The Board of Trustees of the Putnam Funds, one of the nation’s oldest and largest management firms, has suddenly voted to close a $12.3 billion prime money market fund, effective as of 5:00 p.m. on September 17, ’08, and distribute all cash to investors.
Putman Investments said the prime fund, which was valued yesterday at $1 a share, like Putnam’s other money market funds, had no exposure to securities of Lehman Brothers (LEH), Washington Mutual (WM) or AIG (AIG) at the parent-company level. However, on Sept. 17, the fund experienced wide redemption pressure. A drop below $1 a share, known as ‘breaking the buck’, would have exposed investors to losses. In addition, serious constraints on liquidity in money market instruments created the risk that in order to process redemptions, the fund would realize additional losses in selling its portfolio securities.
In the face of these challenges, the Trustees, which believe that this action was in the best interests of shareholders because it ensures an orderly distribution of assets, determined to close the fund. The firm said that this decision does not relate to other Putnam funds, including the retail Putnam Money Market Fund and Putnam VT Money Market Fund.
As of May 2008, Putnam managed $175 billion in assets, of which $103 billion is for mutual funds investors and $72 billion is for institutional accounts. Putnam has offices in Boston, London, Frankfurt, Rome, Copenhagen, Sydney, Tokyo, and Singapore.
Asset manager Putnam Investments is a unit of Canadian insurer Great-West Lifeco Inc. (GWOF.PK).