Browse > Home / Gameplan, Markets / The Money Market that busted $1

The Money Market that busted $1

September 16, 2008 7:06 pm

Not a good sign of the things to come….Reserve Funds busted the $1 money market fund barrier

Sept. 16 (Bloomberg) — Reserve Primary Fund, a money-market mutual fund with $64.8 billion in assets as of Aug. 31, fell below $1 a share in net asset value because of losses on debt issued by Lehman Brothers Holdings Inc.

Investor redemptions will be delayed as long as seven days, the fund’s owner, New York-based Reserve Management Corp., said today in a statement. Withdrawals requested before 3 p.m. New York time today will be paid at $1 a share

Bruce Bent, chairman of Reserve Management, opened the first money-market mutual fund in 1970. The only other money-market fund to inflict losses on shareholders was the Community Bankers Mutual Fund in Denver, which liquidated in 1994 because of investments in interest-rate derivatives.

“This is uncharted territory,” said Peter Crane, president of Crane Data LLC in Westborough, Massachusetts, which tracks money-market funds. “That’s certainly a stunner.”

The fund held $785 million in Lehman Brothers commercial paper and medium-term notes. The fund’s board revalued the Lehman holdings as worthless effective at 4 p.m. New York time. Lehman filed for bankruptcy protection yesterday.

Bent often said the best money-market funds should be “boring.” He derided other funds that invested in securities linked to subprime mortgages and other risky debt.

“It exacerbates some of the flight-to-quality into Treasuries,” said Carl Lantz, an interest-rate strategist in New York at Credit Suisse Securities USA.

–

End

Be Sociable, Share!

Sorry, No Related Posts.

Disclosure: This material is provided for information only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or financial instrument. This material is not a complete analysis of all material facts respecting any issuer, industry or security or of your investment objectives, parameters, needs or financial situation, and therefore is not a sufficient basis alone on which to base an investment decision. Horowitz & Company clients may hold positions (long or short) in investments discussed.
Please click for detailed disclosures and additional information about our stock ratings and scoring.

Written by Andrew Horowitz · Category(s) Gameplan, Markets    |  Tags: •   

4 Responses to “The Money Market that busted $1”

  1. Jon Lawson on September 16th, 2008 9:47 pm

    Well, at least the US Govt pulled off a very good deal with AIG. If it wasn’t done, these MM funds may have been worth only .90 on the dollar. And AIG may actually still have a stock to trade.

  2. Andrew Horowitz on September 17th, 2008 12:20 am

    Now AIG needs to be sold. what a crock. How is market taking this in stride? Next to go? Bets on the deadpool?

    A

  3. Shawn on September 17th, 2008 4:08 pm

    I’m betting regional banks will be the next to go 6 feet under.

  4. Andrew Horowitz on September 18th, 2008 2:02 am

    shawn

    You may be right and the timing is looking lokecsimething is going to break

    There are fewer and fewer suitors daily

    A

Got something to say?