The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:BlackRock and Federated Sound the Money Fund Tsunami Alarm Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, December 20, 2012

BlackRock and Federated Sound the Money Fund Tsunami Alarm

News summary by MFWire's editors

At least two giant money market mutual fund shops are bracing for a flood of inflows and preparing the sandbags.

Dan Fitzpatrick and Kirsten Grind of the Wall Street Journal report that, according to unnamed sources, BlackRock [profile] and Federated [profile] are warning investors that the shops might close some money funds to new investors. It's all thanks to the impending expiration of a special Federal Deposit Insurance Corporation guarantee implemented in 2008 during the financial crisis.

The disappearing guarantee is unlimited on no-interest bank accounts and was intend "to encourage small businesses to stay with their local banks," according to the WSJ. Yet last week the Senate failed to extend the guarantee last week, meaning that it will expire on December 31 and the guarantee will revert to $250,000 per depositor per account category for about $1.7 trillion in bank deposits.

Fundsters expect that small businesses could move much of that cash, up to $250 billion according to FBR Capital Markets, into money funds, especially U.S. Treasury money funds, and depress already low yields even further. Treasury money funds currently hold about $399 billion.

"It could be a tsunami," Pete Crane, president of money fund research shop Crane Data, told the paper.

Both BlackRock and Federated insisted that their none of their money funds are closed, at least for now. BlackRock told the paper that it has "no plans to suspend subscriptions in our Treasury funds at this time."

"If conditions change, we would certainly do what we could to continue to serve our clients," a Federated spokeswoman told the WSJ.

The paper also anticipates that much of the cash in question will shift into accounts with large banks. 

Edited by: Neil Anderson, Managing Editor

Stay ahead of the news ... Sign up for our email alerts now

 Do You Recommend This Story?

Return to Top
 News Archives
2019: Q3Q2Q1
2018: Q4Q3Q2Q1
2017: Q4Q3Q2Q1
2016: Q4Q3Q2Q1
2015: Q4Q3Q2Q1
2014: Q4Q3Q2Q1
2013: Q4Q3Q2Q1
2012: Q4Q3Q2Q1
2011: Q4Q3Q2Q1
2010: Q4Q3Q2Q1
2009: Q4Q3Q2Q1
2008: Q4Q3Q2Q1
2007: Q4Q3Q2Q1
2006: Q4Q3Q2Q1
2005: Q4Q3Q2Q1
2004: Q4Q3Q2Q1
2003: Q4Q3Q2Q1
2002: Q4Q3Q2Q1
 Subscribe via RSS:
Add to My Yahoo!
follow us in feedly

©All rights reserved to InvestmentWires, Inc. 1997-2019
14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
Privacy Policy :: Terms of Use