NEW YORK -- A money-market mutual fund that "broke the buck" amid a rush of orders to pull out cash has begun returning an initial $26 billion to investors who had been unable to access their money for more than a month.
The first in an unspecified number of distributions from the Reserve Primary Fund began Thursday with checks being mailed to retail-direct shareholders, Reserve Management Co. said. Payments to all other shareholders will be made by wire on Friday.
Each investor is getting about half their current account balance, the company said. It said all investors are being treated the same, whether or not they tendered redemption orders, and that the payout is being done on a pro-rata basis.
"This distribution marks a significant step in the process of liquidating the Primary Fund and distributing money back to shareholders," Reserve Management Co. President Bruce R. Bent said in a statement. "We are committed to making future distributions when more cash becomes available."
The fund had total assets of about $51 billion as of Sept. 30. It held $64 billion in assets on Sept. 12, before a soured investment in Lehman Brothers debt triggered a rush of institutional investors pulling out cash.
On Sept. 16, the rapid sell-off of assets caused the value of fund assets to fall to 97 cents for each investor dollar put in — the first instance in 14 years of a money-market mutual fund "breaking the buck," or having its per-share value fall below $1.
Reserve Management froze redemption orders. That 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, and a new temporary government money fund guarantee program.
Reserve Management said it is "focused on liquidating the fund's holdings at amortized cost as quickly as possible."