Bankruptcy

Mother of Money Market Funds Breaks the Buck and Closes Fund

By J. Michael McBride

The Reserve has stated that it will liquidate its Primary Fund, one of the original money market funds. The Reserve announced on September 16 of this year that its Net Asset Value of its Primary Fund had fallen below the standard for money market funds of $1.00. This is commonly referred to as “breaking the buck.” Since that time, the Reserve has had requests to withdraw some 60 billion of its total 62 billion in deposits out of that Fund.

“The Reserve said it will need the time between now and Oct. 13 to ensure an orderly pro-rata distribution of the cash. The distribution process involves calculating an investor’s opening balance as of Sept. 15, less any redemption transaction that settled after Sept. 15, plus any purchases through dividend reinvestment executed between Sept. 15 and Sept. 17.

The fund is using a liquidation management system to track and maintain the payment status of all investors to ensure accurate future payments.”

There is now a “temporary” program by the federal government which protects depositors in money market funds. The specific terms of the Treasury Department program are not widely known.

Here is a link to this article:
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20081001/REG/810019972

Michael

Full post as published by Texas Lawyer Blog on October 02, 2008 (boomark / email).