The Wall Street Journal and Bloomberg report that Bank of America will be shuttering a $12 billion enhanced cash fund. Note that this was a fund for institutional investors, and not a money market fund. Note that we had reported on a freeze on redemptions at this fund earlier.
Investors who are still in the fund will take a small loss.
From the Wall Street Journal:
Columbia Management has closed a giant enhanced money fund for institutional investors after major clients pulled out amid losses on complex asset-backed securities, the firm says.
Columbia, a unit of Bank of America Corp., says it is shutting its $12 billion Strategic Cash portfolio — which just months ago been a $40 billion fund.
The fund was an enhanced money fund, a short-term investment pool that offered higher yields than a traditional money-market fund. Unlike traditional money-market funds, the Strategic Cash fund didn’t offer investors a guarantee that it would maintain a $1-per-share net asset value, although the fund was managed toward that goal.
The fund’s current net asset value is $0.994, firm officials said.
Large investors in the Strategic Cash portfolio will be redeemed “in kind” –- meaning they will be handed their share of the underlying securities. Smaller investors can be redeemed in cash.
The Strategic Cash portfolio was open to investors with a minimum of $25 million or more.
Columbia Management, Bank of America’s Boston-based investment unit, manages $566 billion in assets. Last month, the bank said it may provide as much as $600 million to prop up Columbia funds that bought debt from SIVs and other assets tainted by mortgages.
It isn’t evident whether any of these reserves have been used in connection with the enhanced cash fund.