BOSTON -- The firm managing a money-market mutual fund that "broke the buck" last month said Thursday it is shutting down 15 more of its funds, with no promises when investors can expect money back, or how much.
Reserve Management Corp. said fund trustees voted to liquidate the assets of the 14 funds, including Reserve's $1 billion Yield Plus Fund, and 14 smaller Reserve money-market funds that invest mostly in local government debt.
The New York-based firm said it was in talks with the Securities and Exchange Commission to permit the funds to take longer than the usual seven days to return money after investors place withdrawal orders.
Reserve said it "cannot currently estimate when distributions to investors will be made," but is "acting as expeditiously as markets permit."
To return investor cash, managers must sell their funds' assets and wait for short-term debt to mature — processes that are complicated by volatile markets, and investors' reluctance to buy securities carrying even the smallest risk.
"The funds will liquidate assets as soon as they can, but the funds do not believe that is in our shareholders' interests to sell at fire-sale prices," Reserve said.
Meanwhile, many investors are left without access to cash they parked in the funds, thinking they could easily get it back if needed.
Michael Volko, a 40-year-old insurance salesman from Doylestown, Pennsylvania, was one of the lucky ones. He said he had $296,000 in Reserve's Pennsylvania Municipal Money-Market Fund, placed there through TD Ameritrade, which parks any idled cash in customers' brokerage accounts in money-market funds so the cash earns interest.
Volko's orders to withdraw the money were frozen for a couple weeks until he managed to get the cash back this week. But other investors still in the fund don't know when to expect their cash back, now that the fund is being liquidated.
"There are a lot of people stuck in these funds who have no idea yet they are even frozen out," Volko said.
Volko said he checked the status of his money daily after the Reserve Primary Fund on Sept. 16 "broke the buck" when the value of its assets fell below the level needed to cover every dollar invested in the fund. The episode led institutional investors to pull out cash from that fund and others, creating fears about the safety of the $3.4 trillion in assets held in money-market funds.
The sell-off prompted the federal government to announce a temporary program to guarantee money funds, should one of them break the buck again. Reserve Management said Wednesday it had applied to participate in the fee-based program.
In addition to the Yield Plus Fund, the 14 other money-market funds that Reserve said Thursday would be liquidated are:
Interstate Tax-Exempt; Arizona Municipal; California Municipal; Connecticut Municipal; Florida Municipal; Louisiana Municipal; Massachusetts Municipal; Michigan Municipal; Minnesota Municipal; New Jersey Municipal; New York Municipal; Ohio Municipal; Pennsylvania Municipal; and Virginia Municipal.
Reserve previously said it would liquidate the Primary Fund — whose assets fell to 97 cents for each dollar invested, as did the Yield Plus Fund. Reserve has not provided updates on the value of those two funds' asset levels since they broke the buck. But the firm has been posting daily updates on its website listing other Reserve funds' "net asset values," which remained at the dollar-for-dollar level as of Wednesday.
However, investors could be exposed to losses if managers must sell assets at losses when they liquidate the funds.
Reserve Management spokeswoman Ming Lee Hatch didn't return a message seeking comment on any potential losses at the funds being liquidated Thursday.
Besides liquidating the Primary Fund, the company said last week that it was also liquidating a $10 billion fund, the U.S. Government Fund.
Reserve, which until recently had been listed among the top 20 largest managers of money-market funds, operates a handful of other funds that have yet to announce any plans to liquidate. Some of those funds are limited to institutional investors.
Reserve Primary Fund investors have been told to expect an initial distribution of about $20 billion from that fund sometime early next week. The total is nearly one-third of the $64 billion the fund held in assets on Sept. 12, before a soured investment in Lehman Brothers debt triggered a rush of institutional investors pulling out cash.