You can trust your money fund not to fail this time
Sleep tight. A repeat of the 2008 financial crisis when the Reserve Primary Fund “broke the buck” should be of no concern
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IN RECENT history, when there have been tremors in the banking system, money-market funds have shuddered. People who had thought you put a dollar in, get a dollar out find that’s not necessarily the case. If anyone is worried this time around – as would be natural – they can rest a bit easier.
In 2008, the Reserve Primary Fund, a money-market fund, “broke the buck” – or had its net asset value fall below US$1 per share – due to its holdings of US$785 million in commercial paper issued by Lehman Brothers.
When Lehman collapsed, investors raced to withdraw money from the fund, and the fund was caught selling investments into a spiralling market. Panic selling at other money-market funds ensued.
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