Money-market funds aim to maintain a $1-per-share price and losses on any investments that drive their share price below that mark -- known as "breaking the buck" -- could send investors running for the door. That's a possibility facing a number of money-market funds that hold troubled investments called structured investment vehicles -- or SIVs, complex investments that have come under selling pressure amid bond-market turmoil.
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Some funds have approached the Securities and Exchange Commission for guidance and some have already taken action. Yesterday, money manager SEI Investments -- facing worries of ratings downgrades on its $6.1 billion SEI Daily Income Trust Prime Obligation Fund and $1.4 billion SEI Daily Income Trust Money Market Fund -- said it would provide financial guarantees for some of the funds' holdings of SIVs.
Tuesday, November 13, 2007
Breaking the Buck
WSJ reports that some money market funds are concerned that their exposure to big shitpile will reduce their share price below a buck a share (eroding the principal, something people don't expect will happen with money market funds). At the moment they're figuring out how to make sure that does't happen.