Money market mutual fund companies scrambled Wednesday to calm their clients' fears after the pioneer of the asset class "broke the buck," falling below the industry standard $1 per share in value.
Companies including Fidelity Investments, Charles Schwab Corp. and Vanguard Group posted online alerts noting that their funds had little or no exposure to troubled financial firms such as Lehman Bros. Holdings Inc., whose collapse sent Reserve Primary fund's asset value below the amount that investors had put into it.
OppenheimerFunds Inc., which runs three money funds, promised daily updates on their holdings. "In these difficult times," the firm said, "it is important for investors to be able to see how their money market funds are managed."
The New York-based Reserve fund was only the second in the 37-year history of money funds to break the buck. Money funds, whose assets total $3.5 trillion in the United States, are considered one of the safest uninsured investments.
Clients yanked a net $89.4 billion from these accounts in the week ended Tuesday, according to iMoneyNet's Money Fund Report. Withdrawals from the Reserve Primary fund Monday and Tuesday -- before the fund's losses became news late Tuesday -- accounted for much of the industrywide pullout in the last week, said Managing Editor Connie Bugbee, who predicted more redemptions across the industry.
"Ma and Pa Kettle are concerned," she said, noting that a friend who works at a local bank said her customers were "flocking in and asking for FDIC insurance pamphlets."
But the online updates by major fund providers will cushion the blow to the industry, Bugbee added.
"If this had happened 25 years ago and all these companies had to mail this information to shareholders, it might be a different story," she said.
There were no indications, she added, of potential blowups at other major providers.
Firms contacted Wednesday said they were taking steps to ensure that their money market portfolios would stay whole. "Our first priority in managing these funds has been, and will continue to be, maintaining that $1 net asset value," said Schwab spokesman David Weiskopf. Schwab money funds hold no Lehman Bros. securities, he added.
Meanwhile, online brokerage TD Ameritrade Holding Corp. put in a redemption order for all clients whose cash holdings were automatically "swept" into the Reserve fund.
Because the per-share value of the Reserve Primary fund fell to 97 cents Tuesday, the brokerage's client losses could top $100 million, according to an estimate from FBR Capital Markets.
A TD Ameritrade spokeswoman declined to comment on the report but confirmed that redemptions were underway.