money market

Money funds sign up for guarantee

"There was this massive shift in the high end of the institutional market; but the retail market was barely impacted," says Crane. "Overall, the money funds were fortunate to keep a lot of that cash in the house. Undoubtedly, some money went to banks, but if you look at the numbers, it seems most of the assets stayed in fund complexes and merely shifted from prime into Treasury or government."

Although it appears that all fund families have signed up, if you're concerned about a fund that you were in as of Sept. 19, call your adviser or the fund company to see if it's covered by the government's guarantee.

Details of the guarantee

Here are some of the details of the program, as described by the U.S. Treasury.

The program provides a guarantee based on the number of shares held at the close of business Sept. 19, 2008. Any increase in the number of shares held in the account after that will not be guaranteed.

For example:

  • If you owned 100 shares in a money market fund as of the close of business Sept. 19, 2008, but you sold 50 shares the next week, and the following week the fund broke the buck, you'd be guaranteed for 50 shares.
  • If you owned 100 shares as of close of business Sept. 19, 2008, and you bought an additional 50 shares the next day, and then the fund broke the buck, you'd receive 100 shares. Upon liquidation, the fund would distribute proceeds to you for the additional 50 shares -- which weren't guaranteed -- at the current net asset value.
  • If you owned 100 shares as of close of business Sept. 19, 2008, and then sold 50 shares and later bought 25 shares, payment would be guaranteed for 75 shares.
  • If you had no shares as of close of business Sept. 19, 2008, but you later bought 100 shares and then the fund broke the buck, your shares wouldn't participate in the guarantee but you would receive the net asset value.


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