Troubled [Reserve Primary] Fund Begins Payouts

NY Times ^ | October 30, 2008 | By DIANA B. HENRIQUES

[DeaconBenjamin]

The Reserve Primary Fund, the giant money market fund whose customers have been waiting more than six weeks for their cash, announced late Thursday night that it would begin mailing checks to shareholders on Friday — for half their original investment.

The announcement was the first indication of the losses the fund sustained when a wave of redemptions on Sept. 15 forced it to freeze withdrawals and liquidate its assets. The next day, the fund said it had “broken the buck,” reporting a per-share value of less than a dollar.

The announced per-share payment — 50 cents on the dollar — is more than some had expected, but well short of the dollar-per-share value that millions of money fund investors have long taken for granted. Indeed, it is considerably less than the price the fund reported on Sept. 16, which was 97 cents.

But the Reserve Fund’s president, Bruce R. Bent, said in a statement on Thursday that he hoped the checks being mailed out would be the first installment, not the final payment.

“We are committed to making future distributions when more cash becomes available,” he said.

* * *

“We thank all of you for your patience and sincerely regret the inconvenience,” it added.

The inconvenience has been severe for many of the hundreds of thousands of investors who suddenly found they could not touch the cash they had expected to use to pay their bills. Some have reported having to take out loans to pay nursing home expenses, or to cover their monthly mortgage payments.

* * *

There are 19 other Reserve funds that remain frozen, and the recent statement did not address when those shareholders might expect their money. Unlike the Primary fund, however, those funds have not broken the buck.

[joe fonebone]

money markets were supposed to be the “safe” place for your money...I had 1/3 of my retirement fund in money market, and moved it at the beginning of the year...a 25% hit on the mutual funds is better than the 50% plus hit the “safe” funds have taken.....