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"Even in a low interest rate environment, money market funds and FDIC-insured products achieve the primary goals of most short-term market investors: liquidity and capital preservation."

Article Contributed By:
Michael P. Lydon, President and Chief Executive Officer
600 Fifth Avenue New York, New York 10020
800-433-1918
www.rntfunds.com

Now that the economy is on the mend, your clients may have a renewed interest in reaching for yield in cash accounts. However, a challenging interest rate environment—such as today’s—is not the time to abandon the quality and relative safety that cash management products offer. As a trusted investment professional, you can help by explaining to your clients the drawbacks of money fund alternatives in a rising rate environment.

While interest rates have not yet begun to move upwards, the Federal Reserve Board is already seeking to withdraw some of the excess liquidity it has made available over the past two years. At Reich & Tang, we believe this indicates that interest rates will likely rise in the near future. In this environment, cash sweep products—such as money market funds and FDIC-insured deposit accounts—offer several distinct advantages over individual securities.

• Greater liquidity—Clients can buy and sell shares of money market funds and FDIC-insured products each day. With a constant price of $1 per share, pricing risk is also eliminated, aiding capital preservation.
• Excellent credit quality—Money market funds are required to invest in the highest grade securities in the market, and depositors in FDIC- insured products are protected by the US government. This greatly minimizes credit risk.
• Ample diversification—Money market funds hold different issuers across a variety of industries, which can reduce the effect that any one issuer has on the portfolio. Similarly, FDIC sweep deposits are diversified across many banks.

Cash sweep products also offer clients greater flexibility once interest rates begin to rise. Unlike with a retail CD or investment in an issue by a single company, money market funds can, through management of maturities, take advantage of higher yields as soon as rates start to rise. At Reich & Tang, we believe that you can balance the desire for yield with a conservative investment posture that emphasizes safety, liquidity and the preservation of capital.

If a quick comparison of yields on money market funds and FDIC-insured products to individual securities—such as bonds—has given your clients the impression they are missing out on something, you can reassure them, the truth is, as the economy continues to improve, cash alternatives such as money market funds and FDIC-insured products are poised to benefit.

When it comes to choosing a cash management product today, clients should take a long-term, forward-looking perspective since cash sweep products tend to offer clients greater flexibility in a rising interest rate environment.

Please consider the investment objectives, risks, and charges and expenses of money market funds carefully before investing. The prospectus contains this and other information about the funds. Please contact your financial advisor to obtain a prospectus, which should be read carefully before investing.

An investment in money market funds is not insured or guaranteed by the FDIC or any other governmental agency. Although money market funds seek to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in a money market fund.

The FDIC-Insured Deposit Sweep Product is not a money market fund. Funds maintained in Insured Deposit Sweep Accounts at each participating bank are insured up to $250,000* by the FDIC for each category of legal ownership, including any other balances your client may hold directly or through other intermediaries for a total of up to $2,500,000 of FDIC insurance.

*The amount of FDIC coverage has been temporarily increased from $100,000 to $250,000 until December 31, 2013.

For Professional Use Only.

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