Dreyfus Q&A w/Sr. PM Peter Henshaw
Dreyfus published a new "Meet The Manager" Q&A with Senior Portfolio Manager Peter Henshaw. They ask, "Why liquidity solutions?" Henshaw responds, "I wanted to be more involved in investment management and trading, and so I pursued internal opportunities across BNY Mellon. In 2004, I jumped at the opportunity to join the Dreyfus taxable money market desk. I was aware of the strong history of Dreyfus' money market funds dating back to 1974, as well as Dreyfus' formidable industry presence. I joined a talented team of seasoned professionals and was excited by the scope of front-end investing. Daily, we make portfolio decisions based on our expectations for Federal Reserve (Fed) policy, upcoming economic data, issuer credit quality, regulatory constraints, and technicals like future supply of government securities. It's a much more dynamic environment than many appreciate." When asked, "Why are money market funds such an important tool for investors and what could potentially change about the tools available?" He comments, "Money market funds are important for many reasons. The sheer volume of assets in domestic money market funds, $4.8 trillion (as of December 2022), speaks to its role in the broader economy. Corporates look to money market funds for sources of funding at low interest rates. The U.S. Treasury and U.S. government-sponsored agencies all borrow significantly from money market funds. Both institutional and retail investors entrust their cash managers with considerable responsibility. They employ us to be stewards of a very critical portion of their assets --- assets they utilize for short-term operational liquidity as well as for capital preservation.... Investors are happy to see yield on their cash. They are also concerned about when interest rates will peak, how persistent this excessive inflation will be, and the possibility of an upcoming recession." Henshaw adds, "Forthcoming regulatory changes are also at the forefront of investors' minds and how institutional prime funds are managed is likely to change. The Securities Exchange Commission (SEC) modified 2a-7 rules after the Great Financial Crisis (GFC), and the COVID-19 pandemic is the impetus for another round of reforms. It will be well-received if the SEC decouples money market fund liquidity thresholds from fee and gate thresholds. However, 'swing pricing,' where a fund's net asset value (NAV) is adjusted by a swing factor representing certain trading and portfolio costs during periods of significant redemptions, will be more challenging for investors and fund managers to accept and implement. Increases to required daily and weekly liquidity thresholds should have little impact on government money market funds, if mandated."
