Analysts at JPMorgan suggest that prime money market funds, which had $2 trillion of assets under management in early September and are a leading provider of short-term liquidity to the banking system, suffered between $350 billion and $400 billion of redemptions after the Prime Reserve fund broke the buck following losses on its $385 million holdings of Lehman commercial paper.
Other funds also might have broken the buck in the week beginning September 15 had not their parents injected cash.
At the surviving prime money market funds, these vast redemptions have eaten into the substantial cash cushions – between 10% and 20% of assets under management – all must hold to meet forecast investor calls for their cash back.
These funds must now sell good-quality assets to rebuild cash levels. They are selling some of their...
