This pointer came from a reader: the largest enhanced cash fund, Columbia Funds Strategic Cash, has halted redemptions, which had taken the fund down from $40 billion to $33 billion over several weeks. However, this report has not been confirmed by the fund manager, Columbia Management, nor has it been picked up by any of the major financial news outlets.
Note that this fund was not a retail fund and there is no indication that investors will lose money. However, Bank of America did set aside $300 million already in connection with this fund previously and it remains to be see whether this amount will be sufficient.
From Crane Data:
Columbia StratCash Halts Redemptions. Market rumors swirled Friday that the largest entrant in the “enhanced cash” space, Columbia’s Strategic Cash had halted redemptions. Enhanced cash pools, or “3c-7” funds, are private placements available to only the largest qualified institutional investors.
We’ve received no official word from Columbia yet, but multiple investors and sources tell Crane Data that redemptions have been frozen temporarily but may be made “in kind”, and that the pool is beginning the process of winding down or liquidating. Over half of the pool, $21 billion, has been separated into a “StratCash 2” portfolio, perhaps signaling a very large “in kind” separation. Assets of the now 2 pools have not declined precipitously, contrary to some rumors. StratCash has been gradually declined from $40 billion to $33 billion over the past several weeks. Columbia parent Bank of America reportedly set aside $300 million to support the pool previously.
As in Florida, we don’t believe any investors have suffered losses to date, and the fund’s NAVs have remained at $1.00 a share so far. StratCash becomes the latest enhanced cash product to retreat from the besieged sector. Federated returned investors’ money in full from its small entrant last month, taking a $4.9 million loss, and GE Asset Management liquidated its GE Enhanced Cash at $0.96 cents on the dollar.
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Like Money Market Funds owning SIVs, this is just another example of people taking on way too much risk for just a few more basis points. Enhanced Cash funds were supposed to be like Money Market Funds but with a little more yield. Institutional investors in these funds should go back into the traditional Money Market funds…..Money Market funds that did not invest in SIVs, of coarse. The Money Market fund is still the best place for this money. Greedy people bastardized these safe funds by doing things like buying SIVs and creating the more aggressive and risky Enhanced Cash Funds. There are a number of fund shops out there that never pushed it like Columbia, Federated, Fidelity, Legg Mason, Western, Schwab, JPMorgan, Morgan Stanley, Evergreen, Barclays, Credit Suisse, Blackrock, GE, Lehman, Janus and others recklessly pushed it. The list of good managers might be shorter but they are still out there. Large institutional investors should be capable of know a good vs. a bad Money Market Manager.
While we are well positioned to benefit from any recovery in this market, internal and industry projections anticipate continued lower levels of MBS/ABS issuance throughout much of 2008 and possibly into 2009,” said Frank Filipps, Clayton’s Chairman and Chief Executive Officer. “In our last 10-Q and investor call, we noted that our board of directors would retain an independent expert to review the value of the goodwill and intangible assets that we carry on our balance sheet. While these impairment tests have not been completed, the company’s board of directors has determined that generally accepted accounting principles will require us to record a non-cash impairment charge during the fourth quarter of 2007. This charge does not affect our cash position, our cash flow from operations or our debt covenants.”
After the charge, the carrying value of Clayton’s goodwill and other intangible assets will total approximately $38 million to $63 million.
Minsky
Credit Suisse on a monthly basis puts out one of the most data filled reports in the biz on mortgage and consumer finance. A careful reading of the latest issue, enables one to piece together the nature of the American asset Bubble consumer financing Ponzi scheme. A look at the following chart on housing cash out refinancings, clearly illustrates Joe Soccer Mom’s (JSM) largely unrestrained ability (so far), to effectively service their old debts and continue spending, with new debt.
oops, forgot the link, sorry
http://wallstreetexaminer.com/blogs/winter/?p=139