ corporations, hedge funds, public utilities, local governments, and colleges and universities.
MFI: What about fees? Borchardt: Since we are an independent, fund-neutral portal, we are able to carry the best institutional share classes that funds have to offer. While we cannot directly speak to the pressure that the fund families are feeling regarding management fees, we have seen an increase in fund companies moving their client funds into lower fee share classes on the portal recently.
MFI: Do portals ever charge investors? Vogel: STCM has no upfront or ongoing charges to the clients, and FIS Treasury workstation integration provides additional value through ease of integration and efficiencies for our joint users.
MFI: Where are you looking for expansion? Vogel: From an expansion perspective, we have been looking at new products on the market that are in line with our users’ needs and investment strategies to bring them a more complete portfolio of products. Part of this has been the ESG initiative, as well as our expansion to supporting funds in new jurisdictions outside of the U.S. Borchardt: Outside the U.S, our focus has been in Europe recently, given Brexit and EU Reform, and many of our enhancements have been in line with that. However, we operate on a single instance, so any new functionality is provided to all users immediately.
MFI: What about the future? Vogel: We think the future is going to require significant commitment to the role of technology in the investing process as treasury departments continue to add more responsibilities and need automation to keep up. On the fund side of that equation, their staff is having more responsibility placed upon them and portfolio managers are working to find ways to lower their fees. Using technology to improve automation in that process as well will become more and more important. I mean, we still have fund families in Europe that are running heavily on faxed trades ... seeking out a technology partner for their clients to use.
Borchardt: As for the investment goals of our clients, we are seeing more sophistication in the review process and concern for things other than just yields. This is part of what is guiding us to add the ESG funds as a major focus in the near term. Most of the fund families we’ve been speaking with are heavily focused there and trying to determine their niche, and corporates are developing policies that include social considerations instead of just shareholder value. I’m sure you saw the statement that came out of the recent Business Roundtable lending credence to this theory. With all of this, our goal is to make sure that we are agile to respond regardless of where the market goes and keep things automated and efficient.
