The institutional Putnam Prime Money Market Fund was closed today by the Putnam Funds board of trustees following a wave of redemptions Wednesday, said Laura McNamara, spokeswoman with parent Putnam Investments.
The fund, with a $10 million minimum investment, had $12.3 billion in assets Tuesday, Ms. McNamara said. She couldnt immediately say how much was pulled out Wednesday. Assets will be distributed to investors.
Although the fund has no exposure to the securities of Lehman Brothers, Washington Mutual or AIG, the rush of redemptions at a time of liquidity constraints for money-market instruments raised the risk it would realize losses in selling securities, according to a Putnam news release.
As of Tuesday, the funds net asset value was $1 per share; Ms. McNamara didnt immediately have information on the net asset value as of Wednesday.
The board voted to close the fund to ensure all shareholders would be treated in an equitable manner. Ms. McNamara said its not yet clear whether the fund will make distributions to shareholders in the form of cash or securities. Putnam said in the release that the closing of the institutional fund doesnt affect the companys retail money market funds or its stable value funds.
Putnams announcement came as concerns about supposedly safe money-market and short-duration strategies reached a fever pitch following the Tuesday announcement by money management firm Reserve Management Corp. that heavy withdrawals had left one money-market mutual fund unable to maintain its $1 a share net asset value.
The Investment Company Institute noted late Tuesday that it was only the second time that a money-market fund had broken the buck, but reassurance that the fundamental structure of money-market funds remains sound seemed to fall on deaf ears today.
News during the day that the BNY Institutional Cash Reserve Fund, a $22 billion collateral pool for securities lending clients, had Lehman paper accounting for 1.13% of assets helped fuel the broader intraday sell-off. Around 4 p.m. EDT, State Street Corp.s stock was trading at $59.00, down 8.9%; Federated Investors stock was at $27.10, down 11.2%; and BNY Mellons shares were trading at $31.57, down 4.6%.