Calastone Profiles JPMAM's Przybylski
Mutual fund technology firm Calastone published a blog entitled, "Money Market Services in Person" featuring Paul Przybylski, Global Head of Product Strategy and Client Service at JP Morgan Asset Management. He comments, "The Covid-19 crisis was unprecedented, and the true global impact is still basically unknown. The speed of the markets' reaction was very rapid and the lessons we learned in 2008 were simply not applicable. The crisis wasn't due to a liquidity or credit event specifically tied to money market funds -- all assets were impacted as banks and investors alike focused on reducing risk. When that happens, they preserve liquidity, which leads to a drop in trading liquidity.... For funds, that meant they struggled to sell assets and raise cash for redemptions. We saw significant gaps between bid and offer prices -- if there was one to begin with -- and obviously the central banks intervened very quickly and put a floor under markets. For prime funds, the volatility began around March 12th and peaked in the week of March 16th. Once the Fed announced the Money Market Mutual Fund Liquidity Facility (MMLF) towards the end of that week we saw a very different dynamic. By April 1, prime MMFs all had neutral to positive flows, and they increased through April." On the topic of money market fund innovation, Przybylski explains, "I think after the Covid crisis treasury functions are being looked at even more as a value and revenue generating area. They need technology at their fingertips that gives them the ability to easily identify where all their liquidity resides and how to optimize that liquidity. Clients are looking for tools that give them instant access to their demand deposit accounts (DDAs) and allow them to optimize those DDAs, move money and segment the cash between three months, six months, nine months and 12 months usage. Tools that give them that level of efficiency are going to win out over those that are just traditional trading platforms." He comments, "The integrations are also key. These can't be standalone products any more -- they have to be integrated into the ecosystem of the treasurer, whether that's connected directly to the treasury management system (TMS) or through a deeper integration where they reside within the core TMS. Features like this are going to be standard in the next one to three years -- table-stakes, as we like to call them." Przybylski adds, "We do expect regulation to come to the credit space, specifically. You're seeing credit fund sponsors begin to phase out their offerings. Two retail players, Vanguard and Fidelity, are doing it possibly because they're looking at positioning those funds to hold more government-like securities. It's going to be interesting when it happens. Given we're about 30% of the market in the credit space, we do think it's a value-add offering for clients to have access to more than just government MMFs."
