Money funds given temporary guaranty

In an unprecedented effort to plug a run on money market mutual funds, the federal government has put into effect a temporary guaranty insurance program for money funds.

The program, which started last week, will insure participating money market funds until Dec. 18. After that, the Treasury Department can decide whether it wants to extend the program to Sept. 18, 2009.

It's great news for investors of money funds, which are viewed as ultra-safe places to park cash you can easily get to.

"The announcement of the program effectively stopped the run on money funds and should prevent investors from hurting themselves," said Peter G. Crane, president and publisher of Crane Data LLC, which tracks money funds.

Money funds strive to maintain a price per share of $1, meaning that investors typically can expect to get back $1 for every dollar they invest in the fund, plus any interest or dividends the fund earns.

The root of the recent panic lies in troubles at the Reserve Primary Fund, a money market fund that fell below the sacred $1-per-share level, a rare but serious occurrence also known as "breaking the buck."

The Reserve became the second ever money fund to break the buck, according to the Investment Company Institute.

At the height of the panic – from Sept. 15 through Wednesday – small investors yanked $44 billion from nongovernment money funds, according to iMoneyNet, which compiles money fund data.

At the same time, $61.9 billion went into government retail money funds, which invest in Treasury securities, government agency debt and repurchase agreements backed by government entities.

"As long as we see outflows in the prime [nongovernment] funds – it means that people are just not 100 percent comfortable," said Connie Bugbee, managing editor of iMoneyNet.

Government officials are hoping that the insurance program will restore confidence in money funds.

The program doesn't work the same way as bank deposit insurance administered by the Federal Deposit Insurance Corp.

For one thing, there are dollar limits to deposit insurance. The money fund insurance program doesn't have a cap on the amount that's covered.

Also, the coverage isn't automatic. Each money fund must decide to participate in the program and must apply by Wednesday.

Call your fund and encourage it to apply.

"I'd expect 100 percent participation," Mr. Crane said.

Funds planning to participate include:

•Invesco Aim

•First American Funds

•TCW Money Market Fund

•Federated Investors Inc.

•Evergreen Investments

•Dreyfus Money Market Funds.

Vanguard and Fidelity Investments are evaluating the program.

The coverage, triggered when a participating fund breaks the buck, protects investors based on the number of money fund shares held at the close of business on Sept. 19.

Any increase in the number of shares held in an account after that date will not be insured.

Don't let the temporary insurance program lead you to equate a money fund with a bank deposit. It's not the same as a money market deposit account at a bank, which is FDIC-insured.

And remember: A money fund may strive to maintain $1 per share, but it's still an investment, which carries a risk.

Money-market fund providers seek guarantees

Money-market fund providers flock to federal guarantee program as deadline looms


NEW YORK (Associated Press) - With a sign-up deadline approaching next week, most of the nation's biggest money-market mutual funds providers plan to participate in a federal guarantee program to prop up the $3.4 trillion money-market fund industry.
The Treasury Department announced the program last month after investors pulled out some $170 billion from money-market funds in a seven-day period. The run was triggered when Reserve Management Corp.'s Primary Fund "broke the buck" Sept. 16 _ meaning its assets fell below the level needed to cover every dollar invested _ triggering fears about money funds' safety and exposing investors to losses.
As of Friday, most major fund families had issued statements indicating their intent to participate in the Treasury Department's fee-based program, with the notable exceptions including two of the biggest, Fidelity Investments and Vanguard Group Inc. Spokesmen for those two firms said Friday they were still considering whether to participate, and would decide in time for next Wednesday's application deadline.
The list of money fund providers that have so far indicated plans to participate includes such firms as Alpine; BlackRock; Charles Schwab; Columbia Management; Dreyfus Funds; Evergreen Investments; JPMorgan; Federated Investors; First American; Goldman Sachs; Legg Mason; Morgan Stanley; Putnam Investments; UBS; and Virtus Investment Partners.
Reserve Management has other funds besides its Primary Fund that are under pressure because of a rush of investors wanting to pull out money.
Ming Lee Hatch, a spokeswoman for New York-based Reserve, said Friday that her firm "will explore all avenues" _ including the federal guarantee program _ to protect investors' assets. But she stopped short of saying whether her firm would apply to participate.
The Treasury Department announced the guarantee program Sept. 19, and on Monday announced details including the size of fees that firms must pay to participate.
Firms managing eligible funds that agree to pay the fees will obtain guarantees via the government's $50 billion Exchange Stabilization Fund, extending protection similar to FDIC insurance for bank savings deposits.
For now, the guarantees extend only three months. After that, the Treasury Department will consider market conditions before deciding whether to end or renew. The guarantees cover only funds held in eligible money-market fund accounts as of the end of business Sept. 19, so money put in since then isn't guaranteed. Funds that broke the buck before that cutoff _ such as Reserve Primary _ aren't covered.
If assets in a covered fund fall below $1 per dollar invested, customers will be notified that their fund is covered by the insurance program.

Tamarack Funds Announces Participation in U.S. Treasury Department's Temporary Guarantee Program for Money Market Funds

MINNEAPOLIS, Oct 06, 2008 /PRNewswire via COMTEX/ -- The Tamarack Funds Board of Trustees approved the participation by each of the Tamarack Money Market Funds in the U.S. Department of Treasury's Temporary Guarantee Program for Money Market Funds. Once in place, the program will provide protection to shareholders of the Tamarack Money Market Funds for balances they held as of the close of business on September 19, 2008.

"The Tamarack Money Market Funds have withstood the recent turmoil in the money market fund industry, which we attribute to our rigorous credit standards and consistent approach to risk management," said Erik Preus, president of the Tamarack Funds. "However, we decided to participate in the Treasury Department's program in order to help support investor confidence in this time of market instability."

The program provides a guarantee based on the number of shares held at the close of business on September 19, 2008. Any increase in the number of shares held in an account after the close of business on September 19, 2008 is not covered by the program.

Details on the U.S. Treasury Temporary Guarantee Program for Money Market Funds can be found at: http://www.ustreas.gov/press/releases/hp1163.htm.

About Voyageur Asset Management Inc.

The views expressed herein reflect Voyageur Asset Management Inc. as of 10/6/08. Views are subject to change at any time based on market or other conditions. This information should not be construed as a recommendation for any specific security. Past performance is no guarantee of future results.

Voyageur Asset Management Inc. serves as investment adviser for the Tamarack Funds. Tamarack Equity and Fixed Income Funds are distributed by Tamarack Distributors Inc. The Tamarack Money Market Funds are distributed by RBC Capital Markets Corporation, Member NYSE /FINRA/SIPC.

Founded in 1983, Voyageur is a Minneapolis-based investment advisor with $34 billion in equity, fixed income and money market assets. The firm employs a "multi-boutique manager" approach to investment management with offices in Boston, Chicago and Minneapolis. Voyageur is a wholly-owned subsidiary of RBC Financial Group, a broadly diversified global financial services company, and serves as the principal U.S.-based institutional investment manager drawing upon RBC for incremental financial strength, infrastructure and resources. With 25 years in the investment management business, Voyageur's team-based approach includes experienced portfolio managers and talented analysts who focus on disciplined investment processes, style consistency, and seek strong risk-adjusted performance. For more information, please visit http://www.voyageur.net

Mutual fund investing involves risk, including loss of principal. An investment in the Tamarack Money Market Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds. These risks are more fully described in the prospectus.

Before investing, you should carefully consider a fund's investment objectives, risks, charges and expenses. This and other information is included in the prospectus, which you can request by visiting http://www.voyageur.net/TamarackFunds or calling 800.422.2766. Please read the prospectus carefully before investing.

NOT FDIC INSURED. NO BANK GUARANTEE. MAY LOSE VALUE.

SOURCE Voyageur Asset Management Inc.