Today's Wall Street Journal features, "Money Funds Can't Shake SIVs", which recaps the latest batch of structured investment vehicle (SIV) bailouts. The paper says, "Troubles with structured investment vehicles are continuing to plague taxable money-market funds. As a result, investment-management companies and other providers of money-market funds, such as Wells Fargo & Co., Credit Suisse Group, Janus Capital Group Inc. and Northern Trust Corp., have disclosed they are buying assets of troubled SIVs or have pledged to do so if need be. These purchases threaten to cut into earnings at some fund-management companies." The article continues, "A main concern has been whether such troubles would cause funds to 'break the buck,' or see their net asset values fall to less than $1 a share.... Money-fund researcher Crane Data recently counted a dozen such publicly announced SIV-support moves and accounting losses from fund companies."
Crane Data now counts at least 17 money fund advisors that have taken action to protect or remove downgraded or defaulted securities from their portfolios. Note that, contrary to some reporting, these funds would not have "broken the buck" without these actions -- advisors would move long before the $1.00 a share was endangered. Twelve of the 17 advisor infusions to date are public, with several being much larger than others. The list includes: Columbia, Credit Suisse, Evergreen, First American, Janus, Morgan Stanley, Northern, SEI, STI, TDAM, Wells Fargo, and Western.
There likely will be at least 3 more due to the recent Whistlejacket default. But Crane Data considers it highly unlikely that any money fund NAVs will fall below $1.00 a share, and does not expect any investors to be impacted. Advisors, however, are already feeling the fallout as the first round of departures related to these events are occurring. (See our March issue of Money Fund Intelligence for this "People" news.)
Note too today's news release, "Legg Mason Announces Update of Money Market Fund Support"). "LM announced that it has obtained a letter of credit from a large bank to provide support to a Structured Investment Vehicle (SIV) holding in a money market fund. The Company also provided an update of the combined impact on its anticipated quarterly earnings.... Legg Mason is confident in the overall soundness of the funds and committed to satisfying its client objectives of principal stability, credit quality, and current income, although no guarantees can be given."
