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.

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.