Putnam Investments Closes $12B Money-Market Fund

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/18/AR2008091801792.html?hpid=topnews

Putnam Investments has closed a $12.3 billion money-market fund to limit losses to its investors, the large mutual fund company said today. The highly unusual announcement is the latest sign that tremendous financial pressures are now threatening even some of the safest kinds of investments.

The Prime Money Market Fund was open only to institutional investors. Putnam said in a statement that its board decided to close the fund last night after receiving a large number of redemption requests. The company said it could honor those requests only by selling assets at a loss, reducing the value of the remaining shares.

Putnam said it decided instead to liquidate the fund and spread any losses evenly among all the investors. "We wanted to treat all shareholders equally," said spokeswoman Laura McNamara. She said it was "premature" to discuss how much of a loss, if any, shareholders will incur.

The Putnam action is likely to increase concern among investors about the safety of investments in money-market funds, traditionally viewed as basically comparable to bank accounts. Investors pulled an estimated $80 billion from money-market funds yesterday, according to Crane Data, which tracks the industry. That in turn limits the capital available to banks and other companies that regularly borrow from money-market funds.

I was probably in that fund at one time when my 401(k) with a former employer moved from Vanguard to Putnam. It would have been the default account. Which makes me wonder if many of the people who will get hurt by this are lower wage employees who have simply allowed their contributions to remain in this investment option.

:hurts: