Shakeout From Money Fund’s Collapse Just Starting
With money fund assets at a record high, the guarantee program prompted by the Primary Fund’s troubles is expected to be extended, possibly to Sept. 18 ¿ a year after the guarantees started.
Fund companies have paid more than $800 million so far in fees to extend government backing to their funds and bolster investor confidence. No claims have been paid out ¿ the Reserve Primary Fund didn’t meet the coverage criteria.
The industry’s trade group isn’t counting on the guarantees sticking around. Paul Schott Stevens, the Investment Company Institute’s chief executive, told a Senate panel Tuesday that ICI looks forward to “an orderly transition” out of the program.
A panel of fund industry leaders that the ICI recently convened expects to recommend money fund changes later this month.
While ICI isn’t yet saying what it envisions, an adviser to institutional investors expects the industry will eventually dig into its pockets to create a private insurance system.
“Investors are looking to something to hang onto, even though money fund managers may have full confidence they don’t need insurance,” said Lance Pan, a research director at Newton, Mass.-based Capital Advisors Group.