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| Thursday, March 18, 2010 |
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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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September 18, 2008 4:28 PM ET
Chaos continued in the world of money-market funds today, as nervous investors continued to withdraw their assets from funds that are intended to be safe havens for both institutional and individual investors’ cash. After the Reserve yesterday revealed that its Primary Fund—one of the oldest and largest money-market funds—had exposed its clients to losses because it held now-worthless Lehman Brothers debt, investors in other money-market funds appear to have been sent into a frenzy. This forced at least one asset manager, Boston-based Putnam Investments, to close down a large institutional money-market fund today—even though none of the firm’s funds had any exposure to Lehman, Washington Mutual or AIG. The Prime Money-Market Fund “experienced significant redemption pressure,” yesterday, according to a Putnam spokeswoman, and liquidity constraints would force the fund to realize losses in selling off its securities. She could not say how much money investors had redeemed from the fund this week, but she added that it had assets of $12.3 billion on Tuesday. At the end of August, the fund held more than $15 billion, according to a company filing. Putnam was developing a plan to return the money to investors as Financial Week went to press today. “Clearly investors are panicking,” said Cathy Gregg, partner at Treasury Strategies, a consulting firm. “If there was a holding in the fund that was going to severely impair performance, it would make sense.” “Otherwise,” she added, “it seems to be largely irrational.” Other asset managers with large money fund operations were affected as well. Federated Investors, which manages $271 billion in money-market funds, saw its stock decline by more than 40% at one point today, the day after it held a conference call with several hundred clients to assure them that its funds hold no commercial paper issued by Lehman, WaMu or AIG. State Street also saw its stock tumble on money-market concerns, with shares plummeting by more than 50% midday. This prompted the company to issue a statement “regarding market misunderstandings,” and asserted that its money-market funds did not have any unsecured exposure to Lehman, AIG, WaMu, Wachovia, Merrill Lynch or Morgan Stanley. Both firms also assured investors that their funds have maintained a $1 net asset value, meaning that investors had not been exposed to losses. Yesterday, the Reserve’s $62 billion Primary Fund revealed that it had “broken the buck”—the first time in 14 years any money fund has done so—because it held $785 million in commercial paper issued by Lehman. Other funds, including additional funds at the Reserve, were not immune. The Reserve noted on its website today that aside from its Primary Fund, the value of its Reserve Yield Plus had dipped below $1 a share, to $0.97, while its International Liquidity Fund had dropped to $0.91 a share. The firm froze redemptions from its Primary Fund for seven days earlier this week, after investors pulled out more than $30 billion from the fund. This has now led shareholders to sue the Reserve after they had incurred losses in the fund; a spokeswoman for the Reserve declined to comment on the suit. Aside from the Reserve, at least one other fund revealed it had been negatively impacted by exposure to Lehman debt today. A $22 billion institutional fund run by the Bank of New York Mellon broke the buck, according to a report by Bloomberg. The BNY Institutional Cash Reserves, a fund that functions like a money-market fund for clients in its securities lending business, saw its value dip to $0.991 a share this week, according to the report. BNY isolated the Lehman holdings in the fund—which represented 1.13% of assets—into a separate fund in order to maintain liquidity, according to a statement from BNY Mellon.
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