Mellon Financial is stepping in to make good on $4 million of loses in the Newton Dollar Fund. The London-based money fund had reported a loss of 2.39 percent of principal earlier this week after marking down a note issued by Allmerica Global Funding LLC. The decision also came in wake of the first-ever credit rating downgrade of a money fund by a major rating agency.

The Pittsburgh-based bank was on the hook because it owns the fund's advisor, London-based Newton Investment Management. "In view of the unique circumstances, Mellon felt this was the right thing to do for the fund investors," said Ronald O'Hanley, vice chairman of Mellon and president of Mellon Institutional Asset Management in a statement.

The bank reassured investors that there had been no significant liquidations of the fund.

The bulk of the fund's investors are institutional investors who use it as a cash management tool. That business was at risk since Standard & Poor's Funds Services lowered its credit rating on the fund to Dm from triple-Am, and put Newton's euro- and sterling-denominated funds on CreditWatch with negative implications.

The loss came after the credit rating on Allmerica Global's note dropped to double-B from double-A-minus in late September. The fund was then forced to liquidate its position as Standard & Poor's requires offshore money funds to hold securities rated A1 or above to qualify for its triple-Am rating. Ironically, the fund lost the rating anyway.  

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