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.
This is huge news and it's an example of the escalating SIV crisis. This is the buzz in institutional circles ever since State Street lost approximately 17% in an enhanced money market fund.
Now the big question is, will BofA step to the plate and guarantee its SIVs like SEI and Legg Mason? Citigroup originated half of the SIVs which is why they may not survive or at least be broken into little pieces.
