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USA Today's "Fundline: What was the worst fund news to hit in 2008?" asks, "Who was 'swimming naked' last year?" It answers, "The Reserve fund. The nation's oldest money market mutual fund collapsed Sept. 16, allowing its share price to fall below $1 -- 'breaking a buck,' as it's known in the industry. It was a staggering blow to the money market industry, which has long held itself out as a bastion of safety. Bruce Bent ... was an outspoken critic of other money funds, often arguing that they took too much risk." "A lot of money funds lost their way," he told the paper. "Just follow the rules. Don't get clever." The article also discusses problems in "Ultrashort income funds." In other news, see FT Alphaville's "Slow road to recovery", which includes a Crane Data table showing the recovery in Prime money fund assets.
"Short View: Money market mystery"
The Financial Times writes in "Short View: Money market mystery" that, "The most recent figures from the Federal Reserve show that in November, the amount of money held in US money market funds exceeded the amount in equity funds, for the first time in 15 years." FT continues, "The assets of equity funds had almost halved from $6,900bn in late 2007 to $3,600bn. Meanwhile, money market funds' assets rose to $3,700bn, double their level of three years earlier. According to Citigroup, retail money funds now account for more than 14 per cent of the total market capitalisation of the US stock market, far above the long-term average of 8 per cent." See also, S&P's release "Ratings Withdrawn On Eight Reserve Management Funds."
"Money Market Fund Insurance" Gets an 'A'
Time Gives "Money Market Fund Insurance" an 'A' Grade in its most recent issue. The brief says, "The Plan: After a well-known fund lost money in mid-September, assets in money-market funds dropped by $400 billion in two weeks. Money funds help provide loans for the day-to-day operations of large companies. So with investors fleeing these funds, many companies would have had to pay more for short-term loans or not gotten them at all. The government agreed to insure the $3.5 trillion that investors had in money funds in mid-September against losses. The Result: The move quickly reversed the run on money funds. What's more, it hasn't cost the government a penny. In fact, it has actually made money for the government. Nearly every money-market-fund provider signed up for the insurance, which has generated some $750 million in premiums paid to the government since the program started." "It could be seen as the most successful government program to date," Time quotes Peter Crane, who tracks the money-market industry.