While tensions continue to slowly ease among money market mutual funds, a new, big batch of "no-action" letters was just disclosed on the SEC's website. These disclosures document steps taken by advisors to protect their funds from the Lehman Brothers bankruptcy and from other tumultuous market events in September. Crane Data counts five new advisors disclosing support actions involving money market funds, bringing our running total of advisors "bailing out" their funds to 25, which is now greater than one-quarter of the 90 money fund advisors tracked by our Money Fund Intelligence.
As we discussed in our Sept. 16 article, "Lehman Support Actions Push Money Fund Bailouts to 20 Total," Columbia, Russell and others took steps to protect investors over their exposure to Lehman Brothers debt. Their "no action" letters have now been made public. (See Russell Investment Company and Columbia Funds Series Trust letters.) Russell's Sept. 15 letter explains, "Under the Capital Support Agreement, RIMCo would be obligated to provide a capital contribution to the Fund if, as a result of losses realized on the notes, the market-based NAV per share of the Fund otherwise would drop below $0.995 or such greater amount as may be specified."
Additional disclosures related to Lehman debt include: Mount Vernon Securities Lending Trust, which is affiliated with U.S. Bancorp and which also holds $557 million stuck in Reserve Primary Fund; RidgeWorth Funds, which filed to replace a $70 million Lehman medium-term note with a SunTrust note; and, finally, Dreyfus Cash Management Plus and Dreyfus Money Funds (Dreyfus Basic Money Market Fund, Dreyfus Liquid Assets, and Dreyfus Worldwide Dollar Money Market Fund) entered into capital support agreements with BNY Mellon over Lehman holdings.
Several additional filings, unrelated to Lehman Brothers, were also just posted. These include Legg Mason Partners Institutional Trust - Western Asset Institutional Money Market Fund, which entered into a capital support agreement to protect a $75 million holding in SIV Orion Financial USA LLC; Touchstone Variable Series Trust - Touchstone Money Market, which entered into capital support agreements to assuage valuation concerns over Morgan Stanley and Wachovia CP; and, Phoenix Opportunities Trust - Phoenix Money Market Fund, which disclosed a request to purchase investments in AIG subsidiary International Lease Financing Corporation.
Advantus Series Fund, Inc.- Advantus Series Money Market Portfolio, also filed for an AIG-related capital support agreement backed by parent Securian Financial Group. It says, "You state that as of September 17, 2008, approximately 1.48 percent of the Portfolio's total assets, or $2 million, consisted of commercial paper issued by American General Finance Corp, a subsidiary of American International Group, and approximately 1.85 percent of the Portfolio's total assets, or $2.5 million, consisted of commercial paper issued by AIG Funding, Inc. You state that as a result of recent market events related to the CP, the CP was determined to no longer present minimal credit risks for purposes of rule 2a-7."
Finally, J.P. Morgan Securities Inc. added a "no-action" letter, though it was unrelated to any money fund support actions. JPM sought clarification on issues involving the new Money Market Investor Funding Facility (MMIFF). The letter says, "[Y]ou request interpretive guidance and no-action relief ... [for] registered open-end investment companies that rely on rule 2a-7 under the Act sell certain commercial paper, bank notes and certificates of deposit having remaining maturities of 90 days or less at a price equal to their amortized cost, to certain special purpose vehicles that have entered into liquidity facilities with the Federal Reserve Bank of New York and for which J.P. Morgan Securities Inc. is the structuring and referral agent and JPMorgan Chase Bank, N.A. is the collateral agent, the depositary and issuing and paying agent, in exchange for cash and asset backed commercial paper of the SPVs for which JPMSI is the placement agent."
