Money Funds Targeted by Auction-Rate Note Marketers
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Monday, June 30, 2008

Money Funds Targeted by Auction-Rate Note Marketers

A quartet of mutual fund firms are exploring ways to inject liquidity into auction-rate securities portfolios. The WSJ Fund Track column reports that Eaton Vance, Nuveen Investments, BlackRock and Dreyfus are exploring creating new securities or restructuring current securities to add liquidity.

The secondary and auction markets for the securities have been mostly frozen since February.

The intent of the liquidity feature would be to make the securities eligible for purchase by money funds. The plan would involve finding an investment bank as a backer for the structure. If money funds were to purchase the securities it could provide liquidity to current holders of the securities.

One issue in the plan would be whether money fund managers would find the securities to be an attractive investment. The paper reports that BlackRock and Federated Investors have looked at the new securities and that they could purchase them if they are eligible investment for their money funds and the backer were credible.

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