Reacting to Reserve Primary fund's announcement, mutual fund trade group the Investment Company Institute said that it was "working closely with its members and with regulators, including the Securities and Exchange Commission and the Federal Reserve, to maintain open communications about market conditions and their impact on funds."
Reserve Primary fund's situation apparently has been exacerbated as big investors have withdrawn their money in the last two days, forcing the fund to sell other securities. Assets have dived by more than 60% since Sunday, Bloomberg News reported.
The fund, seeking to dissuade other investors from yanking cash while it sorts out the situation with its Lehman IOUs, said Tuesday that it would take as long as seven days to meet investors' redemption requests. Normally, money funds redeem investors' shares immediately on request.
Industry analysts noted the irony in Reserve Primary fund's troubles: The fund's founder is 71-year-old Bruce Bent, who is considered to be the father of the money fund industry, which dates to the early 1970s.
Just last week, Bent was quoted in a Wall Street Journal story saying that "the purpose of [a] money fund is to bore the investor into a sound night's sleep."
A call to the company's offices in New York wasn't returned.
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tom.petruno@latimes.com
